Private Limited Company

Incorporation of a Private Company in India

In order to incorporate a Private Limited Company, a minimum of two members and a maximum of 200 members are allowed as per the Companies Act.

In case of any financial scarcity or risks, the personal assets of the shareholders are secured and cannot be used for the payment of any liability pertaining to the company in other words it can be said that the Shareholders of the Private Limited Company have Limited Liability. A private limited company has continuous existence and continues to exist even in case of death or bankruptcy of the members.

For online company registration, there must be a least two directors, while a maximum of 15 directors can be appointed in a company. The proposed director must be of or more than the age of 18 years. A foreign national can also become the director of any private limited Company in India. There is no minimum paid-up capital required for a private limited company’s registration. It is mandatory for the Private Limited Company to use "Pvt. Ltd." after their name.

The private limited company does not have any relationship with the public; they aren't allowed to ask for any collateral from any public or public sectors. In a private limited company, individuals are not liable to transfer shares, which protects takeovers of private limited companies from big enterprises.

Benefits of Private Limited Company Registration in India

Starting a private limited company offers many advantages such as:

Limited Liability
The responsibility of the members of a private limited company is restricted to their share only as the private limited company is a separate legal entity.

Separate Legal Entity
A private limited company is a separate legal entity that possesses all the rights to sue or to be sued. It acts as an artificial person who can buy a property in its own name.

Credit Availability
A private limited company can obtain funds from the issuance of debentures as well as the stockholders. Registered Private Limited Company is considered a corporate entity that attracts different angel investors and venture capitalists that helps them to expand and raise their funds for the growth of their business and company.

Perform Internationally
The private limited companies support Foreign Direct Investment, whereas any other form of organization such as requires appropriate licensing and approval from the administration for foreign investments.

Perpetual Existence
A private company has a lifelong existence. Private limited companies are considered separate legal entities and are separate from the existence of their owners. It means they cannot be dissolved or wind up because of the death, retirement, or insanity of any of their members/directors/shareholders.

Enhanced Value in Market
A registered private limited company is considered more trustworthy than a non-registered one. Information regarding the Registration of a private limited company can easily be obtained from the website of the Ministry of Corporate Affairs (MCA). Vendors, suppliers, and investors trust them over the other business structures. As a result, it enhances the brand value of the company amongst the customers and other investors and suppliers.

Ease In Transfer of Ownership
It is quite easy to transfer equity to new members and issue fresh shares in a private limited company.

Basic Requirements of Company Registration

There are a few requirements to be known before initiating a Private Limited Company in India:

• The private limited company must have a unique name that should be different from any other registered company and trademark. (Avoid any offensive name for the Co-registration.)
• It is mandatory for a private limited company to have a minimum of two directors.
• It is mandatory for the Pvt Ltd Company to have a minimum of two shareholders. 
• Directors and Members of the Private Limited Company is required to have DSC (Digital Signature Certificate) 
• There is no minimum capital required for initiating a Private Limited Company.

A private company may be formed as per section 3 of the 2013 Act by two or more persons by giving their names and complying with the requirement of the registration process given under the provisions of the said Act. 

The following documents and information are required to be filled with the registrar within whose jurisdiction the registered office of the registering company is situated:

• The memorandum and articles, duly signed by all the subscribers of the memorandum in the prescribed manner. 
• A declaration by the advocate, chartered accountant, cost accountant or company secretary in a prescribed manner who are engaged in the incorporation of the company and also by the persons named in the articles of the company as a director, manager or secretary of the company that all the requirements of Registration prescribed under the Act are complied with.

Company Registration Filing Form - Manual to New Web-based SPICe + Form

SPICe + Form

SPICe Plus serves many requirements like name reservation, incorporation, DIN allotment, issue of PAN, TAN, EPFO, ESIC, Profession Tax (Maharashtra) and Opening of Bank Account. Moreover, one can also acquire the GSTIN via SPICe + form.

Part A:

Name Reservation: The application for name reservation should be made online by using “Spice Part A”

Part B:

• Company Incorporation
• Application for DIN
• PAN Application
• TAN Application
• GSTIN Application
• EPFO Registration
• ESIC Registration
• Opening of Bank Account for the Company
• Profession Tax Registration (only for Maharashtra)

Declaration

The declaration in form 'INC-9' of the subscribers and the directors must get auto-generated in PDF format and presented electronically. The aspirant has to provide the recommendation along with a certification recommended by a professional, such as Company Secretary, Chartered Accountant, and Cost Accountant.

Documents for Online Company Registration

• The Articles of Association
• Memorandum of Association
• Declaration by the subscribers and by the directors
• A confirmation for the address of the office
• Utility bills copy not older than two months 
• Certificate of incorporation of the Outer Country body corporate [If applicable]
• A resolution passed by the global Company [If applicable]
• A recommendation declared by the promotional Company [If applicable]
• The interest of the directors from other entities [If applicable]
• Nominee’s assent
• Identity proof and residential address of the subscribers and the nominees
• Identity proof and residential address of Applicants
• The Declaration/Resolution of the unregistered companies
• DSC (Digital Signature Certificate)
• Any other document [If required]

For AGILE-PRO :

• Proof of principal place of business
• Evidence of appointment of Authorized Signatory for GSTIN
• Either of the documents– Letter of Authorization/Copy of Resolution passed by BOD
• Managing Committee and Acceptance Letter
• Proof of identity of Authorized Signatory for the opening of a bank account
• Proof of address of Authorized Signatory for the opening of a bank account
• Specimen Signature of Authorized Signatory for EPFO

Declaration :

The declaration in form 'INC-9' of the subscribers and the directors must get auto-generated in PDF format and presented electronically. The aspirant has to provide the recommendation along with a certification recommended by a professional, such as Company Secretary, Chartered Accountant and Cost Accountant.

