How to Register a Private limited Company and a One Person Company in India

Article by Drishti Saigal.

Introduction to Private and One Person Companies in India

·         According  to section 2(68) of the Companies Act, 2013  a  private company means a company which has a minimum paid up share capital of rupees one lakh or such a higher  amount as may be prescribed.

·         Minimum number of members required to form a private company are 2 and in-case of a One-Person Company, it is one. The number of members cannot exceed 200. However, One Person Company is a special type of private company wherein only one member can form a company.

·         You need to have at least two directors, and only one director for a one person company and the maximum can depend upon the Articles of association of company in a private company.

·         In case of a private Company whose shares can be issued only among the members, shares are not freely transferable that is, you cannot transfer shares freely like in the case of public companies.

·         At the end of the name of the company the word “private ltd” must be used.

·         Books of Accounts are preserved for the period of 8 years in a Private Ltd Company.

·         You need a certification of Incorporation for the formation of a Private Ltd Company.

Advantages of Incorporation of a Private Company in India

·         This form of company is more trustworthy as the details of such a company can be confirmed with the Ministry of Corporate Affairs which have to be provided during the Incorporation of a Company. The registration of the company is done in India with the ROC (Registrar of Companies).

·         The liability of the shareholders of a private limited company is limited up to the extent of the contribution made by you has a shareholder.

·         A private company has a separate legal identity so it is responsible for the management of Debtors, Creditors, Assets, and Liabilities etc.

·         Registration of a private company helps entrepreneurs to raise funds through equity and expansion. This also limits its liability and the capital is raised at the same time.

·         Company has a perpetual succession; it means that once a company is incorporated then the life of the company does not depend upon the existence of its members. This is the reason why there is a statement that “Members may come and members may go, but the company goes on forever”.

Related Article: 70 Mistakes that Can Sabotage Your Startup

Procedure of Incorporation or Registration of a Private Company

This is where it goes very technical, so bear with me! I am going to talk about a lot of forms down below. Here’s the list of all the forms that you are going to need and I am going to talk about to register your private company.

Firstly you need to obtain a DSC (Digital Signature Certificate) and the directors need to obtain a DIN (Director’s Identification number).

Related: How to Appoint Directors for Indian Companies

·         DSC is required for the registration of the company and other applications with the Ministry of Corporate affairs.

·         It is issued by the Certifying Authority and it is valid for 1 or 2 years.

·         The shareholders are required to file e-MOA and e-AOA by affixing DSC’S.

·         The documents required for obtaining a Digital Signature Certificate are –

1.      Passport size photo of the Applicant.

2.      Self attested Address proof and PAN card of the applicant.

The next step is to apply for the DIN (Director’s Identification number) which is a Unique Identification number for the Director which is issued by the Ministry of Corporate Affairs.

It is mandatory to have a DIN to be appointed as a director in the company and the same can be used for appointment in any other company or for appointment as a designated partner in a LLP.

1.      For Existing Companies

·         You have to file DIN 3 with Identity proofs (PAN, Aadhaar card, Address proof)

2.      Post January 2018

·         Now, DIN can be applied within SPICe form (INC-32) for up to 3 directors.

·         If the applicant wants to Incorporate with more than 3 Directors and more than 3 persons don’t have a DIN then in such a situation applicant has to Incorporate the company with 3 directors and later on  after Incorporation he can appoint new directors.

Section 7 of the Companies Act, 2013 lays down the Procedure for the Incorporation of a company. A minimum of two persons can incorporate a company, with or without a limited liability to form a private limited company.

However, even one person can form a One Person Company. The guidelines are as follows:-

You need to subscribe your name to the Memorandum and Article of Association of the proposed company and submit an application to the ROC (Registrar of Companies) of the state in which the registered office of the company is to be situated.

Related Article: All You Need to Know about Memorandum of Association for Your Company

2.      You are required to fill an e-form INC 1 with the Ministry of corporate affairs to check availability of name. It should end with suffix “Pvt. Ltd”. You can make a fresh application in case the proposed name is rejected.

Till now, an applicant could seek reservation of name for a proposed company or an existing company could change the company name by submitting an application to ROC by filing e-form INC-1.

This can now be done by the following ways-

A.      A company can be incorporated via RUN (Reserve Unique name) form. It only gives one chance for applying and in case of rejection of the name due to any similarity of the name with a registered company, LLP, Trademark or due to non-adherence of companies rules there are no second chances.

In case of rejection an applicant has to file another RUN form with prescribed fees. DSC and DIN is not required for filing a RUN form; only a MCA account is mandatory.

B.      However, with effect from March 23, 2018, Ministry has decided to permit two proposed Names and one re-submission (RSUB) while reserving Unique Names for the Companies.

C.      You can apply for a proposed name via SPICe (Simplified Proforma for Incorporating Company Electronically) through INC-32 but only one name can be applied through this which is similar to the provision of RUN.

In case of a rejection you will get another chance to fill the same without any further charges of RS 1000/-.

If you do not get a approval even the second time then you can file it again which is any day cheaper than RUN form. The whole process including name approval and Incorporation of the   company takes around 2-3 days.

