Private Limited Company and there Compliances as per Companies Act 2013
Section 2(68) of Companies Act, 2013 defines private companies. According to that, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them. This is the basic criterion that differentiates private companies from public companies.
Features of Private Companies
These are some features that distinguish private companies from other types of companies:
i. No minimum capital required: There was a minimum paid-up share capital requirement of Rs. 1 lakh previously, but that is omitted now.
ii. Minimum 2 and maximum 200 members: A private company can have a minimum of just two members (but just one is enough if it a One Person Company), and a maximum of up to 200 members.
iii. Transferability of shares restricted: Private companies cannot freely transfer their shares to the public like public companies. This is why stock exchanges never list private companies.
iv. “Private Limited”: All private companies must include the words “Private Limited” or “Pvt. Ltd.” in their names.
v. Privileges and exemptions: Since private companies do not freely transfer their shares and involve limited interest by members, the law has granted them several exemptions that public companies do not enjoy.
Types of Private Companies
Private companies are of three types depending on their members’ liabilities:
Limited by shares: The liability of the members is limited to the amount unpaid to the company with respect to the shares held by them.
Limited by guarantee: Here the members’ liabilities are limited to the amount of money they guarantee to pay in case the company is wound-up.
Unlimited liability: The liability of members is unlimited in this type of private companies. Personal assets of members can be attached and sold when the company is being wound-up.
In terms of the number of members, a private company can also be a One Person Company. These types of companies have just one member/shareholder as their promoter. The new Companies Act of 2013 introduced such types of companies.
Further, even small companies that have limited paid-up share capitals and turnover amounts, as defined under Section 2(85), are treated as private companies under Indian company law.
The Section further says private companies can have a maximum of 200 members (except for One Person Companies). This number does not include present and former employees who are also members. Moreover, more than two persons who own shares jointly are treated as a single member.
This definition had previously prescribed a minimum paid-up share capital of Rs. 1 lakh for private companies, but an amendment in 2005 removed this requirement. Private companies can now have a minimum paid-up capital of any amount.
Compliance for Pvt Company :
1. Company Name Board- Every Company shall paint or affix the name and address of registered office and keep the same painted/affixed, outside every office or place in which its business is carried on, in legible letters.
2. Letter Head of Company- Every Company shall get its name, address of registered office, CIN, telephone and email printed on all business letters, billheads, letter papers, notices and other official publications.
3. First Board Meeting- First Meeting of Board of Directors is required to be held within 30 days of Incorporation of Company. Notice of BM must be send to every director at least 7 days before the meeting.
4. Subsequent Board Meetings- Minimum 4 Board Meetings to be held every year with not more than 120 days gap between two meetings. In case of small company, it is sufficient to conduct only two Board Meetings.
5. Issuing of Share Certificate – Company is required to issue Share Certificates to the subscribers of memorandum within 60 days of Incorporation of Company.
6. Filing of Disclosure of interest by Directors- Every director at:
‐ First meeting in which he participates as director; or
‐ First meeting of Board in every FY; or
‐ Whenever there is change in disclosures
shall disclose in Form MBP‐1 (along with list of relatives and concern of relatives in the Company as per RPT definition), his concern or interest in any company, body corporate, firm or other association of individuals (including shareholding interest).
Form MBP‐1 shall be kept in the records of the company.
7. Resident Director- Every Company is required to appoint at least one Director who has stayed in India for a total period of not less than 182 days in the previous calendar year.
8. Alteration in MOA and AOA- Every alteration of Articles and Memorandum shall be filed with Registrar together with copy of altered Articles, notice of meeting and SR within 30 days of passing Special Resolution. Every alteration made in MOA and AOA shall be noted in every copy thereof.
9. Registers- Every Company shall keep and maintain following Registers in the specified format:
– Register of Members MGT-1
– Register of other Security Holders residing outside India MGT-3
– Register of Transfer and Transmission of Shares SH-6
– Register of Charge CHG-7
– Index of the Registers
10. Other Registers- Every Company shall keep at its Registered Office, a Register of Directors and KMP in the prescribed format containing prescribed particulars.
11. Resolution- Copy of every resolution (with explanatory statement, if any) or Agreement for the specified matters to be filed with ROC in Form MGT‐14 within 30 days. Articles of Company shall have copy of resolution effecting amendment in AOA and Agreements referred in Section 117(3) of the Act.
