Under the existing Indian Rules & Regulations, a company can be a Private Limited Company or Public Limited Company or a One Person Company.
What is a Public Limited Company?
A Public Limited Company is a Company limited by shares must have minimum paid-up share capital of Rs. Five Lakh. In this case, there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager/Officer of such a Company remains unlimited under certain circumstances. The minimum number of shareholders is 7 (Seven).
Advantages of a Limited Company
It has following advantages:
Disadvantages of a Limited Company
It has the following disadvantages:
What is a Private Limited Company?
A Private Limited Company is a Company limited by shares must have minimum paid-up share capital of Rs. One Lakh. It can have maximum 200 (Two Hundred) shareholders and it cannot invite public for subscription of its shares or debentures. Further, the shares of Private Limited Company are not freely transferable under the Companies Act, 2013. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager/Officer of such a Company remains unlimited under certain circumstances. The minimum number of shareholders is 2.
Comparison between Private Limited Company & Public Limited Company:-
|REQUIREMENT||PRIVATE LIMITED COMPANY||PUBLIC LIMITED COMPANY|
|Minimum Paid-up Capital of the Company||INR 100000||INR 500000|
|Minimum number of Shareholders||2||7|
|Maximum number of Shareholders||200||No Limit|
|Number of Directors||At least 2 Directors is required. Further, one Director must be Resident in India.||At least 3 Directors is required. Further, one Director must be Resident in India.|
|Quorum||Two members present personally to constitute quorum for any meeting||Five members must be present personally to constitute quorum for any meeting, where number of Shareholders are less than 1000.|
|Transfer of Shares||Restriction Can be imposed||Restriction cannot be imposed|
PROCEDURE FOR INCORPORATION OF PRIVATE LIMITED COMPANY
1. Acquire Digital Signature (DSC) and Director Identification Number (DIN) for the proposed Promoter director of the Company
2. Name Approval:
An application in Form No. INC 1 needs to be filed with the Registrar of Companies (ROC) of the state in which the Registered Office of the proposed Company is to be situated.
Following details are required to be stated in the application:-
1. Five alternative names for the proposed company. The name can be coined names from the objects of the proposed company, or the names of the directors, etc. but should definitely be indicative of the main object of the company. The foreign nationals can have identical name of its parent company, subject to terms & conditions as may be imposed by the ROC.
2. Details of Promoters and Directors of the Proposed Company
3. Authorized Capital of the proposed company.
4. Main objects of the proposed company.
5. Names of other group companies.
On submitting the application, the ROC scrutinizes the same and sends the approval / objections in about 10 days to the applicant. On fulfilling of the objections a formal letter of name approval is issued. Name will be allowed for 60 days only from the date of filing of application for reservation of name.
3. Drafting of Incorporation documents
On receipt of the name approval letter from the ROC, the incorporation documents like Memorandum of Association ( MOA) & Articles of Association ( AOA), Form INC 9, Form INC 10 etc are required to be drafted. The MOA and AOA are charter documents of the company . Therefore, these documents should be drafted with due diligence and by a professional having in depth knowledge of the business and Applicable Indian Rules & Regulations. The MOA states the main and incidental or ancillary objects of the proposed company. It also states the authorized share capital of the proposed company and the names of its promoters. The AOA contain the rules and procedures for the routine conduct of the proposed company. It also states the names of its first / permanent directors of the proposed Company.
Documents required for incorporation of the company
The following documents are required to be executed (signed) before they are submitted to the ROC.
Execution of the documents before filing for Registration
Once the documents as stated above, are properly drafted, these will be signed by the promoter directors and the consultant responsible for incorporation of the company. Further these documents needs to be notarized & legalized in case the documents has been signed outside India. Thereafter these documents will be submitted to the ROC for incorporation of the company alongwith requisite fee as prescribed under the Act.
Issuance of certificate of incorporation by the ROC
The Registrar of Companies on being satisfied about the documents filed and contents thereof , will issue certificate of incorporation. The certificate so issued by the ROC is conclusive proof of incorporation of the company in India under the Companies Act, 2013..
When can a newly incorporated company commence its business operations?
A company can commence its business activities on receipt of approval of declaration filed by the company in form No. INC 21 from the ROC. In fact, INC 21 confirms to the ROC that the subscribers of the MOA has paid their due contribution as per commitment made by them at the time of incorporation of the company.
Time Schedule for Incorporation of Company
Normally a Private Limited Company can be presumed to commence its business activities within 30-45 days provided the clients furnished proper detail and documents on time.
How do comply with the legal formalities when the Foreign Nationals (Directors/shareholders) are not stationed in India?
The company can designate Indian director on the board to execute and sign necessary documents and deed on behalf of the company in the regular course of business without Foreign Nationals being physically present in India. Or else, the Foreign Nationals director can appoint “Alternate Director” to act on his behalf. In any case, under Companies Act, 2013, every Company incorporated in India must have one director on the board who must also stay in India for more than 180 days in a year.
What other approvals/formalities are required for foreign investor in India for commencement of business before and after setting up company in India?
Incorporation of Subsidiary of a Foreign company in India.
A foreign company planning to form a subsidiary in India, in addition to meeting all requirements of forming a company, is required to seek governmental approval before investing in India. Some approvals are automatic, -RBI Approvals - though application is required for those approvals. Special Permission - FIPB Approvals - could be obtained to invest over and above the regular percentage allowed.
Minimum Capital requirement for setting up a Private Limited Company
The minimum Capital requirements for incorporation of Private Limited Company is INR 1,00,000 or equivalent to USD/EURO (about USD 1,700/1250 EURO) and for Public Limited Company it is INR 5,00,000 or equivalent to USD/Euro ( about USD 8500 / about Euro 6250) . The company can increase its Authorized Capital any time, by way of payment of additional applicable fee to the Registrar of Company (ROC) in normal course of business.
Difference between authorized capital and paid up capital
The authorized capital is the capital limit up to which the shares can be issued to the members / public, as the case may be. The paid up share capital is the paid portion of Authorized Capital of the Company.
Every company needs to be registered in India must have permanent place of business. In fact, this is the address where all official correspondence take place during the course of business unless, until the company desires to have different correspondence address. In the normal practice, the consultant office is being used to establish the company to begin with.
All companies must have an engraved seal made of metal or any other material. It is needed to authenticate various contracts and other deeds including share certificates.
What is One Person Company?
One person Company ( OPC) is a legitimate way to form a company with only one member. OPC can work like Proprietorship but it holds the status of company and of course enjoys the benefits that comes with it ( limited liability, trust factor, least compliances etc, However, privilege of incorporation of OPC is available only to the Indian Residents.
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