There is no ROC fees upto Rupees 10 lakh of authorized capital for Incorporation of company. The SPICe serves the purpose of Application for allotment of DIN, Reservation of company name, Incorporation of a new company, Application for PAN AND TAN.

3.      The promoters are required to file the e-memorandum of association in form no-INC-33 which includes-

·         Name clause stating the name of the company. The name of the company shall not be similar to any king, queen or any existing company without their permission. It must be registered with 6 alternative names from which ROC will select any one name.

·         Object clause stating the object of carrying on business activity and the business activities that shall be undertaken by the company which is divided in two types - Main object and Ancillary object.

·         Registered office clause stating the office where main business activity or business shall be carried out. It must be registered with ROC through form INC-22 and it shall also disclose information regarding branches if any.However, INC-22 has now been merged in INC-32.

·         Capital clause mentioning about the paid up capital of the company.

·         Liability clause disclosing the liability structure of the company which may be limited or unlimited. However, generally the liability of the member is limited i.e. only up to unpaid call amount.

·         Any information mentioning promoters/directors of the company.

4.      Article of association shall mention about the directors of the company and             how they shall carry out the affairs of the company. It provides for the internal management of the company.

It is considered as bye-laws of the company and contains set of rules and regulations or terms and conditions through which the company is run. You have to submit this in INC- 34.

5.      You should submit Memorandum and articles of the company duly signed by the subscribers in the prescribed manner.

Read More about Memorandum and Articles of Association for Indian Companies

6.      You should submit an affidavit by all the subscribers to the memorandum and from persons named in the articles as the first directors that they have not been convicted in any offence related to promotion, formation or management of any company and they should not be guilty of any fraud or misfeasance or of any breach of duty relating to any company under the Act or under any previous Companies Act during the last five years.

7.      An affidavit should be submitted by all the persons above that all the documents filed with the ROC for registration of the company contain information that is correct and complete and true to the best of his/her knowledge and belief.

8.      A declaration should be submitted that all the requirements of the Act and the rules made have been complied with in respect of the registration of the company. A declaration should be signed by-

·         An advocate of the Supreme Court or of a High court or an attorney or pleader entitled to appear before a high court.

·         Or a practicing secretary or chartered accountant.

·         Or a person named in articles as a director or manager.

·         Or the company secretary of the company.

9.       You should submit the address for correspondence until the registered office of      the company is established along with the full name, residential address, nationality and other details of every subscriber to the memorandum with proof of identity.

10.  You should submit the particulars of the persons mentioned in the articles as the first director of the company.(Full name, residential address, nationality, Director Identification number etc)

11.  You should submit the particulars of the Interests of the persons named as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company.

12.  Any agreement regarding the appointment of directors is to be enclosed.

13.  You should submit statutory declaration of compliance in Form I under section 4 and 5.

14.  You should also submit power of attorney to correct Memorandum of association and articles of association.

15.  You should submit the original letter approving the name of the company.

16.  The required stamp duty prescribed by the stamp Act is to be paid on “Memorandum of Association” and “Articles of association”.

17.  The Registration fees for the form I and also the Memorandum and Article of association is required to be paid. Thus, Form 1 is filed declaring the compliance to the legal requirements prescribed by the Act.(Now can be done through SPICe or RUN)

18.  The above documents have to be filed along with required filing fees by demand draft in favour of the Registrar.

If the registrar is satisfied and the conditions regarding the registration are fulfilled, Certificate of Incorporation / commencement and Corporate Identity Number (CIN) shall be issued after the system auto-generates the PAN and TAN forms which also have to be affixed with the digital signature. 

These forms have to be uploaded on MCA Portal. The CIN can also be tracked online on MCA portal.

Procedure of Incorporation or Registration of a One Person Company

I know, there's a ton of paperwork involved!

All the procedures for Incorporating OPCs are the same as that for private companies. However, there are some additional requirements which are mentioned below:-

1.      In case there is death or Incapacity to contract of original member the memorandum must state the name of another person who will become the member of the company.

2.      Prior written consent of such a person should be taken and it should be filed with ROC at the time of the Incorporation of the OPC.

3.      In case the person nominated by the original member wants to withdraw he can do so by withdrawing his consent in a prescribed manner. Such changes should be filed with the ROC.

4.      Such change in the memorandum is not implied as an alteration of the memorandum of OPC.

Wrapping it Up

Thus, to conclude I would like to sum up that in order to get a certificate of incorporation, first you need to fill out all the details in the incorporation form of SPICe. Later the PAN (Permanent Account number) and TAN (Tax deduction and collection Account number) of the company will be issued after the application is done for the same in form 49A for PAN and form 49B for TAN.

This procedure will guide you on how to get a Certificate of Incorporation issued by the Income tax department and the e-forms to be uploaded can be downloaded from the link given here (Same Link as the One in the beginning of the article).

If you have any questions, let me know by leaving your comments down below. If you’re thinking about other forms of business, check out this article on starting and registering an LLP. And if you liked this article, do give it a share!

Author Bio: Drishti Saigal is a Bachelor of Laws - LLB student at Svkm's Jitendra Chauhan College, Mumbai. Connect with her on LinkedIn.