PRIVATE LIMITED COMPANY

What is a Private Limited Company?

The definition of a Private Limited Company under the Act is provided here to understand its basics. Section 2 (68) of the Act defines a Private Company as under, A Registration of Private Limited Company in Chennai having a minimum paid-up share capital as may be prescribed, and which by its articles,

(i) restricts the right to transfer its shares;

(ii) except in the case of One Person Company, limits the number of its members to two hundred;

(iii) prohibits any invitation to the public to subscribe to any securities of the company

A Private Limited Company formation with a minimum of two shareholders and a maximum of 200 shareholders.

Also, creditors do not have the authority to sell the directors’ assets.

Make sure your company is registered to start a company in India.

The company gets recognition as a Company through its private limited registration in Chennai, under the Companies Act of 2013 in India. The governing body is the Ministry of Corporate Affairs, widely known as MCA.

What are the major advantages of a Private Limited Company?

Risk avoidance: The biggest advantage for shareholders of a private limited company in Chennai is limited liability. The personal assets of the shareholder will not be at risk in the event that the company faces a loss. The shareholder’s liability is limited to the number of shares he/she has invested in the company.

Foreign Direct investment: A foreign national or foreign entity can easily invest in a private limited company, which is not possible in the case of a partnership or a property company. Thus, a private limited company can attract investment from foreign countries.

Tax benefits: Corporation tax is calculated on 25% of the profits of the corporate entity, but a limited company is taxed only on the profits after many deductions in the name of expenses. Therefore, there are many tax advantages in registering your company as a private limited company in Chennai.

Great status: This type of private limited company registration in Chennai impresses not only the customers but also the suppliers. The status of the company will be greatly enhanced by registration as a private limited company.

Investors: As your company grows, you may have plans to expand it to the next level. In the process of scaling up, you may need a significant amount of capital for this process. You can attract investors and you can raise funds to expand your company to the next level. Registration of a private limited company in Chennai is an appropriate and preferable form of entity to attract investment from angel investors.

What are the basic requirements to form a Private Limited Company?

Minimum 2 Shareholders and maximum 200 shareholders
Minimum 2 Directors
Minimum 1 lakh of paid-up share capital
Office space in India

What are the documents required to register a Private Limited Company?

Proof of Director/Shareholder:

Aadhar Card
PAN Card
Passport size photo
Savings bank Account Statement/Phone bill/Gas Bill

Proof of the company Premises:

Rental Agreement
Electricity bill / Property tax receipt

What is the procedure to register a Private Limited Company:

Step 1: Name Approval

The name of the private Limited Company needs to satisfy basically 3 steps firstly unique in nature secondly stating the descriptive service of the business and should end with entity private limited company(PVT). Once the name of your company has been finalised, it can be submitted to the Registrar of Companies for approval. The appropriate form for name approval is eForm 1. It is recommended that you choose a unique name for your company to avoid rejection by the Registrar of Companies. It is also advisable to give two alternative names so that if the first name is rejected there are some options and at least the second name can be approved.

A few suggestions for choosing a company name,

The company name should be easy to pronounce and easy to remember.
It should not reflect the names of competitors/other popular companies
It should be unique
It should not have any abusive names or terms that violate public morals
It should not be against the policies of the Trademark Act and Rules

Step 2: Obtain Digital Signature Certificate

As mentioned earlier, the entire company registration process takes place online and in order to sign documents online, you may need a digital signature certificate. A digital signature certificate is referred to as a DSC and is issued by a certification authority and authorised by the central government. The list of documents required to obtain a Digital Signature Certificate is,

A passport-size photograph of the applicant
Address Proof of the applicant
Applicant’s PAN card

Step 3: Application for Director Identification Number (DIN)

DIN is the acronym for the Director Identification Number issued by the Registrar of Companies to the directors of a proposed private limited company. It is an 8-digit unique number that is used to track the directors of a private limited company. Only one DIN Number would be issued for one person, even if he will hold directorships in a number of companies. The appropriate form to apply for a DIN number is Form DIR 3. Required documents to apply for DIN

Photograph of the applicant
Applicant’s PAN card
Applicant’s proof of address
Applicant’s digital signature certificate

Step 4: Submission of MOA and AOA

The Memorandum of Association and Articles of Association describe the rules and regulations of the organisation and it is a mandatory document submitted to ROC at the time of company Registration. Form Spice + Part B should be submitted together with the necessary proof and the digitally signed copy of the MOA and AOA.

