How to register a company in India
According to the Companies Act, 2013 there are three types of companies that can be registered under the act:
- Private Companies
- Public Companies
- One Person Company
However, on the basis of liability, there can be three types of companies:
- Companies Limited by Shares
- Unlimited Liability Companies
- Companies Limited by Guarantee
A company’s liability limited by shares is the one in which the liability of the members of the company is restricted to the amount of shares held by them. Whereas, a company limited by guarantee is the one in which the liability of the members is limited to a predetermined amount. Such a predetermined amount is the one which the members of the company agree to contribute. This amount is agreed in case the company gets dissolved with outstanding liabilities.
This article talks about a Private Limited Company. Thus a Private Limited Company is a type of a Limited Company incorporated under the Companies Act 2013. Further, such a company has a limited number of members. Additionally, such a company imposes restrictions on transferability of shares.
So let’s understand what is a Pvt Ltd Company and Pvt Ltd Company registration process.
What is a Pvt Ltd Company?
A Pvt Ltd Company is a company that:
- restricts the right to transfer its shares
- has a minimum of two members and a maximum of 200 members and
- prohibits any invitation to the general public to subscribe to any securities of the company
Characteristics of a Pvt Ltd Company
1. Number of Members
A minimum of two members are required in order to start a Pvt Ltd Company. However, such a company can have a maximum of 200 members as per the Companies Act 2013.
2. Limited Liability
Each of the members’ or shareholders’ liability is limited in such type of business organization. This means that the shareholders are not liable to sell their personal assets in case a company faces losses. Thus, the personal, individual assets of the shareholders are not at risk.
3. Perpetual Succession
The life of the company keeps on existing for an infinite period. In case of death, insolvency or bankruptcy of the business, the company continues to exist. This gives way to the perpetual succession of the company.
4. Separate Legal Entity
A company has an identity distinct from its members. Thus, the assets and liabilities of the company are separate from that of its owners.
5. Risk Bearing
In a company form of organization, the risk of losses is borne by all the shareholders. This is unlike the case of sole proprietorship and partnership where one or few persons bear the losses respectively.
Thus, if a company incurs losses, all the shareholders contribute to such a loss to the extent of their share in the company’s capital. So, the risk of loss thus gets divided over a large number of shareholders.
Pvt Ltd Company Registration Process
Following are the steps required to be taken by the promoters in order to incorporate a Pvt Ltd Company.
1. Obtaining Digital Signature Certificate (DSC)
The only way to incorporate a company form of organization is to register online. Therefore, a valid digital signature is required that can be affixed on all the documents that are submitted electronically. This ensures that the documents furnished are authentic and secured.
Furthermore, such a certificate needs to be acquired from licensed certified authorities. Such authorities are granted a license to issue a Digital Signature Certificate (DSC). The government listed agencies such as NIC, e- MUDRA, NSDL, CDAC etc have been authorized by the controller to issue DSC.
Also, there are two types of DSCs – Class II and Class III. In case of Class II type of DSC, the identity of the person is verified against a trusted pre – verified database. Whereas under Class III type DSC, the person needs to present himself in front of the registration authority and prove his identity.
2. Acquiring Director Identification Number
As per the Companies Act 2013, all existing and intending directors must have a Director Identification Number (DIN). In case any director does not have a DIN, he must acquire the same before becoming director in an existing company or incorporation of a Pvt Ltd Company. Following are the ways in which a director can obtain a DIN.
Option 1: Filing SPICe Form
An individual not having a DIN and who intends to become the first director in a new company needs to file an application through e – form SPICe. Along with the application, such an individual needs to attach his proof of identity and address. Once such a form is approved, the DIN is allocated to the user.
Option 2: Filing Form DIR 3
Any person who intends to become a director in an existing company needs to file an application in e – form DIR 3. Along with such a form he needs to attach his photograph, proof of identity and proof of residence. Such a form needs to be necessarily signed by the applicant and verified by company secretary, MD or CFO of the existing company. Further, the applicant needs to pay the requisite fee to generate such a form.
3. Apply for Name Approval
There are two options through which a company can get name approval.
Option 1: Getting Company Incorporated Through RUN (Reserve Unique Name) Service
The RUN service is a simple and easy way to reserve a name for a new company or change the name of the existing company. If you choose to get your company name approved via RUN service, you first need to login to your MCA (Ministry of Corporate Affairs) account. In case you are a new user, you need to create a new account on MCA portal.
