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What is a private limited company?
Private limited company is a perfect start for anyone who wants to start their business to give it a separate legal identity. Private limited company can be formed with ease and its procedural compliance are also easy when compared to that of a public company.
A private limited company, or LTD, is a type of privately held small business entity. This type of business entity limits owner liability to their shares, limits the number of shareholders to 50, and restricts shareholders from publicly trading shares.
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What are the Features of Private Limited Company ?
Members: To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the companies act 2013.
Limited Liability: This is perhaps the most important feature of Private Limited Company. Imagine a scenario, where someone filed a claim against you more than your business assets. In such a case, your personal assets can also be bought and sold to pay the debt.
Number of Directors: As per the Act of 2013, a Private Limited Company needs to have at least 2 directors. Although they are not required to appoint any independent directors.
Limited Liability: In a Company, a person holds liability to the amount of shares he holds. Unlike partnership, there will be no risk on the assets of a shareholder and he will not be required to pay anymore than the value of the shares he holds.
Fund Raising Capacity: It is the only form of business other than public limited company to raise fund from the Venture Capitalist or Angel investors. It cannot go to public like other big companies.
Protection Against Liabilities: if the company became insolvent the investment in the company would be lost but the shareholders would not be pursued for any shortfall to pay creditors unless they were proved to have acted recklessly.
Prospectus: The private companies need not issue prospectus or file statement in lieu of prospectus with the Registrar of Companies.
Deposits cannot be accepted– Company cannot appeal for money from the public .There are also some restrictions on the sale or transfer of its shares by the shareholders.
Minimum subscription– Company receives the amount which is 90% of the shares issued within a certain period of time. In case the company if the company is not able to receive 90% of the amount then they cannot commence further business.
A company enjoys separate legal identity unlike partnership firms.
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Then you need to apply for PAN and TAN. PAN and TAN are received in 7 working days. Post this, you can submit the Incorporation certificate, MOA, AOA and PAN with a bank to open your bank account.
What are the requirements to be a director?
Any person above 18 years can become a director. Non-residents can also become director of Indian companies.
What are the documents required for registration?
ID proof and residence proof of all the proposed directors, PAN card is mandatory for Indian nationals. No objection certificate from the owner of registered office or lease agreement must be produced.
What is a digital signature certificate (DSC)?
Digital signature is process to authenticate and validate records electronically. DSC is required for every director of the company as the Ministry of Corporate Affairs (MCA) mandates digital signature of directors on some documents.
What is authorized capital fee?
Authorized capital of a Company is the amount of shares a company can issue to its shareholders. Companies have to pay authorized capital fee to the government so as to be able to issue shares. Companies have to pay authorized capital fee for a minimum of Rs.1 lakh.
Can a foreign national be a director in a private limited company?
Yes, a foreign national can become director of a private limited company. Atleast one director in a company should be resident Indian.
Can NRIs or foreign nationals hold shares of a private limited company?
Yes, NRIs / Foreign Nationals / Foreign Companies can hold shares of a Private Limited Company subject to Foreign Direct Investment (FDI) Guidelines.
Can a partnership firm be converted into private limited company?
Yes, a partnership firm can be converted into private limited company by following the procedure laid down in Companies Act 2013.
How many directors can be appointed?
A private limited company must have a minimum of 2 directors while the maximum no. of directors can be upto 15.
What are the requirements with regard to the company’s name?
Company’s proposed name should be unique i.e., it should not be identical to any existing name. Names that infringe others’ rights, trademarks or patents are likely to be rejected by ROC
What is Director Identification Number (DIN)?
DIN is a unique identification number which is allotted to all the directors existing or proposed. DIN can be obtained by filing e-form DIN1 in MCA portal.
What are the statutory compliances required for a private limited company?
Every private limited company must hold a board meeting atleast once in every three months and an Annual general meeting (AGM) every year.
Can a private limited company be later converted into public limited company?
Yes, Companies Act 2013 provides rules for converting a private limited company into a public limited company.