Private Limited Company – An Opportunity to expand Business

INTRODUCTION

A private Limited Company is the most common form of business, since by nature it is a separate legal entity. Entrepreneur prefers to incorporate a Company as it is a form of business which is separate from its promoters. Further, with the intention to promote digital India programme and less departmental communication, the government endeavour to reduce the time taken to incorporate a company. Earlier it used to take around 10-15 days which has been reduced to 2-3 days.

Incorporation of Company is just like giving name to your dream by creating a Separate entity. The promoters of the Company work effortlessly to promote its dream and bring it into existence. Being a separate legal entity, it becomes easy to avail funding in the form of capital and loans.

Further Indian Companies Act, 2013 has provided certain number of privileges and exemptions to private limited companies in order to facilitate doing business in India easily and effectively without much compliance.

ADVANTAGES OF REGISTRATION OF A PRIVATE LIMITED COMPANY

1. Easy to Form: It can be easily registered by two person after complying the certain formalities as mentioned under the Companies Act, 2013 by filing SPICe (Form INC-32 ) along with other form SPICe-MOA (Form INC-33) & SPICe-AOA (Form INC-34).
2. Requirement of Minimum Capital: Earlier there was a requirement of Minimum Capital of Rs. 100,000/- but now such condition has been waived off by the Ministry of Corporate Affair (MCA) and now there is no requirement of putting minimum amount of capital for registering a Private Limited Company.
3. Limited Liability: The Liability of shareholders in case of Private Limited Company is limited only to the extent of the face value of shares taken by them.
4. Foreign Direct Investment: Private Limited Companies are eligible to get Foreign Direct Investment after complying he formalities lain down under RBI Guidelines and FEMA Provisions.

Key Important Points:

1. There must be a registered office of the Proposed Private Limited Company.
2. All the directors and Subscriber to the shares of the proposed Company should have a Digital Signature Certificate (DSC) if he/she does not have one.
3. There must be one resident Director in the proposed private limited company.
4. Limit of Members in case of Private Company is 200.

Further Private Limited Company incorporation has been categorised in 3 steps:

1. Legal Provision for incorporation
2. Incorporation Procedure & documents required
3. Post incorporation

1. LEGAL PROVISION FOR INCORPORATION

Following are the sections which dealt with Incorporation of private Limited Company.

Section 3 to Section 11 of the Companies Act, 2013 and The Companies (Incorporation) Rules, 2014 and amendment made thereof.

Section 3 the deals with Type, Nature, minimum members and object of the Company.

Section 3A imposes liability on the members if the Company carries on the business for more than 6 months without complying the minimum members requirement (Two in case of Private Company), then all such members who are cognisant of the fact shall be liable to pay whole of the debts contracted by the Company during that Company.

Section 4 deals with the type of Memorandum and its content of a Company. Every Memorandum shall state:

• Name of the Company with the word Limited/ Private Limited.
• State in which the Company is incorporated
• Objects: The main objects to be pursued by the Company any matter considered necessary in furtherance thereof
• Liability of member is limited or unlimited to the extent of
  • Shares
  • Guarantee

to the extent each members contribute to undertake

• Bifurcation of its Authorised Share Capital
• Subscriber sheet stating No. of shares subscribed

Standard format for MOA has been prescribed in Table A to E depending upon the liability of the subscriber.

Section 5 of the Companies Act deal with Articles of Association of the Company. The Article deals with the regulation for management of the Company. A Company can adopt articles as per the Standard Table G to J specified in Schedule I.

Section 6 of the Act states that in case any provision of Memorandum and Articles are contradictory to the Companies Act, 2013, then the provision of the Act shall override the Memorandum and Articles of the Company and such provision shall be void to the extent it is repugnant.

Section 7 of the Act deals with the documents and information to be filed for incorporation of the Company.

If all documents are in order than Certificate of Incorporation shall be issued with a distinct CIN (Corporate Identification Number) as a distinct identity of the Company.

2. PRACTICAL PROCEDURE FOR INCORPORATION OF COMPANY

1. Acquire DSC: Digital Signature Certificate is a digital signature of the person which is used to digitally sign E-Forms to be uploaded with the Ministry of Corporate Affair (MCA). It is first step to obtain the DSC of the subscribers.
2. Approval of Name: Decide the name and apply through RUN service available on MCA portal. Before applying, check the availability of name and also check that the name is not registered with Trademark Registry. If the name does not resemble with existing company/trademark, or if NOC from the registered owner of trademark has been obtained, attach the NOC and make payment. If found in order, the name will be approved and is valid for a period of 20 days from the date of approval. A person can mention upto two names in the RUN Form for reservation of name.
3. Filling of spice Form: File e-Form SPICe (Simplified Proforma for Incorporating Company Electronically)(INC-32) along with SPICe-MOA(INC-33) and SPICe-AOA(INC-34) and make the payment. With the intent to promote ease of doing business, the government fees for incorporation have been waived off, except stamp duty to be paid at the time of incorporation. Further, the government has introduced a simplified integrated form, wherein application for new DIN, PAN and TAN can also be made at the time of incorporation. However, normal fees for the same are added to the incorporation challan at the time of payment.

3. POST INCORPORATION

Once the Company is incorporated, following compliances are to be proceeded with:

1. Call First Board meeting at the earliest
2. Disclosure of interest of Directors
3. Printing of Memorandum and articles of the Company
4. Printing and Issue of share certificate to the members
5. Stamping of Share certificate
6. Maintenance of statutory registers

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