Category BLOG

In India, the government are trying their best for simplifying the setup and conducting the business.

In the crucial time of setup of business, one needs to take many decisions for their business. But among all others, the most crucial and significant decision is to choose the constitution.

Types of constitution for the business in India are

• Sole Proprietor Concern                               Limited Liability Partnership
• Private Limited or Limited company          Partnership Firm

In this article, we are addressing the requirements for registration of Private Limited Company.

Legal requirements for registering Private Limited company is that at least two directors are required and one of them must be Indian Resident.

Steps mentioned for Private Limited Registration

Step 1

Acquire Digital Signature Certificate for the promoter who are proposed shareholders of the company.

Step 2   Application for DIN (Director Identification Number)

Any person (not having DIN) proposed to become a first director in a new company shall have to make an application through e-Form SPICe. The applicant is required to attach the proof of Identity and address along with the application. DIN would be allocated to User only after approval of the form.

Documents for DIN Application

Attach the photograph and scanned copy of supporting documents. i.e. proof of identity, and proof of residence as per the guidelines.
Physical documents are not required to be submitted at DIN cell.

Step 3 Application for Name Reservation

Application is to be made for reserving name in e-Form INC – 1 by making payment of requisite fees. You may provide maximum 6 names in preferential order along with the significance for proposed name(s).

The proposed name should not be similar or identical to any company/LLP already registered. Also Name should not prohibited to use.

The name approved will be reserved for the next 60 days from the approval date.

Step 4 Drafting MOA and AOA

MOA stands for Memorandum of Association and AOA stands for Articles for Association are to be drafted carefully with the professional advice in which the objects of the company, its powers, responsibilities, operations are to be incorporated.

Step 5  Application for Incorporating the Company

Incorporating a company through Simplified Proforma for Incorporating Company electronically (SPICe -INC-32), with eMoA (INC-33), eAOA (INC-34), is the default option and most companies are required to be incorporated through SPICe only.

Documents required for Incorporation

Utility Bill and NOC from the owner for the Registered Office address of the Company (Utility bill must not be older than 2 months)

Rental agreement, if property is rented

Consent to act as a Director in Form DIR-2

Affidavit and declaration in the Form INC- 9,by the subscribers and promoters

Self-attested Identity proof of the first subscribers and promoters. 

Once verification is done by the Department for the documents and other compliances for registration, Incorporation Certificate will be issued by the MCA along with PAN & TAN.

Before commencement of business, Private company must file a declaration filed by a director within a period of one hundred and eighty days of the date of incorporation of the company in FORM INC- 20A and every subscriber must have paid agreed value before filing the same.

Also, Form-22 must be filed for verification of Registered Office.

The companies registered under the Companies Act, 2013, have a separate legal entity. The operations are managed by the Board of Directors, and not the owners, subject to the provisions of said Act.

Along with the powers of management, directors have been assigned with some duties and responsibilities, provided in the said Act.

Also Read http://taxacumen.in/2020/04/04/how-to-register-private-limited-company/

Section 166 of the Act, deals with the duties of the directors, towards the company. Here, duties specified under the law are as mentioned below:

1. Act according to Articles of Association

Every director of the company shall act, according to the terms decided under Article of Association. The powers given in the Articles cannot exceed, unless the provisions permitted.

2. Act in the interest of the company

All the directors, shall act in the good faith in order to promote the objects of the company, for the benefits of its members, as a whole, and in the best interests of the company, employees, the shareholders, the community, and for the protection of environment.

2. Don’t make secret profits

A director shall not achieve, or attempt to achieve any undue gain or advantage, either to himself or to his relatives, partners, or his associates, and if found guilty, he shall be liable to pay an amount equal to that gain.

3. Due care and skill

Every directors need to ensure that the due care, skills and diligence is in exercise, while taking the decisions for the company. Also, the independent judgement should be exercised.

Know more about DIN http://taxacumen.in/2020/04/09/allotment-of-director-identification-number/

4. Confidentiality

The directors are the core management personnel of the company. They come to know various sensitive, confidential information, while exercising their duties. These information can damage the company, in case of disclosure.

Hence, there is need to maintain the confidentiality for the sensitive information of the company.

5. Attend meetings

As required by law, directors need to attend the meeting conducted for the operations of the company. He must provide valuable ideas, inputs for the smooth functioning and betterment of the company, whenever required.

6. Conflict of Interest

Directors must know that the company interests are more important than his personal interests. He should not involve in such situation, in which he may have any direct or indirect interest that conflicts, or possibly may conflict, to the interest of the company.

7. Assignment of his office

Director can not assign his office to any person. Such assignment, if done, shall be void.

