Many start-ups register as a ‘Private Limited Company’ as it is the only entity to get Seed funding. It is thus the most popular legal entity in India.
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What is Private Limited 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. A Private Limited Company is a Company which is owned by at least two shareholders. Also, there is a requirement that at least two directors should be there to form a Private Limited Company.
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A Private Limited Company is a type of Company that offers limited liability or legal protection for its shareholders but that places certain restrictions on its ownership.These restrictions are defined in the Company’s bylaws or regulations and are meant to prevent any hostile takeover attempt.
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Entrepreneurs who want a Separate Legal Entity with Limited Liability and Perpetual Succession.
Entrepreneurs who want to issue ESOP’s to their employees.
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Any person above 18 years can become a director. Non-residents can also become director of Indian companies.
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 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 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.
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 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 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.
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.