While beginning a business, everyone must choose between forming a private limited company (PLC) or another type of entity, such as a sole proprietorship, general partnership, limited liability partnership (LLP), corporation, non-profit corporation, trust, joint venture, association, etc.
Giving your business a legal identity is also essential. Also, turning your business into a PLC is by far the most sensible course of action. A PLC can register a wide range of distinct business models. The number of shares that each member of a PLC is allowed to own limits their collective liability.
You can fully comprehend the legal registration procedure for a PLC in Chennai with the aid of this blog.
Importance of Understanding the Legal Process of a Pvt Ltd Registration in Chennai
Have a look at the following information to see how valuable a PLC registration is:
- Limited liability – The main advantage of registering a private company is that the directors and shareholders of the company are granted limited liability.
- Status or recognition of the company – The business has its own legal identity, position, and market recognition after registration. It is distinct from its shareholder or director from the perspective of the law.
- Perpetual succession – Individuals come and go, or in our case, “the director may come and go,” but the firm has its existence and an everlasting succession, therefore it will always remain, according to a proverb. If a person passed away, became disabled, or retired, the corporation would carry on.
- Easy transferability – One advantage of selling the business as a continuing concern is how easy it is to transfer all of the shares to the purchaser, making it simple to change the management and ownership.
- Obtaining a loan from a bank or other organization – It is straightforward to get a loan from a bank or other financial institution once a firm has been founded because that builds a level of confidence.
- Raising money from the public – The registered corporation can raise a large amount of capital from the general public by issuing shares and taking public deposits.
Steps Involved in the Legal Process of a Private Company Registration in Chennai
1) Getting the director’s identification number (DIN) and the digital signature certificate (DSC)
Any person who is suggested for the first directorship of a new company and who does not already have a DIN shall submit an application using eForm SPICe. Proof of the applicant’s identity and address must be submitted with the application. Only after the form has been approved will a DIN be given to the user.
Sections 266A through 266G of the Companies (Amendment) Act, 2006, added the concept of a DIN. Therefore, all current and future directors are required to obtain DIN within the authorized time frame.
Any documents that the authorized person provides electronically bear the DSC stamp. It ensures the confidentiality and accuracy of documents sent electronically. A DSC is annexed to all files submitted via the MCA portal. Online transactions like LLPs, business incorporations, and income tax e-filing are validated using DSC (Digital signature certificate).
2) Name approval and reservation
One of two procedures can be used to authorize the company name:
Option 1: You can request the suggested name using the INC-32 (incorporating corporation); however, only one name may be specified. You must be certain of the proposed name and abide by the restrictions on name availability and registered trademarks to avoid rejection.
Option 2: Before filing INC-32, Form INC-1, in which up to six names may be proposed, may be submitted. Once accepted, the SRN of the INC-1 may then be placed into the INC-32.
The filing of an INC-32 is completed much more quickly than that of an INC-1. The entire process, including name approval and incorporation, takes roughly 2–3 days to complete.
If the name you want is a bit difficult to get because there are other organizations with similar names, you should file Form INC-1 rather than INC-32.
3) Drafting the memorandum of association (MOA) and articles of association (AOA)
Memorandum of Association
A company’s MOA serves as a representation of its charter. It is a legal document produced during the company formation and registration process. It describes the relationship between the firm and its stockholders as well as the purposes for which it was founded.
Articles of Association
The AOA is a suitable name for the organization’s “rule book.” The AOA includes all of the requirements and objectives of the business.
Consider the business like a machine. The AOA then serves as the device’s instruction manual. It outlines the duties that the machine must carry out as well as the most reliable means to do them.
4) Submitting incorporation paperwork to the Registrar of Companies (ROC)
The most important step, MCA registration, requires the incorporation form to be submitted. The SPICE form is made and sent with every document, including the MOA, AOA, PAN, and TAN.
5) Obtaining the certificate of incorporation (COI)
Step 1: You must first obtain a DSC.
Step 2: Be ready to obtain the DIN.
Step 3: You must register using the SPICe+ (INC 32) and INC 35 (AGILE PRO) forms after the prior step.
Step 4: Make the incorporation fee payment.
Key Legal Provisions to be Complied with after Incorporation
1) Appointment of statutory auditors
According to Section 139 of the Companies Act, 2013, the board of directors must select the company’s first auditor within 30 days of the organization’s establishment or registration.
If the auditor is not appointed, the shareholders of a company must summon an extraordinary general meeting within 90 days of receiving the board’s notification. During this meeting, the first auditor must be chosen. The concerned auditor will continue to work until the conclusion of the first annual general meeting. At the first annual general meeting, shareholders will pick a future auditor who will hold office for five years.
