Registering a Private Limited Company in India involves a series of steps under the Companies Act, 2013. It offers benefits such as limited liability, a separate legal identity, and ease of raising funds. A private limited company in India requires a minimum of two directors and two shareholders for its establishment. The structure requires no minimum capital to operate its business.
In this guide, we will explore the meaning of a private limited company, the entire registration process, and post-registration compliance requirements.
What is a Private Limited Company?
A Private Limited Company is a company that is privately owned by a group of individuals. It restricts the number of shareholders to 200 and prohibits public trading of its shares. It is registered under the Companies Act, 2013, and is governed by the rules set by the Ministry of Corporate Affairs (MCA).
Benefits of Choosing a Private Limited Company
The main advantages of registering your business as a Private Limited Company:
- Limited Liability: Shareholders’ liability is limited to the amount unpaid on their shares. Their personal assets are protected in the event of business loss.
- Separate Legal Identity: The company is a separate legal entity from its owners and can own assets, incur liabilities, and enter into contracts independently of its owners.
- Perpetual Succession: The company continues to exist even if the ownership changes, directors resign, or pass away.
- Easy Fundraising: Due to its transparent structure, a PLC is preferred by investors and banks. It can also issue equity shares to raise capital from venture capitalists and angel investors.
- Brand Recognition and Credibility: A registered Private Limited Company enjoys better credibility and a more professional perception than unregistered or informal entities, such as proprietorships.
Eligibility Criteria for Private Limited Company Registration
Before registering a Private Limited Company, ensure the following requirements are met:
- Minimum 2 Directors: At least one must be a resident of India.
- Minimum 2 Shareholders: Directors can also be shareholders.
- Maximum 200 Shareholders
- Registered Office Address in India
- Unique Company Name not already registered or trademarked
Documents Required for Company Registration
You will need to prepare and submit the following documents:
Documents for Directors and Shareholders
- PAN Card (for Indian Nationals)
- Passport (for Foreign Nationals)
- Aadhaar Card / Voter ID / Driving License
- Passport-size Photograph
- Address Proof (Utility bill or bank statement, not older than 60 days)
Documents for Registered Office
- Proof of Address (Electricity bill, water bill, property tax receipt)
- No Objection Certificate (NOC) from the property owner (if rented)
- Rent Agreement or Ownership Document
Company Incorporation Documents
- Memorandum of Association (MoA)
- Articles of Association (AoA)
- Form DIR-2 (Consent to act as director)
- Form INC-9 (Affidavit by subscribers)
- Share Capital and Shareholding Pattern
- Declaration by Promoters and Directors
Step-by-Step Process for Company Registration
- Obtain a Director Identification Number (DIN) and Digital Signature Certificate (DSC) for all directors.
- Choose a Company Name: Ensure the name is unique, not previously used by any other company, and complies with the rules of the Ministry of Corporate Affairs. The suffix “Private Limited” should be included.
- Fill out the SPICe+ e-form: The form is available on the MCA portal and has two parts: one for name reservation and the other for Company incorporation, DIN allotment, PAN, TAN, etc.
- Draft MOA and AOA: Once MCA has approved your company’s name, the next step is to draft the Memorandum of Association and Articles of Association for the Company.
- Memorandum of Association (MoA): It defines the scope of work of the company and its main objectives. It is pertinent that a company cannot engage in any activity outside its scope as outlined in the Memorandum of Association (MOA).
- Articles of Association (AoA): These outline the internal management of the company, including the roles and responsibilities of directors and other officers, the decision-making process, shareholding rights, and rules and procedures governing the issuance of shares.
- File Incorporation Application: Submit the necessary documents (Memorandum & Articles of Association, Director details, NOC from the landlord, etc.) online on the MCA portal.
- Sign the Subscription Agreement: Directors subscribe to shares and sign the Memorandum of Association and Articles of Association.
- Get Certificate of Incorporation: Once approved, you will receive the Certificate of Incorporation, officially making your company a legal entity.
Post-Registration Compliance Checklist
Once your Private Limited Company is incorporated, it must comply with the following statutory requirements:
- Open a Bank Account: Open a current account in the company’s name using the Certificate of Incorporation (COI), PAN, and other incorporation documents.
- GST Registration: It is mandatory if the annual turnover exceeds the threshold limit (₹40 lakhs or ₹20 lakhs based on the state).
- Appointment of Auditor: The first auditor must be appointed within 30 days of incorporation of the company.
- Board Meetings: The first board meeting must be conducted within 30 days, and minutes and statutory registers must be maintained.
- ROC Filings: File annual returns Form MGT-7 and financial statements Form AOC-4 with the MCA.
- Income Tax Compliance: File Income Tax Return annually and comply with TDS, advance tax, and other applicable tax laws.
Checklist for Private Limited Company Registration
Here is a checklist drafted for your convenience to ensure that your Private Limited Company is registered successfully:
- Shareholders: Make sure that there are at least two required (max 200)
- Directors: At least 2 (can be the same as shareholders)
- Attach Director Identification Number (DIN): The DIN is allotted by the Central Government of India, and the director needs to file a DIR-3 application through the SPICe e-form.
- Digital Signature Certificate (DSC): The DSC is issued by the officer of the Controller of Certifying Authorities. It is applied online and is required for all online filings
- Company Name: Make sure the company name is unique. Check the name availability at the MCA portal and add “Private Limited” at the end.
- Registered Office Address Proof: A lease agreement or a No Objection Certificate (NOC) from the landlord is required. You can attach utility bills, such as electricity bills, for two months.
- Identity Proof of Directors & Shareholders: PAN, Aadhar, Passport, or Driving License
- Address Proof of Directors & Shareholders: Utility bills, bank statements, or lease agreement
- Memorandum and Articles of Association: Ensure they are well-drafted. Take the help of a professional to avoid any hassle.
- Declaration and Affidavits: The declaration forms have to be signed correctly, and do not forget to attest the affidavit by an authorised notary.
Conclusion
Private Limited Company Registration in India is not just a legal formality; rather, it is the beginning of a business journey. With its benefits, including limited liability, investor confidence, and legal recognition, it provides the right foundation for entrepreneurs seeking growth. While the registration process may seem detailed, it becomes seamless when approached step by step, with the proper documents and compliance in place. By meeting the legal requirements and staying proactive about post-incorporation duties, your company will not only be compliant but also well-positioned for long-term success in India’s dynamic business landscape.