CA PRASHANT MISHRA

Any company registered under the Company Act need to appoint an Auditor to comply with the provisions of the said Act. The company, whether registered as private limited, or one person company, or limited, or any other firm, are required to conduct the Audit. The purpose of Audit is to ensure financial compliance is being followed by all.

The section 139 states

“Every company shall, at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereafter till the conclusion of every sixth meeting and the manner and procedure of selection of auditors by the members of the company at such meeting shall be such as prescribed”

Who can be Auditor?

A Chartered Accountant or a firm of qualified Chartered Accountant including LLP, can be appointed as the Auditor, If he satisfies the conditions for the same.

Tenure for the Auditor

The tenure for the Auditor is from the conclusion of the meeting in which appointment is proceeded till the 6th AGM. But, there is need for ratification of the said appointment in every Annual General Meeting held before.

Cooling Period

There is the provisions of cooling period, in case of Listed company or companies as prescribed. The period for which appointment can be made:

• An Individual as auditor for more than one term of 5 consecutive years; and
• An audit firm as an auditor for more than two terms of 5 consecutive years.

It is to be noted that the break in the term for a continuous period of 5 years will be considered as fulfillment of the above said condition of cooling period.

Appointment of 1st Auditor

The first auditor shall be appointed by the Board within 30 days from the date of Incorporation. In case of failure of Board to appoint, the EGM needs to be called for appointment within 90 days from the expiry of 30 days given to the Board. The tenure is till the first AGM.

Remuneration for Auditor

As per section 142(1), remuneration shall be fixed in its general meeting. But in the case of 1st Auditor appointed by the Board itself, the Board will decide the remuneration.

From ADT-01

Once the appointment is done, the form ADT-01 is needed to file file with ROC within 15 days from the appointment date. There is no requirement for filing the said form, in case of first auditor.

Procedure mentioned below is required for appointment of auditor

1. Intimate the proposed auditor regarding the intention of the company for appointing him as auditor.

2. Obtain consent & certificate about the eligibility for appointment.

3. In case, the audit committee is required to be constituted under section 177, then obtain its recommendation. Otherwise, the Board can proceed.

4. The Board can only recommend in the Board Meeting, unless, the appointment is for 1st Auditor.

5. On the basis of recommendation of the Board, the shareholders will appoint the Auditor in the Annual General Meeting.

4. Now, the company needs to intimate the auditor about the appointment and file the form ADT-1 with MCA within 15 days.

DEEPA KAINTURA

Under the company Act, 2013, Section 153 to 159 are in relation to the allotment of Director Identification Number (commonly known as DIN) to Director and conditions to be satisfied for the same and penalty for Non-compliance.

Section 153 states that

“Every individual who is intended to become director need to apply for DIN. Application to be made in the form DIR-3 to the Central Government (CG) along with the prescribed fees (presently fees is 500 for each application)

Procedure to Apply for DIN

The following documents need to be uploaded while applying DIN

1. Photograph
2. Proof of Identity
3. Proof of residence
4. Affidavit for verification by applicant in form DIR-04
5. Verification of Signature specimen

The form DIR-03 is to be digitally signed along with the applicant by

A Chartered Accountant in practice or Company Secretary in practice or CMA in practice, or

Managing Director or Director of the company in which applicant intended to be appointed or CS of the company in full time employment.

Section 154 states that the CG shall allot DIN within one month from the receipt of the application after due verification.

Conditions to be complied for Director Identification Number

There are also some conditions mentioned in relation to DIN under the above said Act which are as follows:

A Person can have only one DIN.

Every existing Director shall within one month of receiving the DIN, intimate to all the companies wherein he is a director.

Every company shall, within fifteen days of the receipt of DIN from the directors, furnish all the details to the Registrar.

Every company or directors, while furnishing any returns, information or particulars required under the Act, shall mention the DIN in the return, information or particulars relating to the said director.

Change in Particulars of the DirectorsDIR-6 Form:

• In case of any change in the particulars of the directors, the Form DIR-06 is to be submitted to intimate the changes such as change in address, or any other details.

Penalty/Punishment for Non-compliance

If any individual/ Director of a company, contravenes any provision, shall be punishable with the imprisonment for a term upto six months or with fine upto the limit of Fifty Thousands.

And it is also stated that in case of continuing Non-compliance, punishment can be extended with a further fine upto Five hundered for every day after the first contravention.

Also if any company contravenes the requirement of furnishing DIN of the directors or other officers under section 157, the company shall be punishable with the fine which is not less than Twenty thousands, but may extend upto one lakh rupees, and Every officer-in default of the company shall also be punishable with fine which shall not be less than twenty five thousands, but may extend upto one lakh rupees.