Incorporating a Private Limited Company under India’s Companies Act, 2013

Introduction

Embarking on a new business venture often involves choosing the right legal structure. In India, the Private Limited Company stands out as a popular and often preferred choice for startups and established businesses alike, owing to its distinct advantages like limited liability and a separate legal identity. The process of incorporating a Private Limited Company is governed by the Companies Act, 2013, and the rules framed thereunder. While historically perceived as complex, recent initiatives by the Ministry of Corporate Affairs (MCA) have significantly streamlined the incorporation process, primarily through integrated electronic forms. Understanding this procedure is the foundational step towards building a compliant and scalable business.

Understanding the Private Limited Company Structure

A Private Limited Company is a distinct legal entity, separate from its owners (shareholders). This separation is crucial as it offers limited liability, meaning the personal assets of the shareholders are protected from business debts and liabilities. It requires a minimum of two directors and two shareholders (who can be the same individuals) and can have a maximum of 200 shareholders. Shares in a private limited company are not freely transferable to the public, differentiating it from a public limited company.

Why Opt for Incorporating a Private Limited Company?

Choosing this structure offers several compelling benefits:

1. Limited Liability: Protects personal assets of shareholders from business risks.
2. Separate Legal Entity: The company can own assets, incur debts, sue, and be sued in its own name.
3. Perpetual Succession: The company’s existence continues irrespective of changes in ownership or the death/departure of members.
4. Easier Funding: This structure is often preferred by venture capitalists, angel investors, and financial institutions for equity investment.
5. Enhanced Credibility: A registered company generally enjoys greater trust and credibility among suppliers, customers, and stakeholders compared to unregistered entities.

Pre-requisites for Incorporating a Private Limited Company

Before initiating the registration process under the Companies Act, 2013, ensure you meet the following minimum requirements:

1. Directors: Minimum of two directors. At least one director must be resident in India (stayed in India for at least 182 days in the previous calendar year).
2. Shareholders (Members): Minimum of two shareholders. Directors and shareholders can be the same individuals.
3. Director Identification Number (DIN): Every proposed director must have a DIN. For new directors, this is now applied for within the incorporation form itself.
4. Digital Signature Certificate (DSC): Proposed directors and subscribers to the Memorandum of Association (MoA) must have a valid Class 3 DSC for electronically signing the forms.
5. Unique Company Name: The proposed name must be unique and not resemble existing company names or registered trademarks. It should comply with the Companies (Incorporation) Rules, 2014.
6. Registered Office Address: A physical address in India where the company’s registered office will be situated. Proof of address is mandatory.

Step-by-Step Incorporation Process (Using SPICe+)

The MCA has introduced the integrated web form SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus), making the incorporation process faster and more efficient. It combines several applications into a single window.

Step 1: Obtain Digital Signature Certificate (DSC)
The first step is to procure a Class 3 DSC for all proposed directors and subscribers. The DSC is the electronic equivalent of a physical signature, required for signing the e-forms submitted to the MCA portal. Several licensed Certifying Authorities (CAs) issue DSCs.

Step 2: Reserve the Company Name (SPICe+ Part A)
The proposed company name needs approval from the Registrar of Companies (RoC). This is done through SPICe+ Part A.

• Log in to the MCA portal.
• Navigate to SPICe+ and select ‘New Application’.
• Fill in Part A for name reservation, proposing one or two names along with the significance.
• Submit Part A for approval. Once approved, the name is reserved for 20 days, within which Part B must be filed. Alternatively, name reservation can be applied alongside the incorporation documents in SPICe+ Part B directly.

Step 3: Prepare Incorporation Documents & File SPICe+ Part B
Once the name is approved (or if applying directly), the next step is preparing and filing SPICe+ Part B and linked forms. This single application covers:

• Application for incorporation.
• Application for DIN allotment for proposed directors who don’t have one.
• Application for mandatory PAN (Permanent Account Number) issuance for the company.
• Application for mandatory TAN (Tax Deduction and Collection Account Number) issuance.
• Application for mandatory EPFO (Employees’ Provident Fund Organization) registration.
• Application for mandatory ESIC (Employees’ State Insurance Corporation) registration.
• Application for Profession Tax registration (currently mandatory for Maharashtra, Karnataka, and West Bengal).
• Application for opening a Bank Account for the company.
• Application for Shops and Establishment Registration.
• Application for GSTIN (Goods and Services Tax Identification Number) if desired (optional, can be applied later).

