A private limited company is a company which is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them.Shares of Private Limited Company cannot be publicly traded. All the aspects of Private Limited Company is discussed in the article.
Characteristics of Private Limited Company
- Members– To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
- Limited Liability– The liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
- Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to perpetual succession of the company. The life of the company keeps on existing forever.
- Index of members– A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
A number of directors– When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
- Paid up capital– It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time.
- Prospectus– Prospectus is a detailed statement of the company affairs which is issued by a company for its public. However, in the case of private limited company, there is no such need to issue a prospectus because in this public is not invited to subscribe for the shares of the company.
- Minimum subscription– It is the amount receive by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business. In case of private limited company shares can be allotted to the public without receiving the minimum subscription.
- Name– It is mandatory for all the private companies to use the word private limited after its name.
Requirements for Private Limited Company Registration
- Members- A minimum number of two and a maximum number of 200 members or shareholders are required as per the companies’ act 2013 before registration of the company.
- Directors- A minimum number of two directors is required for registering the private limited company. Each of the directors should have DIN i.e. director identification number which is given by the ministry of corporate affairs. One of the directors must be a resident of India which means he/she should have stayed in India for not less than 182 days in a previous calendar year.
- Name- It is one of the major components for a private limited company. The name of the company contains three parts i.e. the name, the activity and private limited company. It is necessary for all private company to use the word private limited company at the end of its company name. Every company has to send 5-6 names for approval to the registrar of the company and all the names should be unique and expressive. The name for approval should not resemble with any other companies name. So choosing the right company name is an important component is it will stay with the company throughout its life.
- Registered office address- While going for the registration of the company, the owner should provide the temporary address of the company until it does not get register. However when the company has been registered then its permanent address of its registered office should be suited with the registrar of the company. The Registered office of the company is where companies main affairs are been conducted and where all the documents are placed.
- Obtaining digital signature certificate- In today’s modern world everything is done online. All documents are submitted electronically and for that, every company must obtain a digital signature certificate which is used to verify the authenticity of the documents. A digital signature is obtained by all the directors which are marked on all the documents by every director.
- Professional certification- In a company there are many professionals which have required for many purposes. For incorporating a private limited company certification by these professionals are necessary. Various professionals such as company secretary, chartered accountant, cost accountant etc are required to make their certification at the time of company incorporation.