A notice of the appointment in Application Form ADT-1 must also be sent to the registrar within 15 days after the appointment.
2) Issuance of share certificates
Following a Pvt ltd company incorporation, the business must issue share certificates within two months of the incorporation date. Share certificates must be issued within two months after the date of the share allocation if additional shares are allotted to existing or new owners. Within a month of the day the company receives the document of transfer, share certificates must be issued to the transferee in the case of transfer of shares.
3) Compliance with annual ROC filing requirements
A short list of all the annual compliance obligations that must be fulfilled is provided below:
Every year, the board should hold at least two meetings.
Annual general meeting (AGM): There should be two AGMs every year, separated by 15 months.
A statutory auditor is required to audit the accounts.
To compile, verify, and have the financial report audited, every corporation should have a statutory auditor.
In addition to the obligatory compliance filings described above, some non-ROC compliance for PLCs includes the following:
- Payment of TDS
- Submitting and paying a GST return
- Further periodic payments
- Submitting quarterly TDS reports
- Tax payment in advance
- Submitting IT returns
- Reporting on tax audits
- Tax auditing
4) Keeping accurate records and books of accounts
Statutory audit of accounts
Before the conclusion of the fiscal year, businesses must have their accounts prepared and audited by a chartered accountant. Also, the registrar shall receive copies of those audit reports and financial statements.
Maintenance of statutory registers
It is required to keep statutory registers, minutes of board meetings, AGMs, creditors’ meetings, and debenture holder meetings.
Common Mistakes to Avoid in the Legal Process of a PLC’s Registration
For the successful registration of a PLC, one must at all costs avoid the following mistakes when pvt ltd registration:
1) Inadequate due diligence and research
To make sure there are no inconsistencies between what is claimed and what is true of the firm in question, due diligence generally entails reviewing a company’s or individual’s financial and business paperwork. This comprises:
- examining the condition of equipment/facilities
- looking at all company liability documents
- checking for recent or historical lawsuits
To validate all the data in this regard, an accountant and a barrister are typically involved.
Without conducting due diligence, a business that acquires another business exposes itself to potential liabilities and financial risks.
2) Inappropriate selection of business structure
Your business structure has an impact on several factors, including how much tax you pay, how easily you can raise capital, how much paperwork you must file, how much capital you need, how much control and management you have, how stable your company is, how flexible its management is, how you divide profits, and how much personal liability you have. Hence, before you register your business with the state government, you must select a suitable business structure.
3) Not adhering to legal obligations
If a corporation violates the provisions of the Companies Act of 2013, both the corporation and the violating members are subject to a fine for the duration that the violation is ongoing.
Additional fees are due if the yearly filing is delayed. So, it is best to complete the compliances on time.
The severity of the violation or infraction determines the penalties for non-compliance.
Offenses can be classified in accordance with the 2013 Companies Act as follows:
Based upon kind of punishment:
These cover offenses punishable with:
- Fine OR Imprisonment
- Fine AND Imprisonment
- Fine ONLY
Based upon cognizance:
- Arrests without a warrant are considered cognizable offenses.
- Non-cognizable offenses cannot be arrested without a warrant.
4) Disregarding the significance of accurate documentation
When registering a company online, the ROC is quite particular regarding the paperwork that must be presented. For instance, if an applicant submits a voter ID and a passport as identification documents and there are any name conflicts on either document, there is a potential that the application will be rejected or would need to be resubmitted, which could cause a few days’ worths of delay. It is unacceptable to make even a single small error.
One of the highly suggested ways to launch a business in India is by establishing a PLC. PLCs can enter into contracts, possess assets, and file or respond to lawsuits because they have a distinct legal character. They also gain from a variety of tax advantages, simple funding choices, and increased credibility.
The ability to transfer ownership of the business through the sale of shares makes registration an additional stable and long-term investment option. Private limited company registration is a popular option for new and small enterprises in India because it provides several benefits overall.
The following primary headings have served as discussion points for this blog post’s main ideas:
- Importance of understanding the legal process of a PLC’s registration in Chennai
- Steps involved in the legal process of a PLC’s registration in Chennai
- Filing incorporation documents with the ROC
- Key legal provisions to be complied with after incorporation
- Common mistakes to avoid in the legal process of a PLC’s registration
The importance of seeking professional assistance for a PLC registration in Chennai
It can be difficult to register a private limited company in Chennai, but by avoiding common blunders like choosing a company name without doing any research, failing to have the required paperwork, choosing the incorrect business structure, failing to comprehend the legal requirements, and failing to have a concise business plan, you can ensure that the process goes more smoothly and that your application will be approved. You can ultimately save time, money, and stress by doing your study, understanding the legal requirements, and getting professional assistance.