Key Information & Documents for SPICe+ Part B:

• Details of the company (capital structure, registered office address).
• Details of directors and subscribers (identity proof, address proof, PAN, contact details).
• e-MoA (Memorandum of Association): Defines the company’s objectives and scope. Filed electronically via Form INC-33.
• e-AoA (Articles of Association): Outlines the internal rules and regulations for the company’s management. Filed electronically via Form INC-34. (Physical copies can be attached if needed, e.g., specific entrenchment clauses).
• Declaration by first directors and subscribers (part of the form).
• Proof of registered office address (e.g., utility bill, rent agreement) and NOC from the owner if the premises are rented/leased.

Linked Form: AGILE-PRO-S (INC-35)
This form is automatically linked with SPICe+ Part B and covers applications for GSTIN, EPFO, ESIC, Profession Tax, Bank Account opening, and Shops and Establishment Registration.

Step 4: Upload Forms & Pay Fees
After filling SPICe+ Part B, e-MoA, e-AoA, and AGILE-PRO-S, download the PDFs, affix the DSCs of directors, subscribers, and the professional certifying the form (CA, CS, or CWA in practice), and upload them to the MCA portal. Pay the requisite government fees (stamp duty varies by state).

Step 5: Scrutiny by the Registrar of Companies (RoC)
The RoC will examine the submitted forms and documents. If everything is in order, the RoC will approve the incorporation. If there are discrepancies, the RoC may request resubmission with corrections.

Step 6: Issuance of Certificate of Incorporation (CoI)
Upon satisfaction, the RoC issues the Certificate of Incorporation (CoI) electronically (Form INC-11). The CoI is conclusive evidence of the company’s registration. The PAN and TAN are allotted simultaneously and mentioned on the CoI itself. The date mentioned on the CoI is the official date of incorporation.

Documents Required for Incorporating a Private Limited Company

• From Directors & Shareholders:
  • PAN Card copy (mandatory for Indian nationals). Passport is mandatory for foreign nationals.
  • Identity Proof (Aadhaar Card / Voter ID / Passport / Driving License).
  • Address Proof (Latest Bank Statement / Utility Bill – Electricity, Mobile, Telephone – not older than 2 months).
  • Passport-size photograph.
  • Contact details (Email ID, Mobile Number).
  • DSC (Digital Signature Certificate).
• For Registered Office:
  • Proof of Address (Latest Utility Bill – Electricity/Gas/Telephone – not older than 2 months).
  • No Objection Certificate (NOC) from the property owner if the premises are rented or owned by a director/third party.
  • Rent/Lease Agreement (if applicable).

Post-Incorporation Compliances

Getting the Certificate of Incorporation is a major milestone, but not the end of the process. Key compliances immediately following registration include:

1. Bank Account: Ensure the bank account applied for via AGILE-PRO-S is activated. Deposit the subscribed share capital amount.
2. First Board Meeting: Hold the first meeting of the Board of Directors within 30 days of incorporation.
3. Auditor Appointment: Appoint the company’s first statutory auditor within 30 days of incorporation.
4. Share Certificates: Issue share certificates to the subscribers within 60 days of incorporation.
5. Statutory Registers: Maintain mandatory statutory registers at the registered office.
6. Commencement of Business: File Form INC-20A (Declaration for Commencement of Business) with the RoC within 180 days of incorporation, after the subscribed capital is received. Failure to do so can lead to penalties and even strike-off.

Conclusion: Embracing Formal Structure

The incorporation of a Private Limited Company under the Companies Act, 2013, while detailed, has become significantly more accessible thanks to the streamlined SPICe+ process. This structure provides a robust foundation for growth, offering liability protection, enhanced credibility, and better access to funding. Adhering to the procedural requirements laid down by the MCA and ensuring timely post-incorporation compliances are vital for establishing a legally sound and operationally ready business entity in India. Careful planning and execution of the registration steps pave the way for entrepreneurial success within a recognized legal framework.

Disclaimer: This article offers general information on Private Limited Company incorporation in India. It is not legal advice. Please consult a qualified professional for guidance. For assistance, contact us at contact@certificationsbay.com or +91 70119 81997.