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Private Limited Company Registration

By Author: Pooja
Total Articles: 3

What is a Private Limited Company ; A private limited company is a form of business which provides limited liability for its members, a private limited company has some restrictions also;-
1. The number of shareholders can not exceed 50.
2. A private limite company can not sell its shares to general public over stock exchange.
3. Shareholder need to offer their shares first to existing shareholders.

Before implementation of Companies Act, 2013, people used to avoid register a private limited company for operating their businesses. Companies Act, 2013 has resolved some of the practical issues which the general public were facing in choosing a private limited company to be the form of their business. After the Companies Act, 2013 , has come into force, the private limited companies are back in markets.

Some of the amendments made by the Companies Act, 2013 and its impacts are mentioned below;

1. No requirement for minimum capital for starting a private limited company

Privte limited company was incorporated only when the company has minimum sharecapital of Rs.1,00,000/, this was a great reason of choosing Limited Liability Partnership (LLP) over a private limited company before, because there is no such need of a minimum capital in an LLP. Hence, after the amendmend made to this clause, there is no requirement of putting any minimum capital into the company for getting it started and it has prooved to be a great relief to the small traders.

2. Fast Track Incorporation

On 1st May 2015, the ministry of corporate affairs introduced the fast track incorporation of private limited companies by introducing form INC-29. By the introduction of this scheme a new private limited company can be incorporated under this scheme in just 5-6 days instead of the existing time period of 15-20 days by paying a specified extra fee for the form. Hence, now for incoporating a new private limtied company only one efrom is sufficient instead of filing separate eforms for directors identifiction number, name approval, and incoporation.


3. No need of filing INC-21

Previously companies need to file form INC-21 with registrar to declare that the paid up sharecapital has been subscribed by the shareholders. Before filigng Form INC-21, company couldnt commence their business. But now there is no need to file form INC-21 instantly after incoporation, the companies can take time and then can make an application to the registrar under this form.


4. Deposits from members

Earlier a private limited company can be run only through the finances provided by the banks or loan from directors. If a company accepts loan from any party other than director of the company it would be termed as "Deposits" and accepting these deposits attracts rigorous provisions as applicable to the public limited companies. Hence the only source of finance for a private limited company was loan from directors or banks. But practically its very difficult for directors to provide finances to the company from its personal resources, further availing a bank loan as not that easy, in that case it becomes very difficult for a company to operate its business.
But now the government has given partial exemtion in this regard, now the private companies can also borrow money from its members upto a limit set by the government to be the sum of paid up share capital and free reserves, and it will not be termed as deposits. Finally the initiative has given a great relief to small companies in financial term.


5. Loan to directors

In the same way as a private limited company was not allowed to borrow money from any source other than bank or its directors, the directors of the company were also prohibited to avail any loan from the company for their personal use. Even guarantee for any loan of directors were also prohibited.
After the amendement this clause has been modified and a private limtied can now provide loans or guarantee to its directors subject to some conditions as mentioned below;

a. The company should not have any body corporate is its director.
b. The company should not have borrowed from any financial institutation/bank/body corporate an amount exceeds lower of twice of its paid up share capital or Rs. 50 crore.
c. The company should not be in default of repayment of above memtioned loan.

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