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Eligibility Criteria for Private Limited Companies: Who Can Form One?

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Last Updated on July 8, 2024 by Kanakkupillai

Though starting a private limited company in India may be an interesting and successful venture, it’s crucial to know the qualifying requirements before proceeding. In this blog post, we will cover the main factors for starting a private limited company and who may become a member or director.

Minimum and Maximum Shareholders

A private limited business may have no more than 200 owners and a minimum of two. This means you must choose at least one extra person or company to help you start the business. As long as they meet the other qualified standards, the owners might be Indian citizens, non-resident Indians (NRIs), or certain foreign people.

Minimum and Maximum Directors

A non-public constrained company also has to have a minimum of administrators and a maximum of fifteen administrators. At least this kind of director must be an Indian resident, which means they’ve spent a minimum of 182 days in India over the past economic year. As long as they satisfy the specified standards, the opposite directors are probably Indian residents, NRIs, or foreign nationals.

Minimum Paid-up Capital

Forming a private limited company needs minimum paid-up capital of ₹1 lakh. The founders must so make minimum ₹1 lakh in shares or other cash contributions to the business. The first basic expenses and operations of the company may be handled using this money.

Restrictions on Transferring Shares

A private limited company’s main characteristic is that its shares cannot be freely sold or distributed to the public. Usually, including limits on the transfer of shares, the company’s articles of association will ask for the approval of the board of directors or the other shareholders.

Corporate Name Requirements

A private limited company’s name must finish in “Private Limited” or “Pvt Lt.” This sets the corporation apart from other kinds of commercial entities, such sole proprietorships or public limited companies.

Prohibition on Inviting Public Subscriptions

A private limited corporation cannot ask members of the public to subscribe to its securities, like shares or debenturies. This implies that the business may only get funds from its current owners or from outside private sources such loans or venture capital.

Eligible Individuals and Entities

Apart from the overall eligibility standards, there are particular criteria defining who may be a director or shareholder of a private limited company. As long as they satisfy the other criteria, Indian residents, NRIs, certain foreign nationals are qualified to be directors or owners.

Foreign citizens of nations having bilateral investment treaties with India, for instance, could be qualified to be directors or shareholders of a private limited company. Furthermore, depending on the particular situation, several kinds of organizations, including trusts or other businesses, can also be qualified to be directors or owners.

Private limited company registration in India might be a difficult procedure overall, but the first step is knowing the qualifying requirements. Ensuring that you and your co-founders satisfy the required criteria will help you to raise your chances of effectively starting and running a private limited business in India.

Sumitha

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