The FAQs Cover The Process Involved In Incorporating A Private Limited Company In India.

Q1 What is a private limited company?

There are several different types of entities in India such as private limited company, public limited company, limited liability partnership, sole proprietorship etc.A private limited company refers to an entity which limits the liability of the owner to their respective shareholdings and restricts shareholders from publicly trading shares.

Q3 Is a Private Limited Company Suitable for making FDI in India?

Yes, immensely suitable!The private limited companies have been a hugely popular form of business entity amid foreign investors for making the direct foreign investment (subject to FDI Guidelines) in any country, by means of a wholly-owned subsidiary, a joint venture, etc.

Q4 How to form a Private Limited Company ?

Any two or more members/ Persons can form a Private limited company.A minimum of two individual shall act as directors of the company. The shareholders (initial members/promoters) can themselves choose to become director. It is practically seen that generally shareholders are also directors of the same private limited company.Filing of required documents (Director Identification number, Application for name approval, Incorporation documents such as MOA/AOA/, registered address) with the Registrar of Companies.Minimum capital of Rs. one lakh (it can be used for business whenever required and does not necessarily have to be kept in bank/company deposit all the time).

Q4 How many shareholders are required to incorporate a private limited company in India?

To incorporate a private limited company, a minimum of 2 shareholders are required. These shareholders could be natural persons or companies, including foreign companies. The maximum number of shareholders is 200.

Q5 What is the general Procedure for Incorporating a Private Limited Company in India?

After obtaining the DSCs and DINs, the next task is to ensure the availability of the proposed name of the private limited company through filing the Form INC-1. Then, drafting appropriate Memorandum of Association (MOA) and Articles of Association (AOA) of the company will be made. And, finally, Form INC-29 will be filed with the concerned ROC for incorporation of the proposed company, together will all required documents.

Q5 What are the eligibility criteria for shareholder or director to be appointed for Private company registration?

The person should be of –

Sound Mind

Major of age

Citizen or resident of India

Q6 What are the advantages of a Limited Company?

A limited company has following advantages:

Members' (the directors and shareholders) financial liability is limited to the amount of money they have paid for shares.

The management structure is clearly defined, which makes it easy to appoint, retire or remove directors.

If extra capital is needed, it can be raised by selling more shares privately.

It is simple to admit more members.

The death, bankruptcy or withdrawal of capital by one member does not affect the company's ability to trade.

The disposal of the whole or part of the business is easily arranged.

High status.

Q7 What is Director Identification Number (DIN) ?

Any person intending to become director in a company must apply for director identification number, issued by the Ministry of Corporate Affairs. Proof of identity and address is required to be submitted along with requisite fee while submitting the application for DIN. If the documents are in order, the DIN is approved within 3-4 days. The approved DIN is valid for life and the same DIN can be used by the director, even if he/she has directorship in more than one company.

Q8 Can we change the Registered Office of the Company?

Yes, we can easily change the registered office of the company any time after the specified procedure is completed. The changed address can be situated within the same state or in a different state, depending upon the conditions.

Q. 9 For small businesses, what are the benefits of a Private limited company?

It provides creditability to business in the eyes of financial institutions, suppliers and potential clients. As it makes easier for companies to get loans at favorable terms from banks or convincing potential clients while entering into deals.

Q 10 What are the responsibilities of a director ?

The director has been entrusted with the responsibility of managing the company in the best efficient manner. The responsibility of a director depends upon the kind of directorship he holds in the company. For instance, an executive director or a managing director has greater responsibility than a non-executive director who might hold the directorship as an expert or consultant. A director is liable for misconduct or fraud or if found guilty of default.

Q 11 What is MOA and AOA?

MOA stands for Memorandum of Association whereas AOA means Articles of Association. Both these documents act as important source of information for various shareholders and other stakeholders associated with a Company.

MOA reveals the name, aims, objectives, registered office address, clause regarding limited liability, minimum paid up capital and share capital of a Company. In short, it explains the relationship of a Company with outside world.

AOAs are the necessary documents to be submitted when the company is incorporated with the registrar of Companies (ROC). When AOAs are in conjunction with the MOA, they are called the Constitution of the Company.


Q 12 What is the Company Law Act 2013?

The Companies Act, 2013, passed by the Indian Parliament consolidates and amends the law relating to the companies. The new Act has introduced several concepts. For instance, the Companies Act 2013 Act has introduced a new concept of class action suits which can be initiated by shareholders against the company and auditors.The provisions of the Companies Act, 1956 are still in force.

Q13  Is Private Limited Company structure suitable for my business ?

As said before, the biggest advantage of starting a business with private limited company form of organization is the outlook by all outside parties towards the business. A private limited company is perceived to be more trustworthy compared to other business structures.

Q14 What are the forms that are required for Private Limited Company Registration in India?

Ministry of Corporate Affairs has introduced a new form called the SPICe INC- 32 forms for the faster company incorporation. Apart from this, to register a private limited company, an e- MoA (INC-33) and e- AoA (INC- 34) are also to be submitted with the above form.


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