Documents That Can Be Used as an Identity Proof :

1. Voter Id Card
2. Passport
3. Driving License

Documents That Can Be Used as a Residential Proof :

1. Bank Statements
2. Electricity Bill
3. Mobile Bill
4. Telephone Bill

List of assistance which will be offered by the Online Company Incorporation Form i.e., SPICe+ form:

• Director Identification Number (DIN) Allotment
• Incorporation of Company
• PAN Issuance for the Company
• Issue of TAN
• Registration of Company as an Employer with EPFO
• ESIC Registration for the Company
• Profession Tax Registration for the State of Maharashtra
• Bank Account Opening.
• Company Registration as Tax Payer in GST

MOA AND AOA OF A COMPANY

MOA and AOA of the Companies are the legal documents that contain dos and don'ts for the company under incorporation. These are known as MOA and AOA, which states the company's scope of work and internal management. In simple words, they are the constitution of the company. They safeguard and structure the business of the company and establish the identity, goal, and methodology of the company. 

The MOA and AOA are filed with the registrar of the company along with the incorporation form of the company. These are indispensable, and the foundation of the company stands on them only. 

Memorandum of Association (MOA)

MOA contains the details of the constitution of the company, and it is the foundation of the company's structure. It is called the charter of the company as it lays down the objective and scope of the company. At the time of incorporation of the company, its members must put a signature on the MOA of the Company as attestation or approval of its content, which means members must subscribe to the MOA. 

Contents of MOA:

• Name Clause: The name of the company must be there with the ending as "Pvt. Ltd." in the case of a private company and "Ltd." in the case of a public company. The name should be unique and not identical to any existing company. It should not indicate any connection with the government or any local authority.
• Situation Clause: The state in which the company has its registered office. Within 15 days of incorporation, the company must have its registered office, and its address should be written outside of each office of the company. 
• Object Clause: It should state the purpose of the company, and it cannot be changed in the future. The company cannot act beyond what is written here; otherwise, it will be said to be ultra-virus and will be void ab-initio.  
• Liability Clause: The liability of the members of the company should be stated in it in the liability clause whether it is limited by a guarantee by shares or unlimited. A company cannot increase the liability of any member without his written consent. 
• Capital Clause: The amount of share capital should be written with which the company is going to be registered. This will state the maximum amount of shares that the company may issue. 
• Subscription Clause: It has all the details of the subscribers. subscribers. The subscribers should subscribe to a minimum of at least one share and should mention the number of shares they are going to subscribe to. These subscribers must take at least one share, and each of them will write the number of shares he is going to take. 

Articles of Association (AOA) :

The bye-laws, rules, and regulations will govern and control the management of the company and conduct its business. AOA is part of the MOA and is governed by the MOA of the Company. 

It is a secondary document that has the company's internal working, rights, duties, rules, laws, and management. The companies have the power to alter their AOA, and this alteration must be passed by a special resolution. 

Contents of AOA :

• Details of shares
• Details of Directors 
• Rules regarding company dividends and returns
• Rules regarding company accounts and audit
• Company's browsing power
• Meetings of Company 
• Winding up of Company 

Difference between MOA and AOA

Importance of Choosing the Right Business Structure

At the time of starting a business, many decisions are needed to be made, but the most important is to choose an appropriate business structure. The first thing one should consider is what form of entity is best suitable for business. All these forms of the entity have their own pros and cons. Here are some pros and cons you should discuss with your business attorney:

• Limited liability
• Legal paperwork, especially written agreements
• Taxes treatment
• Personal Liability
• Industry
• Flexibility
• Complexity 
• Control
• License, permits and regulations 

Each business structure has different advantages, but one must choose accordingly. One should choose the right business structure based on the local laws and the company's goal. With time one can change their business form also, like from sole proprietor to Limited Liability Company. 

In the beginning, a start-up should mostly consider its goal, financial conditions and financial needs, risk and ability to grow in the business. Each place has different requirements for different business structures, and depending on where you set up your business; there could be different requirements.

Business Structure Comparison

Capital Structure of Company

A company's capital structure mainly falls under these:

Authorized Share Capital
The authorized share capital is a part of the MOA of the Company under the capital clause. The amount is generally decided before the incorporation of the company; however, the companies have options to raise this authorized share capital in the future.

Paid-up Share Capital
The paid-up share capital is the amount for which the company issued shares to shareholders after they have made payments to the company. The paid-up capital of a company is always less than or equal to the authorized share capital. Such amount should be deposited in the company's account within 30 days of allotment of shares. After the Companies Amendment Act 2015, there is no minimum paid-up capital for private companies.