A Private Limited Company is a company limited by shares in which there
can be maximum 50 shareholders, no invitation can be made to the public
for subscription of shares or debentures, cannot make or accept deposits
from Public and there are restriction on the transfer of shares. The
liability of each shareholder is limited to the extent of the unpaid
amount of the shares face value and the premium thereon in respect of the
shares held by him. However, the liability of a Director / Manager of
such a Company can at times be unlimited. The minimum number of
shareholders is 2.
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 of the firm's solicitor or accountant.
This is the address, through, where all official correspondence will go.
Shareholders : There must be a minimum of two shareholders (also
described as `members' or `subscribers'). A private company can have up
to fifty shareholders.
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.
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.
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
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.
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.
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.
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
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