Private Limited Company is one of the most popular options to start a business amongst startups and emerging business. It is a corporate entity which is easy to register, manage and run. The liability of the shareholders is limited to the extent of their shareholding and can induct upto 200 shareholders. Minimum number of directors of a private limited company is 2 and maximum is 15. A person appointed as a director will perform all the duties and functions of a director as per the provisions of the Companies Act, 2013.
A Private Limited Company can be incorporated with a minimum of 2 members or shareholders. An individual person above 18 years of age or a corporate body can be a member or shareholder in it. Moreover, the maximum number of shareholders in a Private Limited Company can go up to 200.
A Private Limited Company needs to have a minimum of 2 directors who shall manage the conduct and affairs of the company. The directors may be existing shareholders of the company or can be a person other than a shareholder. There may be a maximum of 15 directors in any company. Furthermore, every Indian Company has to ensure that they have 1 director who is a permanent resident of India. A person appointed as a director will perform all the duties and functions of a director as per the provisions of the Companies Act, 2013.
The members/shareholders of private limited companies cannot transfer their shares publicly. Therefore, there can be a restriction on the transferability of shares in these companies. Thus it helps the controlling power of the company within the existing shareholders.
Foreign citizens, foreign corporate entities, NRIs, or OCIs can invest in a Private Limited Company and become its shareholder. This is why foreign promoters prefer Private Limited Companies.
A Pvt Ltd Company cannot invite the general public to purchase or subscribe to its shares or any other kind of securities. Also, it cannot accept deposits from the public other than its members, directors, or relatives of directors.
After registration, a Pvt Ltd Company becomes an artificial judicial person, separate from its members. Also, the members of a Pvt Ltd Company have limited liability to the extent of number of shareholdings. It means that if a company faces loss under any circumstances, then its shareholders have to pay the unpaid amount of its share value but not liable to sell their own assets for payment. Thus, the personal, individual assets of the shareholders are not at risk.
One can register a Private Limited Company completely in online mode with less paperwork. The registration process takes 10-15 working days to complete. Also, it offers flexibility in operations like the addition of new directors, allotting new shares, ESOPs, and other various other features.
After the Companies Amendment Act 2017, the minimum requirement of capital of Rs. 1 lakh for private limited companies was abolished. So now, it is possible to form a company even with minimum capital of Rs 2.
Businesses that will require funding from venture capitalists (VCs), angel investors, etc need to register as private limited companies. This is because such investors can become directors and shareholders in a company. Whereas, in the case of an LLP, investment is possible only if such investors become the partners of the LLP.
The structure of a Pvt Ltd Company provides faster exit opportunities to those companies which do not have any assets or outstanding liabilities and want to close their business operations due to some extraordinary circumstances.
An applicant has to provide 2 different names and main objectives for the proposed company. These names are then submitted to MCA, and MCA will approve one out of the two names. Names provided should ideally be unique and suggestive of company business, they should end with the word “Private Limited”
The next step is to apply for obtaining a Digital Signature Certificate (DSC) of directors and shareholders for the digital signing of forms. If the directors/shareholders already have DSC, then this step can be skipped.
After name approval and obtaining DSC, we need to prepare and submit an incorporation application in SPICE+ forms along with a Memorandum of Association (MOA), Articles of Association (AOA), and AGILE form for final approval.
After the final submission, it typically takes 3-5 days to receive the incorporation certificate, which serves as proof of company registration. Simultaneously, the company will also receive the PAN, TAN, ESIC, EPFO, and Professional Tax registration certificates.
Applicant can submit the Incorporation certificate, MOA, AOA, PAN, TAN, and other required documents to the bank to open the current account and start the business operations.
All the proposed directors and shareholders of the company shall submit the following documents. All documents submitted should be valid and readable.
Scanned copy of –
A Private Limited Company should have a registered office place in India. The office address can be residential or commercial premises. The address proof shall be recent and not older than 2 months. The following documents are acceptable as a proof of registered office address –
NIDHI Company is one of the simple and easiest options to start a lending and borrowing business in India without RBI approval. It is engaged in the business of accepting deposits and providing loans only to their members only for their mutual benefit and prohibits dealing with non-members. The full form of NIDHI is National Initiative for Development and Harnessing Innovations.
Nidhi Companies are basically Non-Banking Financial Companies (NBFC) that are engaged in the business of accepting deposits and providing loans only to their members for their mutual benefits. It is a company formed with the exclusive object of cultivating the habit of thrift, savings, and functioning for the mutual benefit of members by receiving deposits only from individuals enrolled as members and by lending only to individuals, also enrolled as members. Therefore, it restricts dealing with individuals who are non-members.
