Private
Limited Company Registration
Private Limited Companies are those types of companies where
minimum number of members is two and maximum number is fifty. A private limited
company has the limited liability of members but at the same time it has many
characteristics as those of a partnership firm. A private limited company has
all the advantages of partnership namely flexibility, greater capital
combination of different and diversified abilities, etc., and at the same time
it has advantages of limited liability, greater stability and legal entity. In
this sense, a private limited company stands between partnership and widely
owned public company. Identifying marks of a private limited company are name,
number of members, shares, formation, management, directors and meetings, etc.,
The maximum number of directors shall have to be mentioned in the Articles of
Association. In the grand of privileges and exemptions, the Companies Act has
drawn a distinction between an independent private company and other private
company which is a subsidiary to the other public company.
In 2015, many new
reforms have been announced by the Government, and they have also come up with
a unified INC-29 form, that reduces paperwork to a very large extent. We have
taken help from folks over at Vakil search to bring you the
updated procedure. Here is the updated process]
Company
registration has forever been a major hassle for entrepreneurs
looking to set up their businesses in India. It’s no wonder then
that India has been ranked 142nd on
the Ease of Doing Business Index and 158th on Ease of
Starting a Business. The newly introduced INC-29, a five-in-one form introduced by the Ministry of Corporate
Affairs (MCA) in May 2015, will go a long way toward improving this ranking.
The
INC-29 doesn’t replace the old procedure (at
least not yet), but significantly reduces interaction with the authorities
through the clubbing of forms for
DIN allotment, name reservation, incorporation, PAN & TAN, as well as ESIC
registration. Do note, however, that while INC-29 does begin the PAN & TAN
and ESIC registration process, you are still required to submit supporting
documents and information on the MCA’s e-biz (ebiz.gov.in) portal (so for now
it not clear why PAN, TAN and ESIC details are asked; perhaps the government
plans to integrate these later).
The
INC-29 form has tremendous ramifications on the registration process.
If you have registered a company prior to May 2015, you will immediately
recognise how much smoother this process can be. Here are the various steps
involved:
Procedure
1:
- Obtain
Digital Signature Certificate from MCA-authorised agency
- Time to
Complete: 2 to 5 days
- Cost to
Complete: INR 1,500
Any
one of the proposed directors must obtain a Class-II Digital Signature
Certificate (DSC) from an MCA-authorised agency to use the electronic filing
system of the MCA 21. There are six vendors in all, including Tata Consultancy
Services, e-Mudhra and n-Code. The rates of each vendor differs vastly, from
INR 400 to INR 2650. Charges would include the cost of a physical USB token and
the certificate itself.
It
would take 2 to 5 days to complete this, mostly depending on how long it takes
to courier your documents to the vendor.
The
applicant would need to submit the completed Class-II form, self-attested copy
of PAN card or, in case of foreign national, copy of Passport, and
self-attested copy of Voter ID/Ration Card/Driver’s License/Latest Utilities
Bill/AADHAR Card.
Procedure
2:
- Preparing
INC-29
- Time to
Complete: 1 to 3 days
- Cost to
Complete: Company secretary fees
As
soon as you get your DSC, you can file INC-29, but don’t assume that you will
be ready to do so. The INC-29 is an eight-page form requiring several pieces of
information and documents, some of which require a Company Secretary’s
signature, to be submitted in one go. Also, in case of errors in your form,
resubmission is allowed only once, after which you will have to pay form filing
fees again and apply for a refund on the government fees you’ve paid. So please
note the documents you need to have in order to prepare the INC-29 and the
attachments.
For
Director Information Number Application:
Up
to three directors can apply for the Director Information Number (DIN) through
INC-29; the rest, if any, may do so separately. The DIN is the number through
which the MCA identifies directors of companies. Obtaining a DIN involves the
submission of the following documents:
1.
Scanned copy of Passport-sized photograph
2.
Scanned copy of PAN card (passport if
foreign national) and Driver’s License/Voter ID/Latest Utilities Bill. Both
should be self-attested, but foreign nationals would need them notarised by the
Indian embassy, too (if they belong to countries not in the commonwealth, they
would also need to be apostilled).
