limited company

In this article, Aakash Vijay pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses Steps for Forming Private Limited Company in India.

Private limited company is one of the common forms of business structure in India. Some of the major private limited companies in India are Reliance Industries Limited, Tata Consultancy Services (TCS), Infosys Technologies Ltd. and Wipro Limited. In a private limited company the shareholders hold all the shares privately. They may manage the company themselves or hire a director to do so on their behalf. Due to the private holding of shares it has the flexibility if a partnership firm as well as limited liability because it is a company.

This article will be covering the procedural requirements; cost and time required for the incorporation of a private limited company which are as follows:

Step 1: DSC (Digital Signature Certificate)

Basically, it is a digital equivalent of a handwritten signature. It is used to digitally sign documents which are on the internet. It is issued by a licensed Certifying Authority (CA) such as Safescrypt, nic, TCS, (n)code Solutions, e-Mudhra.[1] Generally, a CA takes around 2 to 7 working days (or on same day on fulfillment of terms and condition based on eKYC for Aadhaar holders) to issue a DSC. A DSC is valid for 1 or 2 years.[2]

A digital signature certificate of class 2 is required electronic filing of documents with the registrar of companies (ROC), through the website of the Ministry of Corporate Affairs (MCA). Each proposed director needs to have their own digital signature certificate.

The applicant for the proposed company needs has to fill the standard form issued by certifying authority and the following documents are required:

  1. A self-attested colour photograph (affixed on the DSC Form)
  2. ID Proof (PAN Card Copy is Mandatory) (attested by a Banker, Gazetted officer or Post Master)
  3. Address Proof like (recent electricity bill, voter ID card, passport, etc.)[3]

Cost: A DSC of class-2 for an individual from E-mudra costs INR 1500.[4] There will be at least two directors registering for the incorporation of a company, so the total cost will be INR 3000.

Time required: obtaining a DSC requires around three to four days.

Step 2: DIN (Director Identification Number)

The directors of the proposed company must have an allotted DIN.

Director Identification Number (DIN) is a unique identification number given to an existing or a proposed director of the incorporating Company.[5] Its purpose of the din is to keep complete database of the directors of the incorporated companies. Thus, if they try to cheat anyone through the company they will be traceable.[6]

The following procedure should be followed to apply for DIN through e-Form DIR-3:[7]

  1. Fill the E Form DIR-3 off line.
  2. Attach the photograph and scanned copy of supporting documents which are as follows:
  • Proof of Identity (self-attested pan card copy (mandatory), self-attested copy of passport in case of foreign national.
  • Proof of Residence, Self Attested (such as voter ID card, recent electricity bill, bank statement etc.)
  1. Along with the supporting documents, verification by the applicant for applying for allotment of Director Identification Number (DIN) shall also be attached. This shall contain the name, father’s name, date of birth, present address and text of declaration and physical signature of the applicant.
  2. The e Form shall have to be digitally signed and shall be uploaded on MCA21 portal.
  3. Upon upload, the applicant needs to pay the fees for DIR-3 e Form electronically
  4. Upon upload and successful payment, Provisional DIN shall be generated.

Cost: cost of a DIN per director is around INR 500 and a total of at least 2 directors are required to obtain a DIN.Thus, the total cost of obtaining a DIN is at least around INR 1000. [8]

Time required: obtaining a DIN requires one day.

Step 3: Name registration

The proposed company needs to register a name with the registrar of companies. A name will help you to have a protected trademark of your company.[9]

The applicant for the proposed company is required to submit form INC -1 for name approval on the MCA 21 portal for the approval of name for the company.

You need to provide to the Registrar on the Form INC 1 at least six different names in order of preference. The conditions required to be fulfilled while deciding a name of the proposed company:[10]

  1. The name of your company must not resemble or sound the same with the name of another existing company or a LLP.

The name of a company does not become unique in relation to an existing name if:

  • Any prefixes or suffixes are added to it, it is the keywords that must be substantially different.
  • The spelling of any of the words is changed and it sounds similar.
  • Adding the words private, PVT, company, CO. corp., etc.
  • any plural version of any of the words is made
  • There are changes in type, letter case, spacing or punctuation marks.
  • words are joined or separated
  • There is use of a different tense or number of the same meaning.
  • There is any addition of an internet related designation, such as .com.
  • Or other conditions mentioned in the companies Act, 2013 and related provisions.
  1. The name of the company should be in consonance with the principle object of the company as set out in the MOA and must be indicative of the financial activity it will involve in.
  2. the proposed name must not:
  • Include “British India”.
  • Imply association or connection with or patronage or any person held in high esteem or important personnel who occupied or are occupying important positions in government.
  • Be a vague or abbreviated name like the first letters of the name of the promoters.
  • Be identical to a company dissolved as a result of liquidation before 2 years of such dissolution.
  • Be identical to a company which is struck off before the 20 years from the publication of such notice.
  • Be similar to some LLP.
  • Include the word “state”.
  • Be a generic name like “India private limited”.
  1. If the name includes words like ‘Stock exchange’, ‘mutual fund’, then there must be declaration submitted by the applicant regarding fulfillment of the requirements mandated by the respective regulator such as SEBI.
  2. It the name includes ‘Board’, ‘republic’; it requires the approval from the central government.
  3. If the proposed name includes name of any foreign company or any city in a foreign country then it shall be allowed only if the applicant produces any proof of significance of business relations with such foreign country. No company can be incorporated using the name of an enemy country.
  4. Words suggesting pan-India or international nature of company such as “international”, “India” etc. shall only be allowed if the company meets the authorized capital requirement.
  5. The name of the company should not be misguiding or offensive to any section of the people, or which is undesirable in the opinion of the central government.

