Register a Private Limited Company

Understanding Private Limited Companies

A "private company" is defined as a company with a minimum prescribed paid-up share capital, which, by its articles:

• Restricts the right to transfer its shares.
• Limits the number of members to two hundred, except in the case of One Person Company.
• Excludes certain categories of individuals from the membership count, such as employees and former employees who continue as members after employment cessation.
• Prohibits any public invitation to subscribe for its securities.

Characteristics of Private Limited Companies

• Membership: A minimum of 2 members and a maximum of 200 members are required to initiate a private company, as per the provisions of the Companies Act, 2013.
• Limited Liability: Shareholders' liability is limited, except in cases of explicitly incorporated unlimited companies. Shareholders are not personally liable for the company's debts during liquidation.
• Perpetual Succession: The company maintains continuity even in the event of members' death, insolvency, or bankruptcy, ensuring perpetual existence.
• Index of Members: Unlike public companies, private companies are not obliged to maintain an index of their members.
• Directors: Private companies must have a minimum of two directors to commence operations.
• Paid-up Capital: Private companies may be incorporated with a minimum capital requirement as low as Rs. 2.
• Naming Convention: The name of a private company must conclude with "Private Limited" or "Pvt. Ltd."

Applicable Sections/Regulations/Rules for Private Limited Companies

• Section 2(68) of the Companies Act, 2013.
• Companies Incorporation Rules, 2014.

Advantages of Private Limited Companies

• Ownership: Ownership and regulation of shares are controlled within the company. Shares are not publicly traded, resulting in fewer shareholders and simplified decision-making processes.
• Minimum Shareholders: At least two subscribers are required to sign the memorandum of a Private Company.
• Legal Formalities: Private companies benefit from various relaxations in legal compliances provided by the government.
• Management and Decision Making: Management and decision-making procedures are typically less complex due to the closely held nature of private companies.
• Flexibility: Private companies have greater flexibility in both short-term and long-term business decisions.