Requirements for a Private Limited Company

1. 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.

2. 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 of
the firm's solicitor or accountant. This is the address, through, where all official
correspondence will go.

3. Shareholders: There must be a minimum of two shareholders (also described as

`members' or `subscribers'). A private company can have up to fifty shareholders.

4. Share Capital: The company must be formed with a stated, nominal share capital
divided into shares of fixed amounts. Small companies are frequently formed with a
nominal share capital of Rs.100.

5. Memorandum of Association: The memorandum is the company's charter. It states

the company's name; the situation of its registered office; its share capital; the fact
that liability is limited and, most importantly, the object for which the company has
been formed. In theory, the company can only operate in the areas mentioned in the
objects clause but in practice the clause is drawn to cover as wide an area as possible,
and anyway a 75 per cent majority of the members of the company can change the
objects whenever they like. Nevertheless, it is worth bearing in mind that directors of
the company will incur personal liability if the company engages in a type of business
which is not authorised by the objects clause. The memorandum must be signed by at
least three shareholders.

6. Articles of Association: The document contains the internal regulations of the

company, the relationship of the company to its shareholders and the relationship
between the individual shareholders. Many companies don't bother to draw up their
own articles but adopt (sometimes with some modifications) articles set out in the
Companies Act.

7. Certificate of Incorporation: This is the document, which the registrar of companies

issues to you once he has approved your choice of name and your memorandum.
When you receive this document your company legally exists and is ready to trade.

8. Auditors: Every company must appoint a qualified auditor. The auditor's duty is to
report to the treasurer whether or not the books of the company have been properly
kept, and that the balance sheet and profit and loss account presents (or doesn't
present) a true and fair view of the company's affairs and complies with the
Companies Act. Auditors are appointed or re-appointed at general meetings at which
 annual accounts are presented, and they hold office from the conclusion of the
meeting until the next general meeting.

9. Accounts: The Companies Act lays down strict rules on accounting. Every company
must maintain a set of records, which show the financial position at any one time with
reasonable accuracy. The accounts comprise a profit and loss account and balance
sheet with the auditors' and directors' reports appended. A new company's accounting
reference period begins on its incorporation and runs until the following 31st March -
unless the company notifies the registrar of companies otherwise. Within ten months
of the end of an accounting reference period, an audited set of accounts must be laid
before the shareholders at a general meeting and a set delivered to the registrar of
companies.

10. Registers, etc.: In addition to the accounts books, companies are required to have: a
register of members and share ledger; a register of directors and secretaries; a register
of share transfers; a register of charges; a register of debenture holders; a book can be
purchased to hold all of the above. This will be provided automatically if you buy a
running concern.

11. Company Seal: All companies must have an engraved seal. This must be impressed
on share certificates and must be used whenever the company has to execute a deed.
Again, this is included in the ready-made company package.

Requirements

• Minimum number of shareholders is two in case of private limited and 7 in

case of public limited company;;
• Maximum number of shareholder is 50 in case of private limited and
unlimited in case of public limited company;
• The minimum paid-up capital should be INR 100 000 (US $ 2250
approximately) for a private limited company and INR 500 000 (US $ 11235
approximately) for a public limited company;
• Minimum number of Directors is two in case of private limited and 3 in case
of public limited company;;
• Passport copy of promoters;
• Two passport size photo of the promoters;
• Details about the company.

What is the procedure in obtaining a name approval

for the proposed Company?
An application in Form No. 1A needs to be filed with the Registrar of
Companies (ROC) of the state in which the Registered Office of the proposed
Company is to be situated. The application is required to be signed by one of
the promoters. The details to be state in the said application are as follows:1.
Four alternative names for the proposed company. (The name can be coined
names from the objects of the proposed company or the names of the
directors, etc. but should definitely be indicative of the main object of the
company. Justification for the name needs to be specified along with the
application)2. Names and addresses of the promoters (Minimum 7 for a public
company while 2 for private company).3. Authorized Capital of the proposed
company.4. Main objects of the proposed company.5. Names of other group
companies. On submitting the application, the ROC scrutinizes the same and
sends the approval / objections in about 10 days to the applicant. On fulfilling
of the objections a formal letter of name approval is issued.

What is the Memorandum of Association (MOA) and

the Articles of Association (AOA) of a company and
what is the procedure in their regard?

On receipt of the name approval letter from the ROC the MOA and the AOA
are required to be drafted. The MOA states the main, ancillary / subsidiary
and other objects of the proposed company. The AOA contains the rules and
procedures for the routine conduct of the proposed company. It also states
the authorized share capital of the proposed company and the names of its
first / permanent directors. After the MOA and AOA are required to be
stamped.

A stamp duty is required to be paid on the MOA and on the AOA. The stamp
duty depends on the authorized share capital.

What are the documents required to be executed for

incorporation?

