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Incorporation of Private Limited Company

Incorporation of a Private Limited Company

Incorporation of a Private Limited Company

A Private Limited Company is one of the most popular type of business entity to conduct business in India. Private Limited Company offers limited liability for its members, easy to maintain and offers greater flexibility while expanding allowing for easier access to bank loans, private equity, etc., In this blog, we look at the steps involved in the formation of a Private Limited Company.

Basic requirements

The basic premise for the incorporation of a Private Limited Company is that it must be an association of two or more persons for a lawful purpose. Where the purpose is not lawful, i.e., where any of the objects is illegal, the Registrar may refuse to register; and if he registers, the certificate of registration is not conclusive for this purpose, and the registration itself may be cancelled by the Central Government taking appropriate proceedings.

Process for Incorporation of Private Limited Company

Process for Incorporation of Private Limited Company
Process for Incorporation of Private Limited Company

Obtaining Director Identification Number (DIN) & Digital Signature

The first step for the registration of a Private Limited Company is to obtain Director Identification Number (DIN) for the proposed Directors in the Private Limited Company and Digital Signature for one of the Directors of Private Limited Company. Once the above are obtained for the individuals who will be the Director of the proposed Private Limited Company, application for name of Private Limited Company must be made.

Applying for the name

The promoters of the company should decide upon one or more suitable name for the private limited company in order of preference to afford flexibility to the Registrar to decide the availability of the name. The name of the company must end with the words “Private Limited”. The name should not be undesirable, or identical with the name of an existing company or LLP. Further, the name should not be one which is prohibited under the ‘Emblems and names Act, 1950’. Once the desired names are submitted to the Registrar through the prescribed form, the Registrar will review the submission and accord approval. It usually takes about 3-5 working days to obtain name approval for a Private Limited Company.

Filing for Incorporation of Private Limited Company

After getting the name approved, the following documents along with the application and prescribed fees, are to be filed with the Registrar:
  • Memorandum of Association
  • Articles of Association, if any
  • Declaration from Directors
  • Affidavits of the Directors
  • A declaration that the requirements of the Act and the rules framed there under have been compiled with. This declaration is required  to be signed by an advocate of the Supreme Court or High Court or an attorney or a pleader having the right to appear before High Court or a secretary, or a Chartered Accountant in whole time practice in India who is engaged in the formation of a company, or by a person named in the Articles as a Director, Manager or Secretary of the Company.

Besides the aforementioned documents, the company must give a notice regarding the situation of its registered office within 15 days of registration or during filing of incorporation documents.

Subscribing to the Private Limited Company

Subscribing to the Private Limited Company means signing the names and subscribing to the shares of the private limited company under incorporation. Companies Act, 2013 stipulates that each subscriber should add his address, description and occupation in the presence of one witness should sign the Memorandum. In the case of a company having share capital, the subscribers to the memorandum should take atleast one share each and state clearly the number and nature of shares taken by them. In the same way, the Articles of Association should be signed. Both the Memorandum and Articles should be duly stamped and dated.

Certificate of Incorporation of Private Limited Company

Upon the registration of the documents mentioned earlier and the payment of the necessary fees, the Registrar of Companies would issue a certificate that the company is incorporated. From the date of incorporation mentioned in the certificate, the company becomes a legal person separate from the incorporators.