Introduction

The concept of ‘Private Limited Company’ has evolved to facilitate ‘private ownership’ of a business. It is the type of business entity in which the shareholders cannot trade their shares outside the company without first seeking the consent of other members.

What is a Private Limited Company?

A ‘Private Limited Company’ is defined by way of section 2(68) of the Companies Act, 2013 as a company with a minimum paid-up share capital and the AOA of such company restricting the transfer of shares and number of members to 200. However, such a bar on the number of members shall not be operative for a one-person company.

What are the features of a Private Limited Company?

1. Limited Liability
2. Separate Legal Entity
3. Capital adequacy
4. Free from typical procedures
5. Efficient decision-making process

Minimum requirements of a Private Limited Company

A company becomes eligible to attain the status of a Private Limited Company when it satisfies the following requirements:

1. The company should have 2 directors at least.
2. The authorized share capital of a company should be ₹1,00,000 or more. However, the minimum paid-up share capital does not need to be ₹1,00,000 and it can be any amount that suffices the needs of the business.

Compliance requirements for incorporation of a Private Limited Company

A Private Limited Company for its incorporation has to go through the following compliance procedures:

Step 1: Obtain Digital Signature Certificate

It is important to first apply for a Digital Signature Certificate for the subscribers to the Memorandum of Association (MOA). A Digital Signature certificate for the authorized signatory is necessary as the same needs to be attached to any form filed with the Ministry of Corporate Affairs.

Step 2: Obtain DIN for directors

Also, Director Identification Number (DIN) should be obtained by the directors of such Private Limited Company. DIN is quite similar to PAN Number and gives authority to the director to make decisions on behalf of the company.

Section 152(3) of the Companies Act, 2013 clarifies that a person is not qualified to be appointed as the director of a company unless he has a DIN allotted under section 154.

Step 3: Filing of Application for Reservation of Name

For a Private Limited Company to be incorporated, it must reserve its name first. An application through the RUN form should be made for the reservation of the name of a Private Limited Company.

However, one can directly apply for a name in the form SPICe-32 if one is sure that the applied name is unique, novel, and has no resemblance with the name of an already existing company.

Step 4: Documents needed for incorporation

For incorporation of a Private Limited Company, the shareholders and directors need to submit scanned copies of the following documents with the Registrar of Companies:

1. PAN Card
2. Any Identity Card issued by the Govt. of India
3. Bank statement
4. Utility Bills
5. Passport-size photograph
6. Specimen’s signature

Step 5: Application for Certificate of Incorporation

SPICe Form 32 is used to seek a certificate of Private Limited Company Registration. The applicant needs to provide the following details while filling out the SPICe Form 32:

1. Name of the company,
2. Address of the registered office and correspondence address,
3. Contact details of the company,
4. Authorized capital and paid-up share capital of the company,
5. Details of subscribers,
6. Details of PAN and TAN of the company,
7. Source of Income of the company, and
8. Declaration that the application complies with the provisions of the Companies Act, 2013 and rules made thereunder.

Step 6: Issue of Certificate of Incorporation 

After the Registrar of Companies verifies the application under SPICe Form 32 and relevant attachments, he issues the Certificate of incorporation to the concerned Private Limited Company.

Conclusion

A Private Limited Company is that type of business entity where the transfer of shares is restricted and the maximum number of members is 200. On one hand, it does not need many compliance procedures to be followed and on the other hand, has perks like limited liability, separate legal entity, efficient decision-making process, and so on. For its incorporation, the DSC, DIN, and other documents of directors should be obtained and then submitted to the Registrar of Companies along with SPICe Form 32.