The following documents are required to be executed (signed) before they are
submitted to the ROC:

1. MOA and AOA - These are required to be executed by the promoters

in their own hand in the presence of a witness in quadruplicate stating
their full name, father's name, residential address, occupation, number
of shares subscribed for, etc.
 2. Form No. 1 - This is a declaration to be executed on a non-judicial
stamp paper of INR 20 by one of the directors of the proposed
company or other specified persons such as Attorneys or Advocates,
etc. stating that all the requirements of the incorporation have been
complied with.
3. Form No. 18 - This is a form to be filed by one of the directors of the
company informing the ROC the registered office of the proposed
company.
4. Form No. 29 - This is a consent obtained from all the proposed
directors of the proposed company to act as directors of the proposed
company. (Not required in case of private company).
5. Form No. 32 - This is a form stating the fact of appointment of the
proposed directors on the board of directors from the date of
incorporation of the proposed company and is signed by one of the
proposed directors.
6. Name approval letter in original.
7. Power of Attorney signed by all the subscribers of MOA authorizing
one of the subscribers or any other person to act on their behalf for the
purpose of incorporation and accepting the certificate of incorporation.
8. Power of Attorney in case of a subscriber who has appointed another
person to sign the MOA on his behalf.9. Filing fees as may be
applicable.

How is the certificate of incorporation issued?

After the documents in FAQ 5 are filed, the ROC calls the attorney on a
specific date for scrutiny and making the corrections in the MOA and AOA
filed. On complying with the same, the certificate of incorporation is granted to
the attorney.

When can the newly formed company start its

business operations?
On receipt of the certificate of incorporation, the public company has to
complete certain other legal formalities such as a statutory meeting (within 6
months), statutory report, etc. On completion of the said formalities and on
filing of the statutory report with the ROC the ROC issues the certification of
commencement of business to the company. Thereafter, the Public Company
can start the business operations. The Private Company can start its business
immediately on incorporation.
Persons desirous of forming a company must adhere to the step by step
procedure as discussed below:-
1. Selection of type of the company.
2. Selection of name for the proposed company.
3. Apply for Directors Identification Number and Digital Signatures.
4. Drafting of Memorandum and Articles of Association.
5. Stamping, digitally signing and e-filing of various documents with the Registrar.
6. Payment of Fees.
7. Obtaining Certificate of Incorporation.
8. Preparation and filing of Prospectus/Statement in lieu of Prospectus and e-Form
19/20 (in case of public companies) for obtaining the certificate of
commencement of business.
Obtaining Certificate of Commencement of business (in case of public limited
9.
companies).

1. Selection of the type of company

The Promoters of a company may be individual entrepreneurs or body corporate
engaged in efforts to incorporate a company. They have the power of defining the
object of the company and deciding various matters for the company proposed to be
incorporated. It is depending upon, the purposes for which the company is to be
incorporated, proposed scale of operations, capital involved, etc. The promoters can
select type of the company as they wish to form themselves into viz. private company,
public company, non-profit making company, etc.
2.1 Applying for ascertaining the availability of the selected name
The promoters are required to make an application to the concerned Registrar of
Companies to be submitted electronically to the Ministry of Corporate Affairs on
the portal of MCA. An application shall be in e-Form 1A as prescribed by
Notification No. GSR 56(E) dated 10th Feb., 2006 duly digitally signed by any one
promoter or managing director or director or manager or secretary of the company
along with the required fee for ascertaining whether the selected name is available
for adoption by the promoters of the proposed company.

2.2 Approval of the name

After receipt of completed application in e-Form 1A, the Registrar shall intimate
whether the proposed name is available for adoption or not. The confirmation of the
name made available by the Registrar shall be valid for a period of six months.In
case, if the promoters fail to submit all the required documents for incorporation
within that period, then they are required to submit another application after
payment of requisite fees.

2. Selection of name

Six names are required to be selected in order of preference after taking notes of
numerous provisions, clarifications, circulars and rules made by the Ministry of
Corporate Affairs, etc. In case key word is required, significance of each key word
should be given in the e-Form 1A.

3. Requirement for having DIN

As per proviso to section 253 of the Companies Act, 1956, inserted by the Companies
(Amendment) Act, 2006, w.e.f. 1-11-2006, no company shall appoint or re-appoint
any individual as director of the company unless he has been allotted a Director
Identification Number under section 266B.

New section 266A has been inserted by the Companies (Amendment) Act, 2006
which provides that every individual, intending to be appointed as director of a
company shall make an application for allotment of Director Identification Number
(DIN) to the Central Government in the prescribed DIN Form. Therefore, before
submission of e-Form 1A all the directors of the proposed company must ensure that
they are having DIN and if they are not having DIN, it should be first obtained.

Specific care should be taken that a person cannot have more than one DIN, therefore,
3.1 Requirement for having digital signatures
After 16th Sept., 2006, every documents prescribed under the Companies Act, 1956
is required to be filed with the digital signature of the managing director or director
or manager or secretary of the Company, therefore, it is compulsorily required to
obtain digital signatures of at least one director to sign the e-Form 1A and other
documents. It may be noted that if the director or other persons covered are having
digital signatures, their signatures may be used for the above said purpose and there
is no need take new signature again.
a DIN once obtained shall serve the requirement for all the companies in which he is a
director or intended to be a director.

