Private Limited company

A private limited company is defined as a voluntary association of not less than two and not more than 200 members, whose liability is limited, the transfer of whose shares is limited and not allowed to invite the general public to subscribe to its shares or debentures. Main features are:

  • Independent legal existence
  • Less cumbersome to organize and operate as it has been exempted from many rules and regulations a public limited company is subjected to. Some of them are:
    • Need not file a prospectus
    • Need not obtain a Certificate for Commencement of business
    • Need not hold statutory general meeting nor need it file the statutory report
    • Restrictions placed on the directors of the public limited company do not apply to its directors.
  • Liability of its members is limited
  • Shares allotted are not freely transferable between members
  • Enjoys continuity of existence
  • Need a registered office and name
  • Requires signed Memorandum of Association and Articles of Association.
Advantages Disadvantages
Continuity of existence Shares not freely transferable
Limited liability Not allowed to invite public to subscribe
Less legal restriction to shares

Suitable for: people seeking to take advantage of limited liability, but at the same time desire to keep control over the business within a limited circle and maintain the privacy of their business

Steps To Be Taken To Incorporate A New Company

  1. Obtain Director Identification Number DIN for proposed Directors of the new Company.
  2. Obtain Digital Signature Certificate DSC for proposed Directors of the Company.
  3. Filing the proposed name of company for approval to the Registrar of Companies (ROC).
  4. Get the Memorandum of Association and Articles of Association printed.
  5. Pay stamp duties online.
  6. File all incorporation forms and documents online, including the Memorandum of Association and the Articles of Association.
  7. Obtain the certificate of incorporation.
  8. Request and obtain Certificate to Commence Operation.

5 important compliances for Private Limited Companies

Get the basics right – Alteration of Objects Clause

The company formation document “Memorandum of Association” has an “Object Clause” which defines the business company undertakes. Before April 2014, a simple resolution with consent of Board of Director would have sufficed to undertake any other business activity beyond the coverage of main object clause.

How to comply: Now, with effect from 1st April 2014 all such Companies who were/are carrying of activities other than principal business activities as mentioned in the other objects are required to alter the main objects and include such activities therein.

Consequences: If the provisions are not complied, such business activity shall be treated as ultra-virus. Consequently, owing to multiple business activities, the Companies may also be required to change its name.

Displaying Company Identity – CIN on letter heads, invoices etc.
Acceptance of Unsecured Loan by Pvt. Ltd Companies
Deposits Taken from Public
Borrowing Money by Private Companies

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