The Government has made new company registration online process more user friendly with a bunch of benefits from 23rd February 2020. Private Limited company is the most common form of Corporate Legal Entity in India, which is governed by the Companies Act, 2013 and the rules made thereunder.
A Private Limited Company is a separate legal entity in the eyes of law formed by two or more persons, having a separate existence from its Owners (commonly known as Shareholders or Members) with a blend of Limited Liability of members and ability to hold assets and operate the business in its own name with an additional advantage of enjoying good credibility before the financial institutions.
Due to this credibility feature, it’s easier for a Private Limited company to raise funds from financial institutions which will be a lag in the case of Limited Liability Partnership. Advantages of a Private Limited Company are many and will be discussed in the article below.
New Company Registration Online – Anywhere in India
For a new company registration online, minimum two persons are required who will be the Shareholders as well as Directors of the company and a simplified process prescribed under the Companies Act, 2013 is to be followed which will be discussed further in this article.
It must also be noted that where it is desired that the two persons who will become shareholders shall not be appointed as Directors of the proposed company then two more individuals shall be required for the incorporation of Private Limited Company.
Step by Step procedure for New Company Registration Online
Although there are not many changes to new company registration online process, yet with the introduction of new SPICe+ and AGILE Pro forms on 23rd February 2020, it is now mandatory to apply for PF, ESIC, Bank Account and Professional Tax (in case of Maharashtra) with incorporation and GST is optional.
Furthermore, the incorporation process has been slightly changed and following steps should be undertaken to incorporate the company:-
Step 1: An application for reserving the Name shall be made to Ministry of Corporate Affairs (herein referred to as ‘MCA’) for which maximum 2 names can be proposed in one application. It should be noted that the Names so proposed shall be approved as per the MCA Rules.
Step 2: After reservation of Name in Step-2, an application for obtaining Digital Signature Certificates (DSC) for all the Shareholders and Directors will be made.
Step 3: Meanwhile, draft declarations and other documents DIR2, INC9, NOC and so on along with Memorandum of Association (MOA) and Articles of Association (AOA) and on being finalised, the same shall be signed by the Shareholders and Directors.
Step 4: At last, application for incorporation shall be filed with MCA in SPICe+ and AGILE Pro which are comprehensive forms for Company Registration, PAN and TAN Allotment and registration under EPFO, ESIC, Opening of Bank Account and Professional Tax (in case of Maharashtra). Application for GSTIN may also be made using the same application form.
Step 5: Relevant fee and stamp duty as per your state of Registered Office needs to be paid at the time of filing application. Also, it needs to be digitally signed by a CA/CS in practise.
Step 6: Certificate of Incorporation (COI) will be issued by MCA and company gets incorporated.
Step 7: Registration under PF, ESIC, Professional Tax, GST and Bank Account normally takes 10-15 working days after incorporation.
New Company Registration online- Documents and Information:
- Documents and Information required for all the Shareholders and Directors
- 1 Passport Size Photograph;
- Identity Proof (Voter ID/Driving License/Passport);
- Address Proof (Bank Statement/Electricity Bill/Telephone Bill not older than two months);
- E-mail ID and Mobile Number of every Shareholder and Director; and
- Educational Qualification and Place of Birth of every Shareholder and Director.
- Documents Required for Registered Office Address of the Company
If the property is rented:
- Electricity Bill/Water Bill/Gas Bill (not older than two months);
- No Objection Certificate (NOC) from the Owner of Premises; and
- Rent Agreement
If the property is owned:
- Electricity Bill/Water Bill/Gas Bill (not older than two months);
- The registered document which should be in name of the company evidencing title of the premises
Please remember that you can always file registered office within 30 days of the date of incorporation of company but advisable to file with company registration as it involves Government fees. In addition, if you miss to file within the said period there are additional fees as well
Advantages of Private Limited Company:
Following are the benefits of a Private Limited Company which will drive the entrepreneurs to go for it:
- Corporate Personality:
A Private Limited company has corporate personality it means that in the eyes of law, it has an identity of its own different from its members which helps in brand building of the business.
- Limited Liability:
The Liability of Shareholders in a private limited company is limited to that extent up to which they have undertaken to contribute to the capital of the company.
- Uninterrupted Presence:
A company has ‘perpetual succession’, meaning uninterrupted existence until it is legally dissolved. A company being a separate legal person, is unaffected by the death or other departure of any member and continues to be in existence irrespective of the changes in ownership.
- Separate Property:
Being a separate legal entity, a company can acquire, own, enjoy and alienate, property in its own name and no shareholder can claim property of the company as his own as long as company is a going concern.
Why Private Limited Not Limited Liability Partnership (LLP)?
As we get new company registration online, similarly we get new LLP Registration done online. It’s been a very tough choice for an entrepreneur to decide whether to go for Private Limited Company or LLP and in most of the cases, people opt for LLP due to similar features and less compliances in comparison to Private Limited company.
