Setting up a Private Limited Company (PLC) in India : A comprehensive guide

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Incorporation of a Private Limited Company

A private limited company is the most flexible and credible structure of businesses. It is a type of structure wherein investors can be separate and the people managing the company that is directors can be different. The Ministry of Corporate Affairs (MCA) governs the registration of a Private Limited Company (PLC) in India. A PLC is the only business structure that is eligible for fund raising from external shareholders which makes it the most popular structure in India. PLCs are incorporated and regulated under the Companies Act, 2013 and the Companies Incorporation Rules, 2014.

Minimum Requirements for incorporation of a Private Limited Company

• Members AKA Shareholders: A Private Limited Company requires at least two shareholders to register, both the shareholder can be Directors cum Shareholders of the company. A Private Limited Company can have up to 200 people as shareholders as per the Companies Act, 2013
• Directors: In a Private Limited Company there should be a minimum of two (2) Directors. To become a Director, a Director Identification Number (DIN) must be obtained. Anyone of the Directors must be a Resident of India, who has stayed at least 120 days in the previous financial year.

Benefits for incorporation of a Private Limited Company

• Separate legal entity: A private limited company is legally recognized as a separate entity. Hence, a company can have its PAN, bank accounts, licenses, approvals, contracts, assets and liabilities in its unique name.
• Limited Liability: Members of the private limited company have limited liability to the extent of their share in the company and personal assets of members cannot be utilized for the payment of the liabilities of the company under any circumstances.
• Equity Raise: A Private Limited Company can raise the funds from the general public or entities interested in becoming a shareholder 
• Easy Transferability of shares: Members can easily transfer the shares of the private limited company as they must simply file and sign the share transfer form and give it to the buyer of shares along with share certificates.
• Trustworthy and credible: A private company has a lot of compliance and is monitored by a strict set of rules. All the knowledge is on the market on-line. therefore, the company and banks can trust a Private company rather than the other structure

Documents required for company incorporation

• PAN card copies of Directors and shareholders with Self-attestation.
• Voter Id copy or Passport copy or Aadhar card copy or Driving license copy with self-attestation.
• Latest Bank account statement or Mobile /Telephone bill or Electricity Bill (not older than two months)
• Passport size photo in jpg.
• For the registered office proof of the company, if the property is rented/ leased, then copy or rental agreement or lease agreement.
• Copy of Electricity bill or Property Tax receipt or Water Tax receipt not older than two months.
• Copy of No objection certificate from the owner of the property.
• If owned property, copy of Sale Deed and Electricity bill is enough.
• In the case of NRI or Foreign national, Passport copy must be notarized at the Indian Embassy of the country.
• In case one of the shareholder or subscriber is a Corporate Entity (Company, LLP, etc.,) then Certificate of Incorporation and MOA and AOA of the Body Corporate must be attached along with the resolution passed by the Body Corporate to subscribe to the shares of the company under incorporation.

Process of a Private Limited Company Incorporation

Step 1: Acquire Digital Signature Certificate for Directors and shareholders: 

The first and foremost step to register a private limited company is to acquire the Digital Signature Certificate (DSC) of the Directors and Subscribers to MOA. Any e-form is filed with the Ministry after affixing the DSC of the Authorised Signatory for Company Incorporation. Also, it is required for the application of DIN of the directors. Further, DSC of the subscriber is needed to file MOA and AOA.

Step-2: Name Approval Application:

The next step in company registration involves making an application for reservation of name for the proposed company. The application is to be made in
‘Part A ’of SPICe+ Form, where one can apply for maximum 2 names in order of the preference. One shall keep in mind that the names applied are not identical or nearly resembling with any existing Company or LLP or Registered Trademark.

Next, you must give particulars of the ‘proposed or approved name’ and on the click the ‘Auto-check’ to do the first level automatic scrutiny of the proposed or approved name in accordance with the rules governing the name and then submit the ‘Part A’ for reservation of name or proceed with the incorporation.

Step-3: Application for Certificate of Incorporation:

Once the “Part A” of SPICe+ is submitted and then upon choosing to proceed with incorporation ‘Part B’ is enabled for making Application of Certificate of Incorporation in SPICe + form accompanied with SPICe+_MOA, SPICe+_AOA, and AGILE-PRO.

The details required for registration must be entered. The details also include:

1. Address of the registered office of the company
2. Proposed directors and subscribers
3. Capital of the company
4. Other information to apply for tax registrations such as PAN and TAN

After filling up Part B, you must carry out a ‘pre-scrutiny’ check. Once the ‘pre-scrutiny; is successful, click on ‘submit’. A confirmation is displayed upon successful submission of the form.

Next, download the PDF of Part B submitted for affixing the DSC and for filling up any linked forms along with Part B. The forms linked to SPICe+ are AGILE-PRO, SPICe+_MOA, and SPICe+_AOA. Part B of SPICe+ and linked forms can then be uploaded on the MCA portal. 

Step 4 : Formulation of MOA, AOA and AGILE-PRO

MOA and AOA stands for Memorandum of Association and Articles of Association, respectively. These are the two most important documents for any company and marks the last step in the process of registering a Company. MOA of the company states the scope of operations of the company, whereas AOA states how the company will be carrying the operations as per the Companies Act,2013.

AGILE stands for Application for Goods and services identification number, employees’ state Insurance corporation registration plus Employees’ provident fund organization registration.

A Service Request Number is generated for making a payment towards company incorporation. Once the payment is made successfully, the forms would be processed. In a case where the forms need resubmission for any errors being flagged upon processing, the SPICe+ form has to be resubmitted in the same manner.

After due verification of the application and documents provided, the concerned RoC may grant the Certificate of Incorporation (COI). It is conclusive proof of the existence of the company, wherein the date of Incorporation, Company Identification Number (CIN) and Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) is mentioned with the sign and seal of the Registrar.

Once, the Certificate of Incorporation is granted, the company may commence the business activity by executing the post-incorporation activities listed here 

Q. How can Inrole help? What is the cost incurred to register a Private Limited Company?

Inrole is an online financial services platform backed by a team of in-house professionals to facilitate business registrations in India starting at Rs.8,000 +18% GST. We create real value by assigning a dedicated expert to handhold you through the process of company incorporation from start to finish and also assist with managing the business operations i.e. finance, accounting, tax, legal, secretarial and payroll compliances post incorporation. 

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