As the name suggests, a private limited company is a privately-held business entity. It is held by private stakeholders. The liability arrangement in a Private Limited Company is that of a limited partnership, wherein the liability of a shareholder extends only up to the number of shares held by them. The shareholders cannot be held liable beyond the value of the shares. The governing body for such a company is the Ministry of Corporate Affairs (MCA) explained by Edge Legal.
Section 2 (68) of the Companies Act, 2013 defines a private company as:
“A Company having a minimum paid-up share capital as may be prescribed, and which by its articles,— (i) restricts the right to transfer its shares; (ii) except in case of One Person Company, limits the number of its members to two hundred; (iii) prohibits any invitation to the public to subscribe for any securities of the company.”
Characteristics of a Private Limited Company Registration
Now that you know what a private limited company is, the next step is to know the characteristics of such a company:
- Membership: Like any other company, a minimum of two shareholders are required in order to start such a company. But since it remains a small entity, there is also a maximum cap on the number of members fixed at 200. There is also a requirement of two directors to run the company
- Limited liability structure: In a private limited company, the liability of each member or shareholder is limited. Therefore, even in the case of loss under any circumstances, the shareholders are liable to sell their own assets for repayment. However, the personal and individual assets of the shareholders are not at risk
- Separate legal entity: This is a separate legal entity and continues in perpetual succession. This means that even if all the members die, or the company becomes insolvent or bankrupt, the company still exists in the eyes of the law. The life of the company will be perpetual, not affected by the lives of its shareholders or members unless dissolved by way of resolution
- Minimum paid-up capital: A private limited company doesn’t require to have a minimum paid-up capital but in practice, we will start it from Rs. 1 lakh. It could go higher, as per the requirement of the organization and if prescribed by MCA.
A company can raise equity capital from persons or entities interested in becoming a shareholder. Entrepreneurs can raise money from angel investors, venture capital firms, private equity firms, and hedge funds.
Documents Required for Private Limited Company Registration:
Identity proof of Directors and Shareholders
- PAN Card for Indian Nationals (Mandatory)
- Passport for Foreign Nationals (Mandatory)
- Proof of nationality for Foreign Nationals
- Proof of Identity (Voter ID/Passport/Driving License) (anyone)
- Resolution of the board of company / LLP for authorization of director/partner
- 2 Passport size photos.
Address proof of Directors and Shareholders
- Bank statement/Electricity/Telephone/Mobile bill) (not older than two months) (anyone)
Proof of Registered office
- Conveyance/ Lease deed/Rent Agreement etc. along with rent receipts (anyone)
- Copy of the utility bills (Telephone/Gas/Electricity bill) (not older than two months) (anyone)
- NOC from Landlord
- DSC form (physically signed)
Note: All the Documents in the case of the Foreign Director should additionally comply as follows:
- Notarized (if residing in commonwealth countries)
- Notarized & Apostiled (if residing in a country which is a signatory to Hague convention)
Notarized & Consularised (If not covered in above categories)
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