Meaning

Section 2(68) of Companies Act, 2013 defines private companies. According to that, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them. This is the basic criterion that differentiates private companies from public companies.

The Section further says private companies can have a maximum of 200 members (except for One Person Companies). This number does not include present and former employees who are also members. Moreover, more than two persons who own shares jointly are treated as a single member.

Features

No minimum capital required: There was a minimum paid-up share capital requirement of Rs. 1 lakh previously, but that is omitted now.

Minimum 2 and maximum 200 members: A private company can have a minimum of just two members (but just one is enough if it a One Person Company), and a maximum of up to 200 members.

Transferability of shares restricted: Private companies cannot freely transfer their shares to the public like public companies. This is why stock exchanges never list private companies.

“Private Limited”: All private companies must include the words “Private Limited” or “Pvt. Ltd.” in their names.

Privileges and exemptions: Since private companies do not freely transfer their shares and involve limited interest by members, the law has granted them several exemptions that public companies do not enjoy.

Procedure

Once a name for the company is decided by the Proposed Directors, then the following steps have to be taken by the applicant:

• Step 1: Apply for DSC (Digital Signature Certificate) and DIN (Director Identification Number)
• Step 2: Apply for the name availability
• Step 3: File the MOA and AOA to register the private limited company
• Step 4: Apply for the PAN and TAN of the company
• Step 5: Certificate of incorporation will be issued by RoC with PAN and TAN
• Step 6: Open a current bank account on the company name

For any kind of assistance, contact Mr.Manohar B V, FCA, MCom @ manohar@mbvca.in / 9916870055