Formation of private limited company?

Section 3.(1)(iii) of the company Act of 1956, defines a

private limited company as--
(a) One which has a minimum of Rs. one Lakh paid-up share
capital or more
(b) One which by its Articles Association:

1. restricts the right of the transfer of its share;

2. limits the number of its members to 50 which will not
include:-
A. members who are employees of the company; and
B. members who are ex-employees of the company and
were members while in such employment and who have
continued to be members after ceasing to be employees;
3. Prohibits any invitation to the public to subscribe for any
shares or debentures of the company; and
4. Prohibits any invitation or acceptance of deposits from
persons other than its members, directors or their relatives.

Also, the minimum number of members in a private company

is two, and such a company must have the words “Pvt Ltd”
as the last part of its name.

This goes to say that a private company, in addition to

the earlier conditions, shall have a minimum paid-up share
capital of Rupees One Lakh or such higher capital as may be
prescribed and its Articles shall prohibit invitation or
acceptance of deposits from persons other than its
members, directors or their relatives. In case of such
companies, public interest is not involved.

The basic characteristics of a private company in terms of

section 3(1)(iii) of the Act do not get altered just because
it is a subsidiary of a public company in view of the fiction
in terms of section 3(1)(iv)(c) of the Act that it is a public
company. May be it is a public company in relation to other
provisions of the Act but not with reference to its basic
characteristics. In terms of that section, a company is a
private company when its articles restrict the right of
transfer of shares, restrict its membership to 50 (other
than employees shareholders) and prohibits invitation to
public to subscribe to its shares. Therefore, all the
provisions in the articles to maintain the basic
characteristics of a private company in terms of that
section is restriction on the right to transfer and the same
will apply even if a private company is a subsidiary of a
public company.

Steps to be taken to get incorporated a private

limited company:-
• Ensure that the name does not resemble the
name of any other company already registered.
• Apply to the concerned ROC to ascertain the
availability of name in Form-1 A along with a fee
of Rs.500/-. If proposed name is not available
apply for a fresh name on the same application.
• Drafting of the Memorandum and Articles of
Association, vetting of the same by ROC and
printing of the same.
• Stamping of the Memorandum and Articles with
the appropriate stamp duty.
• Get the Memorandum and Articles signed by
atleast two subscribers in his own hand, his
father's name, occupation, address and the
number of shares subscribed for and witnessed
by atleast one person.
 • Get the following forms duly filled up and
signed:-
1. Declaration of compliance - Form-1
2. Notice of situation of registered office of the
company - Form-18.
3. Particulars of Director, Manager or Secretary
- Form-32.
• Present the following documents with ROC with
filing fee and registration fee:-
1. Declaration of compliance - Form-1
2. Form-1, 18 & 32 in duplicate.
Name availability letter issued by ROC.
3. Power of Attorney from the subscribers in
favour of any person for making corrections
on their behalf in the documents and papers
filed for registration.
• Obtain Certificate of Incorporation from ROC.

Other Requirements of the private limited

company:
 • There should be at least to directors of the
company.
• The two directors will be the subscriber of the
memorandum and they subscribe the
minimum capital.
• Minimum capital for a private company is INR
1,00,000/-
• Registration fee is depending upon the
authorized capital of the company. It should
be equal or more than the subscribed capital
of the company.
• Regarding non-resident interest in the
company Foreign Exchange management Act
is controlled all the issue.
• You can invest up to 100% depending upon
the type of industry

What are the Requirements for a

Private Limited Company?
A Registered Business Name: This must be followed by
the word ‘Limited' or ‘Ltd'. The Companies Registration
Office exercises some control over the choice of name, it
cannot be identical (or very similar to) the name of an
existing company. It won't be considered if it is offensive
or illegal and the use of certain words in a company (for
example, `Institute', `National') can only be used in certain
circumstances. The company name must be displayed in
a conspicuous place at every office, or other premises
where the company carries out business.
A Registered Office: This need not necessarily be the
same address as the business is conducted from. Quite
frequently the address used for the registered office is that
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