4. Preparation of the Memorandum of Association (MOA) and Articles of

Association (AOA)
Drafting of the MOA and AOA is generally a step subsequent to the availability of
name made by the Registrar. It should be noted that the main objects should match
with the objects shown in e-Form. These two documents are basically the charter and
internal rules and regulations of the companies. Therefore, they must be drafted with
utmost care with the experts advise and the other object clause should be drafted in a
very broader sense.
5. Filing of documents with the Registrar
Next step for the promoters is to file the following documents with the Registrar for
incorporation of the company. The following documents shall be submitted to the
Registrar alongwith the adequate filing fees as applicable for registration of the
company online with in a period of six months from the date of intimation of
availability of name:-
1. Memorandum of Association, duly signed by the subscribers and witnessed,
showing the number of shares against their names electronically attached in
PDF file. It should also be properly stamped as per the stamp duty applicable in
the State, where the registered office of the company is to be
situated.Simultaneously original stamped copy of the Memorandum of
Association shall be submitted with the Registrar of Companies concerned.
6. Payment of registration fees for a new company The fees payable to the
2. Articles
Registrar at theoftime
Association shouldofbea duly
of registration signed by varies
new company the subscribers
accordingand witnessed,
to the
showing the number of shares against their names electronically. It
authorized capital of a company proposed to be registered as per Schedule X to the should be
properly
Act. Fees can bestamped according
calculated by the to
MCAthe authorized share capitalofasIncorporation
portal. 7. Certificate per the stamp duty
applicable
(section 33 and 34) in the state, where the registered office of the company to be situated.
Simultaneously original stamped copy of the Memorandum of Association shall
be submitted with the Registrar of Companies concerned.

3. Copy of the agreement, if any, which the company proposes to, enter in to with
any individual for appointment as its managing or whole-time director or
manager shall be attached in the PDF file.

4. Declaration in e-Form 1 by an advocate or company secretary or chartered

accountant engaged in whole time practice in India or by a person named in the
Articles as a director, manager or secretary of the company, that all the
requirements of the Companies Act, 1956 and the rules made thereunder have
been complied with in respect of registration and matters precedent and
incidental thereto, which may be accepted by the Registrar as sufficient
evidence of such compliance. It should be carefully noted that details of all the
companies in which directors are also director should be given and the names,
addresses and other particulars of directors and promoters should be matched
with the information provided in the DIN application Form. [ Section 33(2)]
(Appendix 2).

5. Power of Attorney for should be furnished by all the subscribers in favour of

any one subscriber or any other person authorising him to file these documents
and to with the Registrar and to obtain certificate of incorporation. The power of
attorney should be given on Non-Judicial stamp paper of appropriate value and
shall be submitted to the Registrar. (Appendix 3).

6. Other agreement if any, which has been stated in the Memorandum or Articles
of Association shall also be filed in the PDF file with the Registrar because in
such cases the agreement will form part of this basic document.

7. E-Form 18 is to be filed with the Registrar electronically with the digital

signatures in regard to location of the registered office. E-Form 18 shall also be
certified by the company secretary or chartered accountant or cost accountant in
whole –time practice. [ Section 146 (2)] (Appendix 4)

8. E-Form 32 is required to be filed with the Registrar electronically for filing

particulars of directors. The personal details should match with the information
provided in the DIN. Following additional details are also required to given in
e-Form 32:
(a) Name and CIN of all the companies in which they are directors;
(b) Names of partnership concerns in which they are partner;
(c) Names of proprietorship concerns in which they are proprietor;

In case if the field provided in the e-From 32 is not sufficient, an annexure may
also be enclosed for the required details. As an e- Form 32 provides fields for
three directors only, e-Form 32AD i.e. Addendum to e-Form 32 shall be
submitted for additional appointments. E-Form 32 AD, if any is also required to
be certified by the company secretary or chartered accountant or cost accountant
in practice digitally before filing with the Registrar. Consent to act as director
on plain paper and authorization to submit e-Form 32 from all the director
should be attached with the e-Form 32.
On the satisfaction of the Registrar that the requirements specified in sections 33(1)
and 33(2) have been complied with by the company, he shall retain the documents
and register the MOA, AOA and other documents. Section 34(1) cast an obligation on
the Registrar to issue a Certificate of Incorporation, normally within 7 days of the
receipt of documents.

8. Commencement of Business
A Private limited company and a company not having share capital may commence
its business activities from the date of its incorporation. However, a public Limited
Company having share capital is required to take certificate of commencement of
business before it can commence business.

SAURABH KR. SINGH (TAX ADVOCATE)

R-9/261,
RAJ NAGAR,
GHAZIABAD (UP) 201002.
PH# 9811806901
EMAIL: kumartax@gmail.com