What is Private Limited Company?

  • Private Limited Company is the most popular legal structure entity amongst small, medium and large businesses in India and also allows outside funding for business.
  • It is a business entity incorporated under Companies Act, 2013 formed with the word ‘Private’ in its name which has minimum two directors and maximum of fifteen directors and includes minimum two members and maximum 200 members and it offer limited liability and has its own legal personality. Shareholders enjoy the privilege of limited liability, which means they are only liable to meet the debts of the company only to the extent that they have invested into the business, and being a “Private Limited” company may provide more advantages:
  • Tax Reductions
  • Fund Raising
  • Constrained Liability
  • Private Investments
  • Continued Existence
  • Easy Transferability
  • Expansion & Diversification
 

Procedure to Incorporate Private Limited Company

Incorporation of a business into a Private Limited Company can be formed in one of the following ways:

  • Check Name Availability from MCA for
  • Company name
  •  Trademark
  • Name approval through RUN (Reserve Unique Name)
  • Obtain Digital Signature Certificate (DSC)
  •  Incorporation Documents
  • Form DIR-2
  • Form INC-9
  • E-filling of forms with MCA
  • Spice
  • Spice MOA
  • Spice AOA
  • Certificate of Incorporation
  • Notice of situation of registered office (Form INC-22)
  • Commencement  of Business (Form-INC-20A)

Documents required for Company Formation

 

For the incorporation of a company, an applicant has to file the following
documents:

  • Subscriber’s Identity Proof :-
  • For Indian nationality (Pan)
  • For Foreign nationality (Passport)
  • Subscriber’s Residence Proof :-
  • Electricity Bill or
  • Telephone Bill or
  • Mobile Bill or
  • Bank Statement (not older than two months)
  • Subscriber’s Address Proof :-
  • Driving License or
  • Voter card or
  • Aadhaar Card
  • Passport 
  • Relevant Information required from Directors:-
  • Place of Birth,
  • Education Qualification,
  • Email Id,
  • Contact Number,
  • Occupation,
  • Duration of stay at present address,
  • Passport size Photograph
  • Consent from Directors  in specified Form DIR-2
  • Declaration from first Subscribers and Directors in specified Form INC-9
  • Registered Office’s Address Proof
  • Rent/lease agreement or
  • Transfer/Conveyance Deed Utility Bill of
  • registered office Address
  • Electricity Bill or
  •  Gas Bill not older than 2 months
  • No Objection Certificate for use of registered office premises
  • Approval Letter from regulated Authority, as the case may be
  • Trademark Registration Certificate (if  based on trademark Registration)
  • NOC from owner for trademark usage, if any

Private Limited Company is the most popular form of business entity among foreign investors, including various investors, to form a subsidiary, a joint venture or 100% owned company in India.

To incorporate, a minimum of two shareholders and a maximum of up to 200 shareholders are allowed in a private limited company.  The shareholders could be natural persons or companies, including foreign companies.

A private limited company must have a minimum of two Directors and can have up to a maximum of fifteen Directors.

Earlier only 1 name could be applied. However, with effect from 23 March 2018, the MCA has implemented the proposal of 2 names for the RUN web service.

The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, foreign nationals can be directors in an Indian Private Limited Company.

No, professional or educational qualification is required to become a shareholder in the private limited company.

An address in India where the registered office of the Company will be situated is required. The premises can be a commercial / industrial / residential where communication from the MCA will be received.

No, you will not have to be present in India for registering of a Private Limited Company.

Identity proof and address proof is mandatory for all the proposed Directors of the Company. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof. Memorandum of Association and Articles of Association and other documents are prepared by us.

A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Company. Likewise, a digital certificate can be presented electronically to prove one’s identity, to access information or services on the Internet or to sign certain documents digitally.

Once a Company is incorporated, it will be active and in-existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the Company will become a Dormant Company and maybe struck off from the register after a period of time. 

Yes, a Foreign National or an NRI can be a Director in a Private Limited Company in India after obtaining Director Identification Number. However, at least one Director on the Board of Directors must be a Resident in India.

Yes, a Foreign National or an NRI Foreign Companies can hold shares of a Private Limited Company subject to Foreign Direct Investment (FDI) Guidelines.

Yes, foreign parent or holding Companies, including USA parent companies, can incorporate a subsidiary, as a 100% owned Private Limited Company in India subject to Foreign Direct Investment (FDI) Guidelines.  RBI (Reserve Bank of India) prior approval is not required.

100% Foreign Direct Investment is allowed in India in many of the industries under the Automatic Route. There are called RBI Approvals – if the percentage allowed for various Sectors is met.  However, an application for approval is required for automatic approvals.

 

Special Permission – FIPB Approvals – could be obtained to invest over and above the regular percentage allowed for various Sectors.