However, we recommend a different view that an entrepreneur should go for a Private limited company due to following advantages which are not present with LLP:
- Members are not Liable Inter-se:
In case of LLP, wrongful conduct of one partner can bind other partners as well and make them personally liable. Whereas in case of Private Limited Company wrongful acts of one shareholder will not affect other shareholders and they would not become liable personally.
- Easy Fund Raising:
Being a regulated separate legal entity, a Private Limited company enjoys good credibility before the financial institutions for borrowing purposes which is not a case in LLP.
- Higher Penalties in LLP Act, 2008:
For LLP, heavy penalties are provided in Limited Liability Partnership (LLP) Act, 2008 for non-compliance in comparison to the penalties provided under the Companies Act, 2013 for private limited companies.
- Less Chances of Strike Off:
Due to stringent provisions for non-compliance under the Limited Liability Partnership (LLP) Act, 2008, the chances of being Strike Off are higher for LLP in comparison to Private Limited Companies.
Private Company with Foreign Shareholder/Director
New Company Registration online process remains the same even when we have a foreign director/shareholder on board, subject to the condition that at least one Director on the Board of that Private Company shall be an Indian Citizen and Resident of India as well and not more than 50% of the shares shall be held by any Foreign company.
It shall also be noted that for foreign nationals “Passport” is a mandatory document in addition to the abovementioned documents required for incorporating a Private Limited Company in India.
Subject to the fulfilment of above conditions, the documents of Foreign nationals shall be Notarized by the Public Notary of their respective country and
- If their country is a signatory of Hague Convention, then the documents shall be apostilled by the competent authority of that foreign country; or
- If their country is not a signatory of Hague Convention, then the documents shall be consularized by the competent authority of that foreign country .
Conclusion:
New Company Registration online process is easy and user-friendly and required attention to details. It is always better to engage a professional who is an expert in the area to avoid resubmissions, delays and cancellation in few cases. A business enjoys various benefits once a company is incorporated as already mentioned above and in addition to these it also can apply for registration in Start-up India programme and MSME programmes.
FAQs:
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What are the requirements for starting a private limited company?
To register a private limited company, a minimum of two persons are required to act as directors and shareholders. The directors must be natural persons, while the shareholders can be natural persons or corporate entities. In addition, a registered office address in India is also required for company registration.
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What is Limited Liability Protection in Private Limited Company?
Limited liability is the status of being legally responsible only to a limited amount for debts of a company. Unlike proprietorships and partnerships, in a private limited company the liability of the shareholders in respect of the company’s liabilities is limited. In other words, the liability of the shareholders of a company is limited only to the value of shares taken up by them.
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What is the Minimum Paid Up Capital required for Private Limited Company?
There is no minimum paid up capital requirement as per the Companies Act, 2013 and a Private Limited Company can be started with any amount of Capital which may be as small as Rs. 500 or less.
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What is the Minimum and Maximum Number of Shareholders and Directors in case of Private Limited Company?
Particulars Minimum Maximum
Shareholders 02 200
Directors 02 15
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Who can be shareholder and director of a Private Limited Company?
Any individual who is of age of 18 years or above with a sound mind or any artificial legal person including corporates can become shareholder in a Private Limited Company. However, only individuals are allowed to be a Director of the company and corporate entities could not be a Director of a company.
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Do NRIs or Foreign Nationals or Foreign Entities can register a Private Limited Company in India?
Yes, NRIs, foreign nationals and foreign entities can register a company and invest in India, subject to the Foreign Direct Investment norms set by the RBI. However, incorporation rules in India require that at least one Indian citizen shall be a Director of the company. The new company registration online process remains the same and there is no need to travel to India
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Can registered office be a residential property?
Yes, a residential property can be used as a registered office of a company.
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Do Private Limited Company benefits small business or start-ups?
Yes, small business and start-ups get following benefits of Private Limited Company :
- The foremost advantage is of credibility and good reputation of the established business in the eyes of big financial institutions, clients and suppliers.
- The benefit is getting loans at least possible compliance from the financial institution or banks while entering into the business or for expansion of business.
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What is Authorized Capital, Subscribed Capital and Paid-up Capital?
Authorised Capital is the maximum amount of Share Capital upto which shareholders may contribute to the Capital of the company. It may be increased as per the funding requirements of the company.
Subscribed Capital is the amount of Share Capital which the Shareholders undertake to subscribe under the Memorandum of Association.
Paid-up Capital is that portion of Subscribed Capital which has actually been paid by the Shareholders.
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Is there any maximum capital Limit for Private Limited Company?
No there is no such limit.
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Where the Authorised Capital and Subscribed Capital is shown?
Both the capital are shown in Memorandum of Association of the company.
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Whether subscription money can be received in cash by newly incorporated company?
There is no prohibition/restriction under the Companies Act, 2013 for receiving the subscription money in cash (i.e. not through account payee cheque or other banking channel). However, the Company and/or subscriber(s) has(ve) to comply with the provisions of the Income Tax Act with regard to cash transaction.