Cost: Each application of INC-1 Costs around INR 1000.[11]

Time required: The process takes around ten to fifteen days.

Step 4: Drafting and filing of the constitution of the company (define the purpose of the company).

The proposing company needs to have drafted constitutional documents which are MOA and AOA.

Memorandum of Association (MOA) defines the company’s relationship with shareholders.

The Articles of Association (AOA) is a document that contains the purpose of the company as well as the duties and responsibilities of its members defined and recorded clearly. [12]

The following requirements must be noted regarding filing of E-Form INC-7:[13]

  • The applicant needs to file the E-Form INC-7 within sixty days from the date of application of reservation of name in INC-1.
  • In case the address of correspondence is same as the address of registered office of the company then the E-Form DIR-12 and E-form INC-22 should be filed together.

Then the company needs to file the form INC-7 for registration of the company along with evidence of payment of stamp duty and signed copy of the moa and AOA.

Cost: The cost of registering a MOA is INR 2000, an AOA is INR 300 and from INC-7 is INR 300.

Step 5: The applicant needs to submit the particulars of the proposed company’s first directors, managers and secretary of the company, i.e., the key managerial personnel of the company with the registrar at the time of incorporation of the company by filing the e-form DIR -12. Submission of the interest of the directors in other corporate body and their consent to act as a director of the company are included in the form.

Cost: The cost for filing DIR-12 is INR 300.

Step 6: Filing of form INC 22.The proposed company shall have a registered office within 15 days of its incorporation and then within 30 days from the date of incorporation the applicant needs to file INC-22 for notifying the situation of registered office.[14]

Cost: The cost for filing the form INC-22 is INR 300. Stamp duty charges for MOA, AOA and Form INC-7 depends on the state of registration. It is usually around INR 700[15]

Time required: The total time required for steps 4, 5 and 6 is ten to fifteen days.

Or INC- 29:

Instead of separately filing different e-Forms an applicant can apply using Form INC-29, an integrated e-Form which deals with incorporation of a new company and /or application for the following purposes,

  • Obtaining DIN
  • approval often name of the company
  • registration of the company along with the memorandum of association and articles of association
  • intimation of registered office
  • appointment of directors
  • PAN and TAN registration
  • Employer registration under ESIC Act

The documents required for this form are same as stated (except the PAN and TAN registration and Employer registration under ESIC Act which is not covered in this article) under the individual forms of corresponding purposes.

Cost: The cost of filing the form INC-29 is INR 2000.

Step 5: Finally, Incorporation.

The Registrar of Companies issues a certificate of incorporation and a Corporate Identity Number (CIN) after the examination of all the above documents. After this a private company becomes entitled to run its business.

The total cost of incorporating a company will range from Other than the cost mentioned above will range from INR 9500 to INR 10000 if done without form INC- 29. Additionally, the professional fee of Chartered Accountant will range from INR 5,000 to INR 15,000 which depends on the area and expertise.[16]

References

[1] ICSI- Incorporation of company (August, 2015 edition)

[2] ICSI- Incorporation of company (August, 2015 edition

[3] ICSI- Incorporation of company (August, 2015 edition)

[4] e-mudra website.

[5] ICSI- Incorporation of company (August, 2015 edition)

[6] http://www.startupfreak.com/what-is-director-identification-number-din-how-to-get-din/

[7] ICSI- Incorporation of company (August, 2015 edition)

[8] leagaladda.myonlineca.in

[9]https://blog.ipleaders.in/how-to-name-a-company-in-india-a-simple-guide-on-company-registration-and-trademarking/

[10] DEABL study material and https://www.indiafilings.com/learn/naming-guidelines-per-companies-act-2013/

[11] leagaladda.myonlineca.in

[12] Wikipedia

[13] ICSI Incorporation of company, August,2015 edition

[14] ICSI incorporation of company, August 2015 Edition

[15] leagaladda.myonlineca.in

[16] leagaladda.myonlineca.in

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