Once you login to your account, you need to click on the RUN icon under MCA services. Upon clicking the RUN button, an online form appears that you need to fill. Such a form contains company details like entity type, CIN, LLPIN, proposed name 1, proposed name 2 and comments.
There is no need for CIN and LLPIN. Earlier, RUN service gave only one chance to apply for the company name. This option is given in case the name was rejected on the grounds of resemblance of the name with a registered company, an LLP or a trademark. Or non adherence of (incorporation) rules, 2014. The portal did not give a second chance.
However, with effect from March 2018, the ministry has allowed one re-submission and two proposed names while applying a company name through RUN facility. Further, a fee of Rs. 1000 needs to be paid before submission of the form.
Hence, a challan is generated giving details of the fees paid by the applicant. This happens once the payment of the fee is made and the proposed name is submitted.
Option 2: Applying Proposed Name through e – Form SPICe (Inc – 32)
Another way to apply for a company name is through SPICe (Inc – 32) form. SPICe means Simplified Proforma for Incorporating Company electronically. Through this form only one name can be applied.
However, the applicant has the option to resubmit a proposed name twice in case it gets rejected at the first instance. This means the applicant gets a second chance of filling the same SPICe form without any additional charges. Hence, you need to pay Rs. 1000 only once and you get two chances to fill the same form.
Documents Required to Fill SPICe (INC – 32) Form
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Affidavit and declaration by first subscribers and first directors (INC – 9)
- Address proof of office
- Copies of utility bills not older than two months
- Copy of name approval in case the proposed name contains words or expressions that require approval from central government
- Trademark registration certificate or trademark application copy. This needs to be attached if the proposed name is based on a registered trademark. Or it is a subject matter of an application pending for registration under trademarks act.
- NOC from the owner of the property
- Proof of office address
- Identity proof and residential address of the subscribers
- Proof of identity and residential address of directors
5. Filing the Information in SPICe (Inc – 32)
SPICe form was introduced by the ministry under the Companies Act, 2013. Such a form serves the following purposes:
- Incorporation of a new company
- Reservation of a company name
- Application allotment of DIN
- The Application for PAN and TAN
The integrated form INC – 29 has been replaced with SPICe for INC 32. This means that INC 29 has been completely removed from the MCA portal. SPICe (INC – 32) is very similar to INC – 29 that helped with fast track incorporation of company in India. Prior to May 2015, the incorporation of a company required an applicant to fill up several documents. These documents included:
- INC – 1 for obtaining name approval
- DIR 3 for acquiring DIN
- INC – 7 for registering a company with MOA and AOA
- And INC – 2 for approval of registered office
However, with the introduction of SPICe INC – 32, the approval time is much shorter. This is because this new system supports filing of MOA and AOA electronically. It is important to note that the applicant needs to affix digital signatures on Form INC – 32.
6. Preparation of MOA and AOA
After filing the SPICe form the applicant needs to download e – MOA and e – AOA forms from the MCA website. e – MOA is electronic Memorandum of Association in form INC – 33 and e – AOA is electronic Articles of Association in form INC – 34.
Memorandum of Association is the charter of the company and it lays out the scope of activities of the entity. Whereas, AOA lays down the rules and regulations that govern the management, internal affairs and conduct of business.
Earlier both MOA and AOA had to be filed with the Registrar of Companies physically during the incorporation of the company. However, now these forms are filed online on the MCA portal along with SPICe (INC – 32) form.
After filing the information in the above forms, DSC of all the subscribers and professionals need to be affixed on the subscriber sheet of MOA and AOA.
7. Application of PAN and TAN
As mentioned earlier, the applicant can apply for company’s PAN and TAN through this single SPICe (INC – 32). Form 49A is used to apply for PAN whereas form 49B is used to apply for TAN.
Once the SPICe for is submitted, the MCA system will automatically generate these forms. You are just required to download these forms, affix digital signatures on them and upload both the forms on MCA portal.
8. Generation of CIN and Certificate of Incorporation
Finally, when the applicant fills all the details and attaches all the requisite documents, the MCA approves the registration. It generates a Corporate Identity Number (CIN). Along with this number, the registrar shall also issue a Certificate of Incorporation. This document certifies that the proposed company is incorporated under the act.
Here is an info graphic that describes the Pvt Ltd Company Registration procedure in a much simpler way.
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