What is a Private Limited Company in India?

Definition of Private limited company

• (i) restricts the right to transfer its shares;
• (ii) Except in the case of One Person Company, limits the number of its members to two hundred:

• (A) Persons who are in the employment by the company; and
• (B) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased,

• (iii) prohibits any invitation to the public to subscribe to any company securities.

Characteristics of a Private Limited Company

• Limited Liability Protection:  Shareholders of a private limited company are only liable to the extent of their shareholding. This means that their assets are not at risk in case of financial losses incurred by the company.
• Separate Legal Entity: A private company is a separate legal entity from its owners. It has its legal identity and can own property, enter into contracts, and sue or be sued in its name.
• Minimum Number of Shareholders: A private limited company must have a minimum of two shareholders and a maximum of 200 shareholders.
• Minimum Number of Directors: A private limited company must have a minimum of two directors.
• It is mandatory for at least one director to be an Indian citizen.

• Name of the Firm: The name of the PVT company must end with the words "Private Limited."
• Share Capital: A private limited company must have a minimum paid-up capital of Rs.1 lakh or a higher amount as prescribed.
• Restrictions on Transfer of Shares: The right to transfer shares in a private limited company is restricted. Shares can only be transferred with the approval of the Board of Directors or following the Articles of Association of the company.
• Prohibition on Invitation to the Public: A private limited company is prohibited from inviting the public to subscribe to its shares or debentures.
• Compliance Requirements: Private limited companies must comply with various legal and regulatory requirements, such as maintaining proper books of accounts, holding annual general meetings, and filing annual returns with the Registrar of Companies.

Requirements to start a Private Limited Company

• A minimum of two shareholders are required to start a private limited company. The maximum number of shareholders allowed is 200.
• A minimum of two directors are required to start a private limited company. At least one of the directors must be a resident of India.
• The Registrar must approve the proposed name of the company of Companies (ROC). The name must be unique and not similar to any other company name registered with the ROC.

• Digital Signature Certificate
• Director Identification Number
• Permanent Account Number (PAN)
• Tax Deduction and Collection Account Number (TAN)
• The Company must register with other authorities such as the Goods and Services Tax (GST) department, Employee Provident Fund (EPF) department, and Professional Tax department, if applicable.
• Private limited companies must comply with various legal and regulatory requirements, such as maintaining proper books of accounts, holding annual general meetings, and filing annual returns with the ROC.