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What Is A Private Company?
The responsibility of members of the pvt ltd company is restricted to their shares. Shares belonging to private limited companies are not able to be traded in a free market. The Private Limited Company Registration is the best recognized legal structure for business in India. It is created by the Companies Act, of 2013, and controlled by the Ministry of Corporate Affairs (MCA).
Characteristics of a Private Limited Company
1
Number of Member
To start a business, the minimum requirement is two members are required and up to 200 members as per the requirements under the Companies Act, 2013.
2
Limited Liability
The responsibility of each shareholder or shareholder is limitless. This means that if the company suffers losses under any circumstance, then its shareholders are responsible to sell their assets in exchange for reimbursement. The personal or individual assets of shareholders are not in danger. A nominee shareholder is an owner registered with shares in a company. The nominee arrangement is utilized to protect the shareholder's identity secret.
3
Perpetual succession
The Company exists as per the law regardless of insolvency, death, or bankruptcy of any one of its members. This is the reason for the continual continuity of the business. The existence of the company is never-ending.
4
Index of members
A private business has an advantage over the public one in that it doesn't need to maintain an inventory of its members, whereas the public company must keep its members' names in an index. (If the membership is greater than 50, an additional index of members is required.)
5
The directorships of the directors.
A private business must be run by two directors. With two directors (with at least one director that is an Indian resident) A private company can start operations.
6
Capital authorized
Minimum authorized capital of 1 lakh or an equivalent amount as may be set from time to time.
7
Prospectus
The prospectus is a comprehensive description of the business's affairs that is distributed by a business to its shareholders. But, there is no requirement to publish a prospectus in the instance of a privately-owned corporation because the public is not allowed to purchase shares of the company.
8
Minimum subscription
It is the amount paid to the company, that represents 90% of shares that are issued during a specific time. If the company isn't in a position to receive the full 90 percent of the value, it is not allowed to continue the business. If it is a private limited company shares are available to the general public without the minimum amount of subscription.
9
Name
All private companies have to include the word"private limited" in their name.
How To Set Up A Private Limited Company In India
Advantages Of Setting Up A Private Limited Company In India
1
Separate Legal Entity
An entity is an entity that is real that has an identity. The company can be described as a legally-constituted entity, and juristic persons are created by the Indian Companies Act, 2013. The term juristic means someone who is not an actual person or human being but an artificial legal entity. Thus, a juristic person is a kind of entity, such as a corporation that has a broad legal capability and can have property as well as be liable for debts it incurs. The members (Shareholders/Directors) of a company are not liable to the creditors of a company for such debts. Thus, it's an entity legal and distinct from its members.
2
Infinite existence
A company is considered to have 'perpetual succession' i.e. an uninterrupted or continuous existence, even after its legal dissolution. A business, which is an independent legal entity, cannot be affected by the departure, death, or bankruptcy shares of any members. It remains active regardless of any change in membership. Perpetual succession is among the main features of a private limited business.
3
Limited Liability
Limited Liability is the state of being legally responsible for a certain amount of obligations of a company. Contrary to partnerships and proprietorships with limited liability businesses the liability of members is limited to debts owed by the business. That is, the liability of members is limited to the value of the shares held by them. So, if a business is governed by shares, the liability of shareholders in winding-up is limited only to the value of the shares that are not paid for their shares.
4
The transferability of shares is free and easy. shares
A private limited company is private and the shares of any shareholder of this closely-held company can be transferred by a shareholder to anyone else as per the Article of Association of the company. Transfers are easy it is different from that of an ownership interest to a company that is a proprietary concern or partnership. Filling out and signing a share transfer form, and then handing it to the purchaser of the shares with a share certificate will effortlessly transfer the shares.
5
Owning Property
A legal person can purchase, own, benefit from, and dispose of properties in their name. The shareholder cannot claim any right to the property of the company so it is operating as a go-to business. A shareholder does not constitute the sole owner of the property owned by the company. The company is the real owner.
6
The ability to sue and to be capable of being sued and sue
To sue is to initiate legal proceedings against another person or make a claim in a court of law. Like a person who can file a legal suit on behalf of another person, a corporation as an entity that is independent can sue or be sued under its own name.
7
Dual Relationship
A company may have a valid, effective agreement with any one of its employees. Someone who is under the control of a business may also be employed by the company. So, one can be a creditor, shareholder director, or shareholder. They can also be employed by the business at the same time.
8
Borrowing Capacity
The company has more options for borrowing funds. It can issue secured and unsecured debentures. It can additionally accept deposits from the general public. Many banks and financial institutions would prefer to offer substantial financial aid to companies instead of partnership companies or private companies.
9
Raising Funds
It may raise funds through loans, equity, and deposits. It may get money from its promoters, directors, and their families as well as financial institutions, banks as well as from its members, and by releasing different financial instruments. Before utilizing any financial facility, a business should make sure that it is to the Companies Act, 2013 and the regulations and be in that it is in compliance with all other laws.
Conclusion
Private limited companies have the right to formation of a shareholders' contract to distinguish various interests. If the company isn't doing financially, it is protected by the clause of limited liability, and individuals' assets and investors are secured. Since the parent company oversees and controls all of the shares held by their subsidiary, the latter can ensure the strict operation of this private company within India. In India, the Private limited business is the sought-after type of business because it has the benefit of great branding, as it keeps the name of the parent company, but also benefits from the flexibility to expand in new areas.
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