For
Name Approval
While
the old process allowed you to submit six options for your company name, in
order of preference, the INC-29 only allows you to give one option.
Understanding the MCA’s naming guidelines, therefore, is critical to ensuring
your form is approved on first attempt. Largely, you need to follow the following
rules:
1.
Ensure that your company’s proposed name
has not already been taken on mca.gov.in.
2.
Ensure that there is no registered
trademark in the same name by checking at ipindia.nic.com. If there is one, you
can get an NoC from the trademark owner authorising you to use it.
3.
Ensure that the first half of the name is
unique. Avoid geographical references, adjectives, abbreviations and generic
terms. Also, the words bank, exchange and stock exchange require approval from
RBI and SEBI.
4.
Ensure that the second half describes the
sector you’re in.
Once
you’ve decided on a name, also describe the significance of the name in one or
two sentences. It would need to be entered into the form.
For
Memorandum and Articles of Association
The
Memorandum of Association (MoA) and Articles of Association (AoA) need to be
attached to the INC-29. These may or may not be drafted by a Company Secretary,
but should contain the signature of one. The MoA will also contain the main
objects of your business (keep in mind that the Registrar tends to disapprove
of businesses that are in unrelated sectors). You would also need to attach an
affidavit from all subscribers through Form INC-9 (available on mca.gov.in).
The cost of these documents would vary depending on the Company Secretary you
choose.
For
Registered Office Verification
All
companies must have a registered office address. This does not have to be a
commercial space. It can even be the home of a director. But the details need
to be provided, along with a copy of the Rental Agreement along with an NoC
from the owner (if rented property) and sale deed (if property is owned).
For
Appointment Letters and Declarations
A
number of attachments need to be submitted along with the application. These
need to be self-attested, but a Company Secretary must give a separate
declaration toward your company verifying the authenticity of all the
declarations. The required attachments are:
1.
Letters of appointment of directors, CEO,
managers
2.
Declaration by first director in INC-9
3.
Declaration by appointee director and
managing director in Form DIR-2.
Procedure
3
- Filing
INC-29
- Time to
Complete: 1 day
- Cost to
Complete: Rs. 2000 + authorised capital fee + stamp duty
If
you have all the papers in order, you can now file the INC-29.
Fill in the form and attach all the required documents. Ensure that you haven’t
missed anything out or it will come in for resubmission. And if the Registrar
finds an error in your form on resubmission, too, the form will be rejected
completely.
Once
you file the form, you will be directed to pay the fees and stamp duty to a
payment gateway. The fees will change according to the authorised capital fee
and the stamp duty will vary according to your location. Stamp duty is similar
in most states, but costlier in Punjab and Kerala.
Authorised
capital fees are as follows:
a.
INR 100,000: INR 5,000;
b. For every INR 100,000 of authorised capital up to INR 500,000, INR 4,000;
c. For every INR 100,000 of authorised capital up to INR 50,00,000, INR 3,000;
d. For every INR 100,000 of
authorised capital up to INR 100,00,000, INR 1,000;
e. For every INR 100,000 of authorised capital over INR 100,00,000, INR 750.
Let’s
take an example. For a company with a registered office in Mumbai and
authorised capital of Rs. 300,000, the fees would be as follows:
1.
Memorandum of Association:
Rs. 2000
2.
Articles of Association: Rs.
300
3.
Stamp Duty: Rs.
1300
4.
Authorised Capital Fee: Rs.
13,000
5.
INC-29: 2000
Procedure
4:
- Issue
of Incorporation Certificate
- Time to
Complete: 2 days onwards
- Cost to
Complete: Does not apply
While
the government claims that it will issue the incorporation
certificate within two days, this is still to be tested. However, the
filing of the single INC-29 form will grant you the incorporation certificate,
which is, in itself, a huge step forward.
Once
you receive this certificate, you can follow the old steps listed below from
Procedure 6 (Make a Seal) onwards.
Hopefully, the PAN & TAN and ESIC registrations are also soon combined in
the INC-29, as seems to be the plan. This would shorten the procedure some more
and move us further up the rankings on the Ease of Doing Business Index.