The primary object of Nidhi Companies is to carry on the business of accepting deposits and lending money to member-borrowers against gold, silver, jewellery, immovable property, fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies, etc.
Also, they are not allowed to engage themselves in the business of Chit Fund, hire purchase, insurance, or in any other business including investments in shares or debentures.
Further, Nidhi companies are incorporated in the nature of a Public Limited company and hence, they have to comply with two sets of norms, one of Public limited company as per the Companies Act, 2013 and another is the Nidhi Rules, 2014 as amended by Nidhi (Amendment) Rules, 2022.
Nidhi Company is a class of Non-Banking Financial Companies (NBFC) and the Reserve Bank of India(RBI) has powers to issue directions and make rules for deposit-related activities. But, as Nidhi Companies deal with shareholder-members only, RBI has exempted them from the provisions of the RBI Act and other directions applicable to NBFCs. Nidhi Company is also known as the Mutual Benefit Society.
Nidhi Company mobilizes small savings, mostly from the middle-class, and lower-middle-class citizens, and disburses loans to eligible borrowers. Owing to their small size and closeness to the customers, the disbursement of loans is speedy. This is especially useful in cases where the borrower is in urgent need of funds.
Nidhi company is a public limited company and therefore there is no prescribed limit for the maximum number of members. It can have as many shareholders as its share capital can accommodate.
The minimum capital required for incorporation of a Nidhi Limited is Rs. 10 lakhs as per Nidhi Rules (Amendment) Rules, 2022. Therefore, the capital required for Nidhi company is much less as compared to NBFC Registration, where the capital required for registration is at least Rs. 2 crores
Nidhi Company is allowed to provide secured loans against gold, silver, jewellery, immovable property, fixed deposit receipts, National Savings Certificates, Government Securities, and insurance policies to its members. Therefore, repayment of such loans is guaranteed, as the loans are secured, and due to peer pressure, borrowers ensure that the loan is repaid on due dates.
Nidhi Company carrying out financial activities falls under the NBFC category, but it does not require any special permission from the Reserve Bank of India (RBI) for registration. Also, it is not required to comply with RBI directions or rules for the conduct of business, unless specifically required. It has to comply with the Companies Act and Nidhi Rules for the conduct of business.
The Board of Directors and management of a Nidhi company normally consists of senior persons who have experience in handling finances and who are well respected in social circles. This lends credibility to the institution and imparts confidence in the minds of borrowers and depositors.
A company enjoys ‘perpetual succession’, which means it maintains continuous and uninterrupted existence until legal dissolution occurs. The death of one of its shareholders does not impact the company; instead, the shares are transferred to their family member or legal heir. Consequently, the company can carry on its business operations without any disruption.
Every Nidhi Company shall fulfil the following conditions within a period of 1 year from the date of incorporation :
Note: According to Nidhi (Amendment) Rules, 2022, the above requirements do not apply to companies that are formed as a Nidhi Company on or after the date of commencement of such rules i.e. 19th April 2022.
An applicant has to provide 2 different names and main objectives for the proposed company. These names are then submitted to MCA, and MCA will approve one out of the two names. If the initial 2 names are rejected, then we can apply with a further 2 names as a resubmission. In addition, names provided should ideally be unique and suggestive of company business. Further, the name shall end with the words “Nidhi Limited”.
The next step is to apply for obtaining a Digital Signature Certificate (DSC) of directors and shareholders for the digital signing of forms. However, if the directors/shareholders already have DSC, then this step can be skipped.
Once the name is approved and the Digital Signature Certificate (DSC) is generated, we must create and submit an incorporation application in SPICE+ form. This submission should include the Memorandum of Association (MOA), Articles of Association (AOA), and AGILE form for obtaining final approval.
It typically takes 3-5 days after final submission to get the incorporation certificate. An incorporation certificate is the proof of registration of a company. PAN, TAN, ESIC, EPFO, and Professional Tax registration certificates will also be received simultaneously.
You can submit the Incorporation certificate, MOA, AOA, PAN, TAN, and other required documents to the bank to open your current account and start the business operations.
Once a company is incorporated, it should make an application to the Central Government in Form NDH-4 (along with fees) to be declared as a Nidhi Company. The application shall be made within 120 days of incorporation of the company. Further, a company should fulfil the following two conditions for making an application to be declared as a Nidhi Company –
A Company should have a registered office place in India. The office address can be residential or commercial premises. The address proof shall be recent and not older than 2 months. The following documents are acceptable proof of Registered Office Address.
