Under the Companies Act of 2013 there are multiple types of companies given. Private companies are one of them. These companies have their own advantages as well as disadvantages. Hence before choosing a private company for the business one must have complete knowledge about them. The present blog will try to give you every possible information regarding such companies, thus make sure that you will read every line of this blog till the end. Such kinds of companies have been defined under section 2(68) of the company law. These entities are further divided into subcategories. This subcategorization makes it more difficult for the business owners to choose one among them. To clear your every doubt regarding the private limited company registration and for its better understanding continue reading the write-up.
What are Private Companies?
As defined under the definition clause of the Companies Act of 2013 under Section 2 sub clause 68, “Private company” is defined as the company with a paid-up share capital of at least one lakh rupees. These companies limit the ability to transfer their shares through its articles. restricts the number of its members to 200, with the exception of One Person Company Registration. It also forbids inviting the public to subscribe for any of the company’s securities..
Features of Private Company
There are various features of Private companies some of them are mentioned below:
- They can be registered online
- Can be stated with minimum two individuals
- Its members can go up to 200 in number
- Its directors can be disqualified under some cases
- They are having perpetual succession
- After registered as private company they becomes legal individuals
- Distinct liability from the members
- Authenticity is high
- Gets many tax exemptions
Different Types of Private Company
There are three types of sub categories of the private companies which are mentioned below:
| Types of Private Company | Description |
| Companies Limited by Shares | The responsibility of the company’s shareholders in private limited companies that are share-limited is restricted to the amount that each shareholder has invested in the business. A shareholder in any of these businesses is only accountable for the number of shares it has bought in the Pvt Ltd Company. In this case, the company’s personal debt is not the shareholders’ responsibility. |
| Companies Limited by Guarantee | Shareholders in Private Limited Companies bound by guarantees are only required to pay the portion of the money for which they have obtained guarantees. The company’s Memorandum of Association makes reference to this sum. Furthermore, the shareholder’s liability is limited to the sum specified in the Pvt Ltd Company’s Memorandum of Association. |
| Unlimited Companies | Unlimited companies are included in the three types of Pvt Ltd companies. The liability of shareholders in these kinds of private limited companies is unrestricted. In such cases, the personal debt of the companies is also the responsibility of the shareholders. Since this category offers unique legal identity, stockholders cannot be sued individually even though there is no limited responsibility. |
Process of registration of Private Company in India
Step-by-step process to form a private company in India is given below for the reference of those who wants to register their private company:
- Select a unique name for your company
- Check the name’s availability on the MCA portal.
- Obtain Digital Signature Certificates for all the proposed directors of the company.
- Apply for Director Identification Numbers for all the proposed directors
- Draft the MOA and AOA of your company.
- Prepare the necessary incorporation documents
- Submit the prepared documents to the Registrar of Companies
- Pay the prescribed registration fees
- Now the application will be verified by the ROC
- After the successful verification of the application certificate of incorporation or registration will be issued to the one who have applied for the same
- Apply for the PAN and TAN numbers of the company and open a bank account for the same
- Deposit the initial capital in the company’s bank account
Advantages and Disadvantages of Private company
Private companies are having both advantages as well as disadvantages. For your reference both are mentioned below separately:
Advantages of Private Companies
- Process of registration is easy
- Registration process is entirely online
- Allows for a convenient location while doing registration.
- No need for in-person visits to vendors, saving time and effort.
- Option to hire a professional for assistance, freeing up your time.
- Increases credibility and reliability of the business in the market
- Establishes a reputation of the business in the market
- Government incorporation and verification enhance trustworthiness.
- Clients can verify details on the Ministry of Corporate Affairs portal.
- Government verified platforms inspire confidence.
- Investors get attracted towards private company
- MCA has access to online registered businesses’ data.
- Government oversight ensures compliance and deters fraud, making these businesses favorable for investment.
Disadvantages of Private Companies
- They have complex incorporation formalities
- Even missing a single step can result in rejection or the need for clarification.
- It’s challenging for non-experts
- Specialists are often needed to complete the process.
- Its incorporation cost is high
- High maintenance
- Various documents need to be prepared, each with associated fees.
- They have complicated and costly compliances
- No Citizenship Right has been given to these companies
- Private limited companies cannot own 100% of shares in their subsidiaries
Conclusion
Private companies in India, defined by the Companies Act of 2013, have a minimum capital requirement of one lakh rupees and a maximum of 200 members. They come in three types: Limited by Shares, Limited by Guarantee, and Unlimited Companies. The registration process involves several steps, and advantages include a straightforward online process, enhanced credibility, and attractiveness to investors. However, there are complexities, costs, and compliance requirements. Such companies lack citizenship rights and have restrictions on subsidiary ownership.
