While beginning a business, everyone must choose between forming a private limited company in Chennai or another entity type, 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 private company is the most sensible action. A private limited company can register a wide range of distinct business models. The number of shares each member of a PLC can own limits their collective liability.
You can fully comprehend the legal registration procedure for Pvt Ltd in Chennai with the aid of this blog.
Have a look at the following information to see how valuable a private limited company 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 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 continue.
- 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 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 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 a DSC.
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 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 other organizations have 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 and 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 the machine must carry out and the most reliable means to do them.
4) Submitting incorporation paperwork to the Registrar of Companies (ROC)
The most important step, MCA registration, requires submitting the incorporation form. 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: After the prior step, you must register using the SPICe+ (INC 32) and INC 35 (AGILE PRO) forms.
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 transfer document, 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 yearly, separated by 15 months.
A statutory auditor is required to audit the accounts.
Every corporation should have a statutory auditor to compile, verify, and audit the financial report.
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 Pvt Ltd Registration in Chennai
For the successful registration of a Pvt Ltd, one must at all costs avoid the following mistakes when pvt ltd registration:
1) Inadequate due diligence and research
To ensure no inconsistencies between what is claimed and what is true of the firm, 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
An accountant and a barrister are typically involved in validating all the data.
Without 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, you must select a suitable business structure before registering your business with the state government.
3) Not adhering to legal obligations
Non-compliance
Suppose a corporation violates the provisions of the Companies Act of 2013. In that case, both the corporation and the violating members are subject to a fine for the duration of the ongoing violation.
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 under 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 will need to be resubmitted, which could cause a few days’ worth of delay. It is unacceptable to make even a single small error.
Conclusion
A highly suggested way to launch a business in India is by establishing a private company. Private limited companies can enter into contracts, possess assets, and file or respond to lawsuits because they have a distinct legal character. They also gain from various tax advantages, simple funding choices, and increased credibility.
The ability to transfer business ownership through the sale of shares makes registration an additional stable and long-term investment option. Private limited company registration in Chennai is a popular option for new and small enterprises in India because it provides several benefits.