12. Minutes of Meeting- Minutes of every general meeting, Creditors, Board and Committee shall be prepared and kept within 30 days of conclusion of every meeting concerned. All appointments in the meeting shall be included in the minutes. Minutes of each meeting shall be entered into Minutes Book along with date of such entry.
13. Appointment of Director- Every person to be appointed as Director shall provide his consent in Form DIR‐2 and such consent shall be filed by the Company with ROC in Form DIR‐12, within 30 Days of appointment.
14. Provisions related to DIN- Every individual intending to be appointed as director shall make an electronic application in Form DIR-3 to Central Government for allotment of DIN.
15. Qualification of Director- Declaration from Director at the time of appointment or reappointment in Form DIR‐8 .Annual disclosure from Director to be taken.
16. Number of Directorship- No person shall be a director in more than 20 companies. Maximum number of public companies can be 10 (Director in Section-8 Co. and Dormant Director not to be included)
17. Resignation by Director- Director shall intimate his resignation to the Company, which the Company shall file with ROC in Form DIR‐12 in 30 days. Company shall put resignation details on its website and in its Directors’ Report.
18. Return of Director and KMP- Return of Directors and KMP to be filed with ROC in Form DIR 12, within 30 days of appointment or change.
19. Meeting at shorter notice- Meeting can be convened on a shorter notice for urgent matters. Consent from not less than 95% of members entitled to vote thereat.
20. Quorum‐ Quorum shall be one‐third or two directors, whichever is higher. Directors participating through Video Conferencing shall be counted for the purpose of quorum.
21. First Auditor- First Auditor of the company shall be appointed by the BOD within 30 days of Incorporation who shall hold the office till the conclusion of 1st AGM. In case of First Auditor, filing of ADT-1 is not mandatory.
22. Subsequent Auditor- The BOD shall appoint the auditor in first AGM of company who shall hold the office till the conclusion of 6th AGM and shall inform the same to ROC by filing ADT-1. The responsibility to file Form ADT 1 is that of the company and not of the auditor within 15 days from the date of appointment.
23. Ratification of Auditor- Shareholders will ratify the appointment of Auditor in every AGM but there is no need to file ADT-1 for ratification.
24. Casual Vacancy of Auditor- If Casual Vacancy is arising due to the resignation of auditor, it shall be filled within 30 days of BOD meeting, subject to approval in General Meeting (AGM or EGM). Any auditor appointed in a Casual Vacancy shall hold office until the conclusion of the next Annual General Meeting.
25. ADT-3- The auditor shall file with the company a resignation letter stating the reason for resigning and file Form ADT-3 with the registrar within 30 days from the date of resignation. Filing form ADT-3 is the responsibility of the auditor and can only be filed if ADT-1 of the relevant auditor was filed.
26. Annual General Meeting- Every Company is required to hold an Annual General Meeting on or before 30th September every year during business hours (9 am to 6pm), on a day that is not a public holiday and either at the registered office of the Company or within the city, town or village where the registered office is situated. A 21 clear days’ notice is required to be given for the same.
27. Filing of Financial Statements- Every Company is required to file its Financial Statements within 30 days of its Annual General Meeting with Registrar of Company in E-Form AOC-4. The same shall be digitally signed by one director and certified by CA/CS/Cost Accountant in Practice.
28. Filing of Annual Return- Every company is required to file its Annual Return with Registrar of Companies within 60 days of Annual General Meeting in E-Form MGT-7. A company having turnover of INR 50 Crore or more shall be certified by a Practicing CS in Form MGT-8.
29. Regularisation of Additional Director- If company wants to appoint additional director as director, then it shall regularize the person as director in General Meeting by passing Shareholder Resolution. File form DIR-12 for Change in Designation of Director along with ordinary resolution within 30 days of AGM.
30. Directors’ Report- Directors’ Report is to be filed within 30 days of AGM along with Form AOC-4. It should be signed by the “Chairperson” authorized by the Board, where he is not so authorized by at least 2 Directors.
31. Filing of Financial Statements of a Foreign Co. -Every Foreign Company is required to file Annual accounts (consolidated financial statements/ global accounts) along with the list of all principal places of business in India within 6 months of close of the Financial Year.
32. Filing of Annual Return of a Foreign Co.- Every foreign company shall prepare and file annual return of the company in e-Form FC-4 within 60 days from the close of financial year.