Registering a private limited company

SUNDAY, 01 JUNE 2008 00:00 CHHAVI TYAGI STRATEGY - LEGAL & POLICY

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• Pharma exports up by 29% in 2008-09... • Deemed Universities in India... • Financial constraints in handling and process... DARE brings you a step-by-step guide to register a private limited company. Thinking of setting up your own business but skeptical of the “long, complex” procedure of getting that incorporation certificate?

DARE/rules of a pvt. ltd. For incorporating a private limited company: A minimum of two directors are required and minimum two shareholders. The right to transfer shares is restricted as per the articles of association. The number of shareholders is limited to fifty.

DARE brings you a step-by-step guide to register your business as a private limited company. Before the registration process, let's look at some of the rules that apply to a private limited company (see box). The route to registration The registration of companies as also subsequent filings can be done online. Still, there are a couple of stages where an authorized person has to make a personal appearance—for instance, during the vetting of the memorandum and articles of association and during the stamping of the documents. Before starting the process of registering your company, the prospective directors must have director identification numbers (DIN) and digital signature certificates.

An invitation to the public to subscribe to any shares or debentures is prohibited. No invitation or acceptance of deposits from persons other than members, directors or their relatives is allowed. Lesser number of compliance requirements

DARE/the process Obtain Director Identification number Time taken: One day Charge: Rs 100/- w.e.f. 1st July, 2007 Get your digital signature certificate Time taken: Four days Charge: Rs 400 to Rs 2650 Get the name of the company approved Time taken: Two to three days (within seven days) Charge: Rs 500 Memorandum and articles of association vetted and printed Time taken: within six months of name approval Charge: Nil Get the documents stamped Time taken: One day Charge: Stamp duty varies from state to state Get the memorandum and articles signed by at least two subscribers Time taken: One day Charge: Nil Get the certificate of incorporation Time taken: Five to ten days Charge: Registration fee varies on the basis of the company’s authorized capita

After acquiring the two, you have to get the name of the company approved by the concerned Registrar of Companies (RoC), which is done by filling Form 1A. You can give a maximum of six names and the RoC replies within seven days as to the availability of the names. In practice, however, the name-approval process only takes two to three days. (See Box the process) Once the name is approved, the next step is drafting the memorandum and articles of association (MoA and AoA). The difference between the two is that the articles contain only those clauses that define the internal

functioning of the company. On the other hand, the memorandum of a company defines important clauses such as authorized capital clause and the object clause. The authorized capital clause determines the extent to which the ownership base can be expanded by issuing fresh shares or other instruments in the future. The object clause defines the objectives of the company and has two sections; one for the main objectives and the second describing the other businesses that you might want to get into at a later stage. After the MoA and AoA are prepared they are printed and sent to the concerned registrar for vetting and to mark out objections, if any. The documents are then stamped (the stamp duty varies from state to state) and finally all the documents along with some other details like particulars of appointment of managing director, directors, manager and secretary are sent to the concerned registrar. The last step is to pay the registration fee, which varies on the basis of the company’s authorized capital, after which the company gets registered as a private limited company under the Companies Act, 1956 and gets its certificate of incorporation. The whole process to get the certificate of incorporation for a private limited company takes roughly about 15-20 days. One thing to keep in mind is that the registration must be done at the regional office of the Registrar of Companies where the registered office is to be located. DARE/fees The fees for the various applications for registration can be paid either through: - Cash - Internet banking - Credit card - Challan

There are some more things that are required by a private limited company, like getting a permanent account number and a company seal, after it is registered. However, unlike a public limited company, a private company can begin its operation right after getting a certificate of incorporation and complete the rest of the formalities simultaneously.

100. Many companies don't bother to draw up their own articles but adopt (sometimes with some modifications) articles set out in the Companies Act. Every company must maintain a set . Memorandum of Association: The memorandum is the company's charter. 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. Small companies are frequently formed with a nominal share capital of Rs. the relationship of the company to its shareholders and the relationship between the individual shareholders. 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: Every company must appoint a qualified auditor. nominal share capital divided into shares of fixed amounts. The memorandum must be signed by at least three shareholders. It won't be considered if it is offensive or illegal and the use of certain words in a company (for example. Certificate of Incorporation: This is the document. Nevertheless. The auditor's duty is to report to the treasurer whether or not the books of the company have been properly kept. through. and they hold office from the conclusion of the meeting until the next general meeting. most importantly. In theory. The company name must be displayed in a conspicuous place at every office. the situation of its registered office. This is the address.What are the Requirements for a Private Limited Company? A Registered Business Name: This must be followed by the word ‘Limited' or ‘Ltd'. where all official correspondence will go. Share Capital: The company must be formed with a stated. or other premises where the company carries out business. A private company can have up to fifty shareholders. Quite frequently the address used for the registered office is that of the firm's solicitor or accountant. which the registrar of companies issues to you once he has approved your choice of name and your memorandum. `National') can only be used in certain circumstances. The Companies Registration Office exercises some control over the choice of name. the object for which the company has been formed. A Registered Office: This need not necessarily be the same address as the business is conducted from. the fact that liability is limited and. and anyway a 75 per cent majority of the members of the company can change the objects whenever they like. `Institute'. Accounts: The Companies Act lays down strict rules on accounting. It states the company's name. Auditors are appointed or re-appointed at general meetings at which annual accounts are presented. Articles of Association: The document contains the internal regulations of the company. 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. its share capital. When you receive this document your company legally exists and is ready to trade. it cannot be identical (or very similar to) the name of an existing company. Shareholders: There must be a minimum of two shareholders (also described as `members' or `subscribers').

