Characteristics of a Private Limited Company

A private limited company is a popular form of business structure in India, commonly used by small and medium-sized enterprises. It is a privately held company where the shares are not available for public trading, and the general public cannot be invited to invest in the company.

Definition of a Private Limited Company

As per Section 2(68) of the Companies Act, 2013, a private limited company is defined as a company with a minimum paid-up capital as prescribed by the Act. Its articles of association must:

• Restrict the transferability of shares.
• Limit the number of members to 200, excluding One Person Company (OPC).
• Restrict any public invitation to subscribe to its securities.

Additionally, employees and ex-employees who held shares during their employment are not counted as members after their tenure ends.

Key Features of a Private Limited Company

1. Members: A private limited company must have at least two members, and the maximum number of members cannot exceed 200.
2. Directors: A minimum of two directors is required, and the maximum limit is 15 directors.
3. Limited Liability: The shareholders’ liability is limited to the amount they have invested or committed to invest in the company. They are not personally responsible for the company’s debts.
4. Perpetual Succession: The company will continue to exist regardless of changes in ownership, insolvency, or death of its members.
5. Capital Requirements: While a private limited company must have an authorized share capital of Rs. 1 lakh, there is no minimum requirement for paid-up capital due to recent amendments.
6. Name: The company must include “Private Limited” at the end of its name. For example, “ABC Pvt. Ltd.”
7. No Public Prospectus: A private limited company cannot issue a prospectus to the public for inviting them to subscribe to its shares.
8. Index of Members: Unlike public companies, a private limited company is not required to maintain an index of its members.

Types of Private Limited Companies

Private limited companies can be classified based on their member liabilities:

• Limited by Shares: Members’ liability is limited to the unpaid amount on their shares.
• Limited by Guarantee: Members agree to pay a specified amount if the company is wound up.
• Unlimited Liability: Members have unlimited liability, meaning their personal assets can be sold if the company is liquidated.

Requirements for Registering a Private Limited Company

1. Members: The company must have at least two members but not more than 200.
2. Directors: A minimum of two directors is required. All directors must have a Director Identification Number (DIN), and at least one director must be an Indian resident.
3. Name: The proposed name must be unique and approved by the Registrar of Companies (ROC).
4. Registered Office: A valid address must be provided, and it should be established as the official office within 30 days of incorporation if a temporary address is initially provided.
5. Digital Signature Certificate (DSC): All documents must be digitally signed, so directors must obtain a DSC.
6. Professional Certification: A chartered accountant, company secretary, or other professional must certify the application for company registration.

Steps to Register a Private Limited Company

1. Obtain DSC: All directors must acquire a Digital Signature Certificate for submitting documents online.
2. Obtain DIN: Directors must get a Director Identification Number.
3. Name Reservation: Propose a unique company name using the SPICe+ form. Once approved, it is reserved for 20 days.
4. Filing SPICe+ Form: The SPICe+ form provides multiple services like name reservation, DIN application, and PAN/TAN application.
5. e-MOA and e-AOA: File electronic versions of the Memorandum of Association (e-MOA) and Articles of Association (e-AOA) online.
6. PAN and TAN Application: Apply for the company’s PAN and TAN through the SPICe+ form.

Once all forms are correctly submitted, the ROC will approve the registration, issue a Corporate Identity Number (CIN), and send the Certificate of Incorporation to the registered office.

Documents Required for Private Limited Company Registration

• Affidavit from subscribers expressing their intention to become shareholders.
• Proof of office address (rental agreement or ownership deed).
• NOC from the property owner (if the office is rented).
• Utility bills (not older than two months) for office address verification.
• Identity and address proof of directors.

FAQs

1. What is the minimum number of members required to form a private limited company? A private limited company must have at least two members, and the maximum limit is 200.

2. Can a private limited company invite the public to subscribe to its shares? No, a private limited company cannot invite the public to subscribe to its shares.

3. How many directors are needed to register a private limited company? A minimum of two directors is required to register a private limited company.

4. Is there a minimum capital requirement for a private limited company? No, there is no minimum paid-up capital requirement for private limited companies after recent amendments to the Companies Act.

5. What are the main documents required for private limited company registration? Key documents include identity proof of directors, office address proof, and an affidavit from shareholders.