Establishing a private limited company is undoubtedly one of the turning points in every entrepreneur’s career. That is a journey to the land of legal creatures, both offering opportunities and ensuring safety through limited liability. We will now explore the details of the procedure of private limited company registration in Delhi, highlighting the elements particular to Delhi and the Indian regulatory system with the help of Taxcellent, the Tax Partner.
1. What is a Private Limited Company?
A private limited company having limited share capital is a legal entity separate from its shareholders, offering limited liability protection wherein the liability of shareholders is limited to the extent of their shareholding. In India, a private limited company is governed by the Companies Act, 2013, and is identified by restrictions on the transferability of shares, prohibition on public offering of shares, and a cap on the number of shareholders, typically not exceeding 200.
2. What are the important Features of Private Company Limited?
- Benefit of Limited Liability: Shareholders have limited liability, wherein their personal assets are safeguarded from the company’s liabilities.
- Restrict on Share Transferability: Shares of a private company limited are not freely transferable. It requires approval from existing shareholders or in accordance with the provisions of the Articles of
- Minimum Share Capital: Private companies are not required to have a minimum share capital requirement, resulting in ease of incorporation for startups and small businesses.
- Exemption from Stringent Regulatory Requirements: Private companies limited are subject to fewer regulatory requirements compared to public companies, including lesser compliance obligations and exemptions from certain disclosure
3. Points to remember at the time of Pre-Incorporation
Before initiation of the incorporation process, the following steps to be taken to ensure a seamless incorporation of a company. These include:
- Determining the Business Objectives: Clearly define the objectives, mission, and vision of the company, along with clarity on the nature of business activities and target markets.
- Selecting a Suitable Name: Choose a unique and different name for the company, ensuring compliance with the naming guidelines prescribed by the Ministry of Corporate Affairs (MCA). The name chosen should not be already in use.
- Identification of Directors and Shareholders: Identify individuals who will be designated as directors and shareholders of the company, based on their expertise, experience, and contribution to the growth of business.
4. Procedure -How to Incorporation a Company:
The incorporation of a private company limited in India entails the following steps:
Step 1: Obtaining Digital Signatures of Directors & Subscriber (DSCs): Directors and subscribers to the Memorandum of Association (MOA) and Articles of Association (AOA) are required to obtain Digital Signature Certificates (DSCs).
Step 2: Requirement of Director Identification Number (DIN): All the respective persons intending to serve on the board of the company must apply for Director Identification Number (DIN) through the Ministry of Corporate Affairs (MCA) portal.
Step 3: Apply for Name Reservation: Reservation of the company name should be applied by filing Form SPICe+ through the MCA’s online portal (SPICe+ means Simplified Proforma for Incorporating Company electronically Plus).
Step 4: Drafting of necessary Documents:
a) Memorandum of Association (MOA)
Prepare the MOA, which defines the primary objectives along with the scope of activities of the company.
b) Articles of Association (AOA)
Draft the AOA which provide the details about rules, regulations, and internal governance structure of the company.
Step 5: Filing of Documents for Incorporation:
- SPICe + Form: Complete and file the SPICe+ form for reserving the name along with the filing of MOA, AOA, and other necessary documents, including address proof, identity proof, and declarations by directors, shareholders and subscribers.
- Application for PAN and TAN: Apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) through the online form SPICe+.
Step 6: Payment of Statutory Fees: The person registering the company is required to pay the prescribed fees for incorporation, stamp duty, and other statutory charges through the MCA’s online portal.
Step 7: Verification and Approval: Subsequent to submission of documents and payment of fees, the Registrar of Companies (ROC) will verifies the application and issues the Certificate of Incorporation (CoI) electronically on email.
Step 8: Formalities to be completed Post-Incorporation:
- Bank Account: Open a current account in a bank in the name of the company and deposit the subscribed share capital. The Bank account details also need to be updated on GST
- Commencement of Business: Declaration to be made in relation to the commencement of business with the ROC within 180 days of incorporation, confirming the utilization of subscribed share capital for the purpose of business objective and related
5. Other Statutory Compliance:
Incorporation is an evidence of the inception of the company’s journey, accompanied by number of statutory and regulatory compliance obligations, including:
- Appointment of Auditor: Within 30 days of incorporation, a qualified auditor needs to be appointed for conducting the first audit of the company’s financial statements.
- Maintenance of Statutory Registers and Records: Maintain registers and records, including minutes of meetings, share register, and statutory books, in accordance with the provisions of Companies Act, 2013.
- Filing of Annual Returns and Financial Statements: File annual returns, ITR GST returns, financial statements, and other requisite forms with the respective tax departments, ROC within the prescribed timelines to ensure regulatory compliance and avoid penalties.
