Private Limited Company Registration | Advantage and Documents Required

A private limited company (PLC) in India is a privately held business enterprise owned by individual people or other companies. The formation regulations and registration of the PLC is governed by the Companies Act, 2013 and the Companies Incorporation Rules, 2014. For a business entity to qualify as a PLC, the following parameters apply:-

• A PLC requires minimum two shareholders and two directors to be registered
• The Company cannot have more than 200 shareholders and not more than 15 directors.
• The shares are non-transferable and can never be traded publicly. Hence the PLC can never issue a prospectus or a detailed statement of the company.
• Neither can they borrow money from the public as loans or as deposits. It can only borrow money from financial institutions.
• Each shareholder’s liability is limited to the value of his shares.
• The company has a separate legal entity. The company continues to run and operate even in the event of director or a shareholders’ death, in case of insolvency or bankruptcy. However, the ownership can be transferred by transferring shares. Since it has a separate legal existence, the company can acquire, own and alienate property in its name.
• It is mandatory by law to include the word ‘Private Limited’ after the name of the company.

As per Indian laws, there are three distinct types of Private Limited companies:-

1. Company Limited by Shares - the liability of the shareholder is limited to the nominal amount of his shares, as mentioned in the MoA.
2. Company Limited by Guarantee – the liability of the shareholder is limited to the amount of liability undertaken by each member as per the MoA.
3. Unlimited Company – the liability of each member in such type of PLC extends to the entire value of the company’s debts and liabilities.