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Can Share Capital be introduced in kind?
No, in case of companies Share Capital cannot be introduced in kind and can only be contributed in Cash or Demand Draft or through Bank Transfers.
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What is the proof for allotment of shares by the company?
Share Certificates are issued to the Shareholders by the company as proof of allotments of shares.
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Can a Private limited company give loan to its Directors?
Yes, a Private Limited company may provide loans to its Directors subjected to the fulfilment of following conditions:
- There should be no investment in the concerned company from any other body corporate;
- The company should not have any borrowings from banks, financial institutions and other body corporate equal to or more than twice its paid-up share capital, OR Rs. 50 crores, whichever is lower; and
- There should be no subsisting default at the time of making such transaction, and that the company should have the capability to pay off the loan.
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Can a Director give loan to Private Limited company?
Yes, subject to the fulfilment of certain conditions as provided in the provisions of Companies Act, 2013 and the rules made thereunder.
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What are the Annual Compliance requirements to be fulfilled by a Private Company?
Following are the mandatory compliances to be fulfilled by a Private Limited company:-
- Annual Return Filing with Registrar of Companies (ROC) in Form MGT-7.
- Board Report Filing and Independent Auditors Report Filing with Registrar of Companies.
- Filing of Financial Statements of the company with Registrar of Companies in AOC-4.
- Filing of DIR-3 KYC by Directors with Registrar of Companies.
- At least 4 (Four) Board Meetings shall be convened in every Financial Year except the first year of incorporation.
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What are the Statutory requirements to be fulfilled once Private Limited Company is registered?
- Filing of Registered Office with Registrar of Companies within 30 days of date of Incorporation if not intimated at the time of Incorporation.
- Opening of Bank Account in the name of company within 60 days from the date of Incorporation.
- Issue of Share Certificates to Shareholders within 60 days from the date of Incorporation.
- Appointment of Statutory Auditor within 30 days of date of Incorporation by the Board of Directors and if they fail to appoint then within 90 days by the Shareholders in Extra Ordinary General Meeting.
- Filing of Intimation to Registrar of Companies for Commencement of Business in INC-20A at within 180 days of Incorporation of the company.
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Is stamp duty payable during incorporation process?
Yes, Stamp Duty is payable and will be calculated as per the respective State Stamp Act applicable in the State of Registered Office of the company. We should remember that stamp duty is payable when you are getting your new company registration online
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What is MoA and AoA?
MoA means Memorandum of Association which provides details about the object and nature of business of the company and also provide for the liability of members, share capital and registered office address of the company.
AoA stands for Articles of Association which are the bye laws or rules and regulations providing for the managing the affairs of the company.
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What is a DIN?
Director Identification Number (DIN) is a unique identification number required for a person to become a director of a company. DIN is issued by Ministry of Corporate Affairs (MCA).
It is similar to a PAN Card number. DIN is to be mentioned in documents while appointing a person as a director of a company.
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What is DSC?
A digital signature is electronic signature, which is in the form of codes. It is used for signing the electronic forms, filed with ROC for incorporation of Company. Digital Signature cannot be used in physical documents.
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Does it compulsory to have a unique name?
Yes. Since, Ministry of Corporate Affairs (MCA) has prescribed various rules for approval of Name of the company it will be highly recommended to have a unique name so that we can save us from unnecessary rejection of Name by MCA.
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Can Private limited company issue debentures?
Yes, a private limited company can issue debentures subject to the provisions of Companies Act, 2013.
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Can Private limited company accept deposits?
Yes, subject to the provisions of Section 73 of the Companies Act, 2013.
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Is it allowed to change the registered office of a company after registration?
Yes, company office address can be changed any time after incorporation. There are different provisions when change is within ROC, State or different states
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After registering my company, does it mean my trademark is also protected?
No, you have to make separate application for registration and protection of your Trademark. However, when making the application for incorporation, professional will check that there is no trademark on name suggested by you.
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Is it mandatory for foreign directors of the Indian company to take DIN?
Yes, it is mandatory for Foreign directors of the Indian company to take DIN. There is no need to travel to India for them
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Does PF, GST is automatically applicable to Private Limited?
There is no automatic applicability. Provident Fund (PF), GST applicability is same for all types of businesses like sole proprietorship, partnership firms and companies. These laws are applicable only after crossing certain threshold limits.
However, after introduction of new incorporation process by MCA now it is mandatory to obtain registration under EPFO, ESIC, Professional tax (in case of Maharashtra) and Bank Account while making application for incorporation of the company.
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Can a Private Company carry multiple businesses?
Yes, a Private Company can carry multiple businesses if it is mentioned in the company’s MoA and approved by a registrar. The company can mention more than one business operating within the same field or of the same nature.
Activities which are unrelated, such as fashion designing and event management or construction, those cannot be registered under the same company.
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