Based on what we’ve covered so far, we believe that this blog will be of interest to anyone who wants to fully understand the registration procedure for a PLC.
FAQs On Private Limited Company Registration
A private limited company is a group of persons who manage a tiny business. Members of a Private Limited Company are only responsible for the quantity of shares that they actually own. Private Limited Company shares cannot be exchanged on a public market.
Yes, a small business can apply to become a private limited company with the Indian government. They gain credibility and a good impression of their business in the eyes of vendors, potential clients, and financial institutions. It enables the firm to enter into contracts with potential clients or banks and acquire financing with little compliance.
Private limited company is the simplest and most widely used kind of business registration in India. It can be registered with at least two individuals. It is the most suggested type of business entity for the vast majority of small and medium-sized businesses, whether they are family-owned or managed by professionals, due to the limited liability protection provided to shareholders, the ability to raise equity funds, and the separate legal entity status.
Limited Liability Partnerships are defined as those in which the partners have limited liability at that time (LLP). LLP essentially combines the terms "company" and "partnership." Professionals, medium-sized firms, and small businesses typically prefer it as an alternative method of business registration in India. Limited The LLP Act of 2008 and the LLP agreement signed at the time of incorporation serve as its legal framework.
After receiving the DSCs and DINs, the next step is to file the Form INC-1 to ensure the availability of the proposed name of the private limited business. The company's Memorandum of Association (MOA) and Articles of Association (AOA) will then be drafted if necessary. Finally, Form INC-29 together with all necessary documents will be submitted to the relevant ROC for incorporation of the proposed business.
There is no longer a specific form needed to obtain the DIN if a person wants to become a director of the company. Instead, they must apply for the Director Identification Number. The SPICe form can be used to apply for a DIN. There is no unique form needed.
It is necessary to submit the needed fee together with documentation of the applicant's identity and residence. Approval of the DIN typically takes 3–4 days. Once you receive your DIN, you can use it forever.
In the perspective of financial institutions, suppliers, and potential customers, it gives business credibility. It makes it simpler for businesses to persuade potential customers to enter into arrangements or to obtain loans from banks at advantageous rates.
Yes, after following the Companies Act, 2013, procedures, a sole proprietorship can become a private business registered.
The following documents must be submitted when a private limited company is registered in India:
Picture of each Director taken by PAN ID card for each Director All Directors' Identification (Driver's License, Passport, or Voter ID)
Electric bills, such as an electricity bill, can serve as evidence of a registered office's address.
For a private limited company to be incorporated, there must be a minimum of two directors. One Person Company (OPC) private limited, which allows a single person to establish a private limited company, was created by the Companies Act of 2013. Consequently, if you want to incorporate OPC, you can do it with just one director.
Yes, registration for a private limited company is required because a firm cannot exist without registration.
Following are the ROC requirements that a Private Limited Company must meet:
- Form ADT 1: Within 30 days of incorporation, the BOD shall appoint the company's first auditor, who shall serve in that capacity until the end of the first annual general meeting
2. Form MGT 7: Every year, Form MGT-7 must be submitted by all Indian enterprises. The Ministry of Affairs provides all corporations with an electronic form to complete in order to submit their annual return information. Within 60 days of the date of the annual general meeting, MGT-7 must be filed.
3. Form AOC 4: Within 30 days of the annual general meeting, every private limited company must file its balance sheet, a statement of profit and loss, and a director report in this form.
The above forms must be CA/CS/CWA certified.
The Ministry of Corporate Affairs must receive an application from anyone wishing to register a new company in India (MCA). You can submit your application remotely through the MCA site online. A Digital Signature Certificate (DSC) and a Director Identity Number (DIN), among other things, are required for registration.
- Apply for DSC (Digital Signature Certificate)
- Request a DIN (Director Identification Number)
- Request the availability of the name.To register the private limited corporation, file the EMOA and EAOA.
If a One Person Company's paid up capital surpasses Rs. 50 lakhs or its annual sales turnover exceeds Rs. 2.00 crores, it must be legally transformed into a Private Limited Company.
(Aadhar card, driver's license, ration card, voter ID) evidence of residence (Electricity bill or bank statement) Rental agreement notarized. The property owner's NOC, or No Objection Certificate, is required.