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Private Limited Company in 5 steps

Private Limited Company in 5 steps

Corporate Law/Tushar Singh/15 Dec 2017
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If you are thinking of creating a separate legal entity for carrying on your business or raising funds, incorporating a private limited company is typically the best option. These are easy to create, come without onerous compliance obligations, provide operational flexibility and limit liability in case something goes wrong. Over time steps have been taken to make the process of incorporating one extremely time effective and streamlined.
The basic law regulating incorporation of priviate limited companies is the Companies Act, 2013.

Why Incorporate?

  1. Limited Liability- shareholders are responsible for the debts of the company only to the extent of the nominal value of their shares
  2. Perpetual Succession- company continues to exist even after the death of its shareholders
  3. Investment Friendly- private limited companies are the best entity for raising investments
  4. Separate Legal Entity- company is treated as a seaprate legal entity

Image Courtesy- ventureeasy.com

Set out below are 5 easy steps to incorporate a private limited company in India:  

First Step - Obtain DSC for Directors and Shareholders

A ‘DSC’ refers to Digital Signature Certificate.  Directors and subscribers to the Memorandum of Association (MOA) and Articles of Association (AOA) require a DSC for all e-filing and e-forms which come up as and when the incorporation process moves ahead. Also, any form can be submitted online to the Ministry of Corporate Affairs (MCA) website only after affixing the DSC of the authorised signatory for company Incorporation purposes. Further, it is required for the application of director identification number (DIN) of the directors. 

Second Step - Obtain DIN for Directors

DIN or Director Identification Number is a number allotted by the MCA to an individual for acting as director in a company. DIN is unique such as PAN Card or Aadhar Card to any person and which is applied and allotted once in the lifetime. This needs to be done prior to the company being incorporated.

Third Step - Name Approval Application

An application in the format of Form INC-1 must be made and submitted for reservation of name for the proposed company. Important to note;

  1. You are only allowed a maximum of 6 names in the order of preference.
  2. Names applied cannot be identical or nearly resembling with any existing company name or LLP name or Registered Trademark.
  3. Once the name applied is approved, it is reserved for the applicant for a period of 60 days, During this 60 day period you have to then apply for the Incorporation of Company, non-compliance of which leads to withdrawal of the name granted by the Ministry.

Fourth Step - Application for Certificate of Incorporation

Application for Certificate of Incorporation has to be filed in the specified format with the MCA along with final versions of the MOA and the AOA. The application is submitted by paying the requisite amount of stamp duty (the MCA portal provides for a ready reckoner of stamp duty payable state wise). Once the application is submitted, form for application of PAN and TAN of the company is generated online, which needs to be duly submitted after affixing the DSC with MCA.

Fifth Step - Formulation of MOA and AOA

The Memorandum of Association and Articles of Association are the most important documents for any company. It cannot be emphasized enough how important a well drafted MoA and AoA truly is. The MOA and AOA not only set out the objectives sought to be achieved by the company but also lay out various practices, procedures and operational protocols to be followed while operating/running the private limited company. 

Click here to get your MoA and AoA drafted from the convenience of your own home!

In case of a Private Limited company, the Articles will need to include the following three clauses in addition to general clauses:

  1. Limitation on the number of members/shareholders up to a maximum of 200.
  2. Restrictions on transfer of shares.
  3. Prohibition on accepting monies from public.                  

Checklist of documents for filing along with your MoA/AoA:

  • Utility Bill and NOC from the owner of the premises for the registered office address of the company;
  • Rental Agreement with the owner of the registered office, if premises is rented;
  • Consent to act as a director of the company in form DIR - 2;
  • Affidavit and declaration by first subscribers/shareholders and director(s) in form INC – 9 (duly franked and notarized); and
  • Certified True copy of the self-attested Identity proof of the first subscribers and directors

Once all these steps are completed, what you receive is the reward in the form of the certificate of incorporation. 

For all your incorporationor corporate complianceheadaches let us help you out!

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