1 and Memorandum and Articles of Association. The Identity Proof should contain any one of the following: • • • • PAN Card Driving License Passport Voter Id Card The Residence Proof should contain any one of the following: • • • • • • • Driving License Passport Voter Id Card Telephone Bill Ration Card Electricity Bill Bank Statement The involved authority authenticates all the credentials and. The price of stamp duty differs from state to state. a register of charges. Director of the company is required to submit the recommended application form along with the identity and residence proof. Step 4 . upon agreement. This must be impressed on share certificates and must be used whenever the company has to execute a deed. a register of share transfers. signed and sent to the Ministry of Corporate Affairs for its consent along with the identity and address proof. Change of name of companies. a book can be purchased to hold all of the above.unless the company notifies the registrar of companies otherwise. Company Seal: All companies must have an engraved seal. This process takes two days for attaining consent of the name if the suggested name exists and matches to the naming values instituted by the Company Act. a register of debenture holders. . Again. this is included in the readymade company package. 1A should be presented to the Registrar of Companies (ROC) of the state citing the address of the Registered Office of the projected firm along with the signature of one of the promoters. The temporary DIN is instantly issued which must then be printed. Within ten months of the end of an accounting reference period. Eliminating the names of companies and Penalty action against companies. This will be provided automatically if you buy a running concern. Form No. The Registrars of Companies in different states chiefly manage: • • • • • • The integration of companies. Step 2 . companies are required to have: a register of members and share ledger. drafts a permanent DIN.of records. The appeal for stamping the inclusion certificates should be complemented by unsigned copies of the Articles of Association. etc. which show the financial position at any one time with reasonable accuracy.Cache the company name with the Registrar of Companies (ROC).Acquire digital signature certificate to utilize the latest electronic registration system under MCA 21. Step 3 . Change of fiscal year Alteration of companies from Private to Public and vice versa. Form . To attain name consent for the suggested firm. The methods of registering a company in India are as under: Step 1 . This certificate can be acquired from any one of the six private bureaus sanctioned by MCA 21. an audited set of accounts must be laid before the shareholders at a general meeting and a set delivered to the registrar of companies.Attain director identification number (DIN) by filling Form DIN-1. Registers. a register of directors and secretaries. The accounts comprise a profit and loss account and balance sheet with the auditors' and directors' reports appended.Seal the company credentials at the State Treasury (State) or certified private bank. A new company's accounting reference period begins on its incorporation and runs until the following 31st March . The firm must make sure that no promoter has written anything nor have signed on the documents which are deposited to the Superintendent of Stamps or to the certified bank for stamping.: In addition to the accounts books. A maximum of 6 proposed names can be presented which are verified by RoC staff for any resemblance with other company names in India.

occupation and number of shares subscribed. Registration of VAT requires filling up of Form 101.Enroll with the Office of Inspector. Ministry of Corporate Affairs. released by the Registrar of Companies along with the identity and residence proof.The documents should be signed by the firm's promoters after the MOA and AOA have been stamped. Residence proof. Copy of PAN card.Attain a Permanent Account Number (PAN) from a certified franchise or agent allotted by the National Securities Depository Ltd. Besides the promoter's signature. One can get PAN application from IT PAN Service Centers or TIN Facilitation Centers using Form 49A with the acknowledged copy of the certificate of registration. Under this procedure. Shops. 1961 and the Tax Account Number (TAN) for submitting tax reduced at source. The submission for allotment of a TAN must be registered using Form 49B and deposited at any TIN Facilitation Center certified to accept e-TDS returns. Step 5 . Making a company seal is not a legal obligation for the firm to be integrated.Acquire a Tax Account Number (TAN) for income taxes abstracted at source from the Assessing Office of the Income Tax Department. Challan on Form No. a proclamation incorporating the names of employer's and manager's and the establishment's name (if any). other information which must be filled in applicant's handwriting is the company's name.Attain the Certificate of Incorporation from the Registrar of Companies. and group must be delivered to the local shop inspector with the pertinent fees.Enroll for Value-Added Tax (VAT) at the Commercial Tax Office (State). Other credentials which need to be enclosed with Form 101 are: • • • • • • Attested copy of the memorandum and articles of association of the company. Step 9 . The prerequisites of Section 203A of the Income Tax Act state that all individuals who subtract or collect tax at the source must submit an application for a TAN. copies of agreement of the original directors and signed and sealed form of the Memorandum and Article of Association must be enclosed in Form 1.. The Tax Account Number (TAN) is required by anyone accountable for deducting or gathering tax. The forms which are required to be filled online on the Ministry of Company Affairs website are: e-form 1. 210 . as outsourced by the Income Tax Department (National). (NSDL) or the Unit Trust of India (UTI) Investors Services Ltd. Step 7 . and e-form 32. Each person is entitled to state his or her Permanent Account Number (PAN) for the purpose of tax payment under the Income Tax Act. father's name. Step 10 . Applicant's one current passport-sized photograph. Step 6 . address. Proof of location of company. but firms require a seal to deliver share certificates and other certificates. Along with these papers.Make a seal (applicable for the private limited companies). e-form 18. postal address. description of company's activities and motive. and Establishment Act (State/Municipal). Step 8 .

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