Step 5: Issuance of the Certificate of Incorporation

The Certificate of Incorporation, also known as the ROC Certificate or Company Registration Certificate, will be issued by the Registrar of Private Limited Companies in Chennai after the company documents have been verified. The certificate also includes the CIN number, which is a unique number issued to each company registered under the ROC.

What are the major traits of a Private Limited Company?

Members: A private limited company can be formed with a minimum of two shareholders and a maximum of two hundred members. There should be a minimum of two directors and a maximum of fifteen directors. This does not include any past members of the company.

Paid-up capital: Under the Indian Companies Act, the minimum paid up capital of a private limited company is one lakh. This will be the capital of your company.

Endless Succession: A limited liability partnership continues to exist even in the event of the death, insolvency or bankruptcy of any of its members. What does the law mean by an endless succession of a company? The lifetime of a company continues to exist forever unless the shareholders of the company thinks to winding up the private limited company enjoys the endless succession

A separate legal entity: A private limited company, unlike a proprietary company or partnership, enjoys the status of a separate legal entity. A separate PAN card will be provided in the name of that company. In addition, a private limited company can acquire property in its own name. And the private limited company can be considered as a legal person.

Prospectus: It is a report that collectively possesses company details and statements submitted to the MCA portal for public reference but in the case of a private limited company, it does not issue the prospectus. Because the prospectus can be raised to invite the public as a shareholder so in this case a private limited company can not go for a prospectus, prospectus can be raised only by a public limited company to invite public shareholders.

What are the differences between a Private Limited Company and a Public Limited Company Proprietorship?

Private Limited Company	Public Limited Company
1. Name: Both a private limited company and a public limited company require a distinct name but the name of a private limited company ends with the suffix “Pvt Ltd”. For example, Malabar Gold Pvt Ltd, Parle Products Pvt Ltd, Hindustan Coca-Cola Beverages Pvt Ltd etc.	The name of a public limited company ends with the suffix “Ltd”. For example, Indian Oil Corporation Ltd, Reliance Industries Ltd, Tata Consultancy Services Ltd, HDFC Bank Ltd, etc.
2.Paid-up capital: A minimum of one lakh rupees is required to incorporate a private limited company	A minimum of five lakhs rupees is required to incorporate a public limited company.
3.Legislative meeting: A private limited company is privately owned by a group of shareholders and therefore, no mandatory regular meetings are required.	A public limited company is a publicly owned company and therefore regular board meetings are required.
4.Director’s Retirement: In a private limited company, rotation of a director’s retirement is not compulsory	Public limited company, the retirement of directors is compulsory at regular intervals.
5.Members: 2 members minimum 200 members maximum	Minimum 7 shareholders No maximum limit
6.Public involvement: The private limited company restrict the public to be a shareholder	The public limited company allows the public to be a shareholder and does not restrict them to sell their shares.
8.Stock Exchange: The private limited company cannot list the company for stock exchange.	The public limited company can list the company for stock exchange to the public.

FAQ

FAQ ON PRIVATE LIMITED COMPANY :

1.What are the factors that private limited companies are highly suitable for ?

There were a large number of factors that are highly suitable for private limited companies but there are three importance that highly sits for private limited companies and they were.

Attracts more customers
Risk factors are high
These companies can be easily devolved from small business to high growth with the help of support factors.

2. Whether the liability of a private limited company lies on individual persons are its members ?

No because, The biggest advantage for shareholders of a private limited company is limited liability. The personal assets of the shareholder will not be at risk in the event that the company faces a loss. The shareholder's liability is limited to the number of shares he/she has invested in the company.

3. Can anyone be a director of a private limited company?

A director is a person who is appointed by the shareholders of the company to manage the company affairs as stated in the MOA and AOA of the company. The person who is trying to join as a director in the company needs to be listed in Digital Signature Certificate (DSC) and Director Identification Number (DIN).

And any person above 21 years can be added as a director to a company if the AOA of the Company has the provision to add new directors to the company according to the companies Act 2013.

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PRIVATE LIMITED COMPANY