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REGISTRATION OF A PRIVATE LIMITED COMPANY
A Company is a separate legal entity. In other words, a company is a separate person from its owners in the eyes of law. The members/owners/shareholders are separate from the company Thus, a company has a range of legal capacities and its members/owners/shareholders have no personal liability to the creditors of the company. In India, companies are governed by the provisions contained in the Companies Act, 2013 and rules made under the Act. There are different forms of companies under the Act. Under this article, we shall discuss Private Limited Companies.
A Private Limited Company is a closely held company which can be started by minimum Two (2) owners/shareholders and directors. The owners are called the members or shareholders of the company. The maximum number of members of a Private Limited Company is 200. Thus, to register a Private Limited Company, at least 2 shareholders are required. A person who starts a company is also called promoter of the company.
Directors are the individuals who run the show. Directors and members of the company can be same or different. A director can be a shareholder of the company and a shareholder can be a director of the company. One should not get confused between directors and owners. They both can be different individuals. Minimum 2 directors are required to run a Private Limited Company. Therefore, to register a Private Limited Company minimum 2 shareholders and 2 directors are required. Foreign nationals, NRIs are allowed to be directors and/or shareholders of a company with Foreign Direct Investment, making it the preferred choice of entity for foreign promoters.
The advantages of doing business under a Private Limited Company are the limited liability of promoters, separate legal entity status, ability to raised funds, shares transferability, making it suitable for small or medium-sized businesses and start-ups.
REGISTRATION OF A PRIVATE LIMITED COMPANY
Process of registration a Private Limited Company is governed by Companies Act, 2013 and the Companies Incorporation Rules, 2104 as amended from time to time. The average time required for company registration is around 10-15 working days from the date of providing all the documents, subject to government processing time, which may vary. Keeping in view the current scenario, if there is no deficiency in the forms, a company gets registered within 2 days from the date of filing the forms with the authority. Registration of a company is done online with Ministry of Corporate Affairs administering the process through its website i.e. www.mca.gov.in. The relevant forms for registering a company are available on the said website and uploaded on the same for registration of a company. MCA has established a Central Registration Centre (CRC) where all the forms related to company registration are processed and registration is done. Companies from all over India are now registered in CRC only which is situated in Manesar, Haryana.
For registering a company, documents/information of promoters and directors are required. On the basis of the documents of promoter and directors, affidavits and other incorporation documents are prepared. A list of documents and information required are as follows:
- Self-attested copy a Pan Card
- Email id and Phone no
- Passport size photograph
- Self-attested ID proof (Aadhaar Card/ Passport/ Voter id Card/ Driving License)
- Self –attested latest address proof (Latest utility bill – electricity bill/ water bill/ mobile bill) (not older than 2 months)
- Proof of the proposed registered office duly signed by the owner of the premises whose name appears on the bill (Latest utility bill- electricity bill/ water bill/ rent agreement) (not older than 2 months)
On the basis of the aforementioned documents, other documents such as affidavits, NOC for company registration are prepared.
PROCESS OF INCORPORATION/REGISTRATION OF A PVT. LTD. COMPANY
Process of company registration starts with application for Digital Signature Certificate and ends with company registration. With the introduction of new forms by MCA i.e. SPICe (Simplified Proforma for Incorporating Company Electronically) forms (“SPICe forms”), registration of a company can be done in two ways i.e. (1) with prior approval of name; and (2) name approval and company registration together. Taking prior approval of name and thereafter, getting your company registered is more advantageous since it mitigates the risk of form rejection due to name unavailability. The standard process of company registration is as follows:
- Apply for DSC: The first Step is to obtain the Digital Signature Certificate (DSC) of the proposed Promoters/Directors. Copies of following documents are required for obtaining DSC.
- Address Proof
- Aadhaar card
- PAN card
- Email Id
- Mobile Phone Number
- Name Approval Application: The next step while incorporating a Private Limited Company is to decide on the name of the Company. The name of the Company shall be in the form of “XYZ Private Limited”. One has to apply for name reservation through RUN (Reserve Unique Name) service of Ministry of Corporate Affairs (MCA), which has been introduced by MCA on 26th January, 2018. RUN service can only be used by creating an account on MCA website. At present, only two name can be applied at a time through RUN service. This is a chargeable service and fee is payable for using the service. If for any reason, the applied names are rejected by MCA, one resubmission shall be given to the applicant.
- Documents Required: Once the name get approved by MCA, following documents shall be prepared for the purpose of filing them with Registrar of Companies.
- Memorandum of Association (MOA) and Articles of Association (AOA): These are the charter documents of the company. MoA is prepared in eSpice form INC 33 (can be downloaded from MCA website www.mca.gov.in). Location of office, main objects, capital, liability, subscriber details are set forth in MOA. AoA is prepared in eSpice form INC 34 (can be downloaded from MCA website www.mca.gov.in). AoA lays down the bylaws on which the company will operate. Note: Include the definition of Private Limited Company as per Section 2(68) of the Company Act, 2013 in the Definition section of AOA. For MOA objects, click here
- Affidavits and Consent: Affidavits, as required under the Companies Act, 2013 and rules made thereunder, are required to be prepared and executed. Affidavits should be properly stamped and notarised. Note: date of execution of Affidavits and date of Notary should match. Consent of first directors is required to be taken in form DIR – 2 (available online).
- Registered office: Proof of the registered office of the proposed Company along with the proof of ownership is required. Latest Utility Bill (Government bill) or Lease Agreement or Conveyance deed etc. shall be treated as proof of ownership of registered office. Latest Utility bill (Government or private) shall be required as proof of registered office. No objection certificate from the owner, whose name appears on the proof of ownership, is required. Note: Latest means the date of the document should not be older than 2 months.
- Filing/Approval of forms with MCA: All the aforementioned documents except MOA and AOA shall be attached to eSpice Form (INC 32). Self-attested copy of Proof of identity, PAN and Address proof of the Promoters shall also be attached to the form. Director Identification Number, if not available, shall be allotted with the approval of eSpice form (INC 32). Note: Aadhaar Card is considered as identity proof not as an address proof. PAN is mandatory. Latest (not older than 2 months) Bank statement/ Mobile phone bill/ Telephone bill is considered as Address proof. Address in Aadhaar Card and Address in Bank statement/ Mobile phone bill/ Telephone bill can be different.
- Certificate of Incorporation: After verification, the Registrar of Companies (ROC) will issue a Certificate of Incorporation. Thus, Company registration process is completed and business can be commenced.
- PAN and TAN of the company are allocated at the time of approval of aforesaid forms by ROC. PAN is mentioned in the Certificate of Incorporation of the Company.
- Once approved, the name shall be available for 20 days. Company registration forms should be filed within 20 days from the date of name approval; otherwise, the reserved name shall get lapsed and application for name reservation shall be filed again.
- Permanent Account Number (PAN) & Tax Deduction and Collection Account Number (TAN) application forms part of the company registration process now. PAN and TAN forms are filed along with company registration forms. Once the company is registered, Certificate of Incorporation is issued after allotment of PAN & TAN by Income Tax Department. Certificate of Incorporation bears PAN.
- The forms are required to be certified by a practicing professional such as Company Secretary, Chartered Accountant, Cost Accountant or Advocate.
- It is advisable to submit the forms after checking it thoroughly since 2 chances are available if the forms get rejected due to any deficiency after first submission. In case of failure to submit the complete form in all the submissions, the forms get rejected and the fee paid to MCA also gets forfeited.