In India companies areincorporated as a public or private limited company. Similar procedures are followed across India which starts with the registration of a name for the proposed company with the Registrar of Companies. This is followed by the submission of an application for incorporation substantiated by necessary documents.
The registrar issues a Certificate of Incorporation which is enough for a private company to start business right away while for a public company certificate of commencement of business from the ROC is required.
The process has been simplified by the introduction of e-filing processes for companyincorporation in India. The online procedure includes all form submissions while original documents have to be submitted in person.
The step by step process involves obtaining a Director Identification Number and Digital Signature Certificates for each Director / Promoter followed by an application for the name.
After the name is approved it is valid for six months before which the company has to beincorporated. Requisite documents along with registration fee and stamp duty which depends on the authorized capital of the proposed company is submitted by the directors to the ROC. After diligent checking the registrar issues the certificate of incorporation.
The number of shareholders must be two minimum for private companies in India. The minimum number of directors is also two. The minimum paid up capital is fixed at INR 100,000 for a private company.
A private company can have foreigners as shareholders who have to follow foreign exchange laws in India. The board of directors has to meet at least four times a year and the board meeting can be held in India or abroad.
Private companies in India can have minimum two and not more than fifty members. The members’ liability is limited and transfer of shares is also limited to its members. A private company has an independent legal existence and it cannot invite the general public to subscriber for shares or debentures.
It is less complicated to organize and operate compared to a public limited company. This type of structure and operation is preferred by those who need only limited liability and who want to keepthe control of the business within a small private circle of friends and family.
Although there are lesser legal restrictions, disadvantages are faced by private companies as shares are not freely transferable and there may be undemocratic control and occurrence of promotional frauds.
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