Private Placement

Section 42 of Companies Act 2013 and Rule 14 of Companies (Prospectus and Allotment of Securities) Rules apply on Private Placement of Securities.

What is a Private Placement?

It means any offer or invitation to subscribe securities to a specified group of persons by a company through the issue of Private placement offer letter. A Company making this offer has to comply with lesser regulatory provisions.

Points to consider while making this Offer

The Company making the Private Placement of Securities needs to consider the following points:-

  • The Offer of securities through this issue can be made to a maximum of 50 persons in a single offer. However, Company can make this Offer to 200 persons or less in the aggregate in a Financial year. (excluding offer to Qualified Institutional Buyers and employees being offered securities under ESOP)
  • Moreover, the company needs to approve this offer in Special Resolution in the General Meeting before making the Offer.
  • Furthermore, the Company needs to circulate a Private Placement Offer letter among the proposed names allotted in Form PAS-4.
  • A Company can issue the Offer Letter only after it files the Special Resolution with ROC in Form MGT-14.
  • In this case, the monies that the Company receives from the offer shall be kept in a separate bank account in a Scheduled Bank.
  • This offer does not carry any right of renunciation. Hence the person to whom the offer letter is addressed can apply for the securities only.
  • In case of this offer, Company can accept the subscription money from this offer either by cheque or demand draft or other banking channels.
  • The Company shall make the allotment within 60 days of receipt of the application money from the subscribers.
  • Furthermore, if the company is not able to allot securities in 60 days, it shall repay the money of applicants within the next 15 days.
  • The company shall file a Return of Allotment to ROC in Form PAS-3 within 15 days of allotment of securities.
  • The company requires to maintain the complete record of this issue in Form PAS-5.

Private Placement Procedure

The following procedure applies in case of Private Placement Offer.

  1. Board Meeting

    Company shall hold the Board Meeting and shall discuss in the meeting following points:-
    Approve the list of persons to whom a Private placement offer shall be made
    Approve Draft Offer letter
    Call the general meeting

  2. General meeting

    The company shall hold the General Meeting to pass the Special resolution for approving the Private placement of shares.

  3. File Special Resolution

    Company shall file Special resolution with ROC in Form MGT-14 within 30 days of General Meeting.

  4. Offer Letter

    The Company shall circulate the offer letter among the proposed allottees to the securities in Form PAS-4.

  5. Application Money

    Company shall keep the application money of Private placement in a separate Bank Account in a Scheduled Bank Account.

  6. Allotment

    The company shall make the allotment of securities within 60 days of receipt of the Application money.
    If the company fails to do so, it shall refund the money within the next 15 days
    If the company fails to refund money then it shall be liable to repay money along with interest @12% p.a. from the 60th day from receipt of application money.

  7. Return of Allotment

    Company shall file return of allotment in Form PAS-3 with ROC within 15 days of allotment.

  8. Share Certificates

    Company shall issue Share certificates within 2 months from the date of allotment

  9. Update the Register of members

    At last, Register of members will be updated by adding the particulars of the new allottees of securities.

  10. Record of Private Placement

    Company shall maintain the complete record of Private Placement in Form PAS-5.

Ask an Expert
Talk to an expert and ask any question related to compliances related to Company
[Rated 4.8 stars by customers like you]
Ask an Expert
Talk to an expert and ask any question related to compliances related to Company
[Rated 4.8 stars by customers like you]

FAQs

Can a Company accept the money for subscription of securities offered by Private Placement in cash?

No, a Company making the Private placement offer cannot accept the subscription money in cash. It can accept such subscription money only through cheque or demand draft or any other banking channel.

Is it mandatory to file the return for allotment with ROC?

Yes, it is mandatory to file a return of allotment with ROC within 30 days of Allotment of securities in Form PAS-3.

Is it mandatory to take the approval of shareholders in the meeting for making a Private Placement Offer?

Yes, it is mandatory for a Company making a Private Placement offer to take prior approval of shareholders by passing Special Resolution in the General Meeting.

Private Placement Offer Letter


A Private Placement Offer Letter is the document that a Company issues while making a Private Placement Offer to a specified group of persons. Furthermore, when a Company raises capital through Private Placement, it needs to issue this document in Form PAS-4 and circulate it among the identified persons.

Section 42 of Companies Act 2013 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules 2014 applies while making Private Placement of securities.

Filing of Private Placement Offer Letter

  • The company needs to file the Private Placement Offer letter cum Application in Form PAS 4. Moreover, it should be serially numbered and addressed to the persons to whom the offer is being made.
  • The company requires to send the PP Offer Letter to the proposed allottees either in writing or in electronic mode.
  • Furthermore, it is accompanied by an Application form while sending to the proposed allottees.
  • However, the Private Placement Offer does not contain the right of renunciation. Hence the person to whom it is addressed can only make the application for the securities of the company through the application form accompanied.

Contents of Private Placement Offer Letter

  1. Information related to the Company
    • Name, addresses, and contact details of the company
    • Name, address, and other details of Directors of the Company
    • Business activity of Company
    • Details of default by Company, in case of any.
  2. Particulars of the Offer
    • Date of Board Resolution
    • Date of Resolution of General meeting approving the offer
    • Kind and Class of Securities offered
    • Price of Securities
    • Details of Valuer who values the securities
    • Amount of Capital that Company intends to raise through the offer
    • Terms of raising securities (Duration, Rate of Dividend or interest, Mode of payment, etc.)
    • Proposed Time for which offer letter is valid
    • Purpose and objects of raising Capital
  3. Disclosures with regard to
    • Interest of Directors
    • Litigation or legal action, if any
    • Remuneration of Directors
    • Related party transactions
    • Summary of reservations or qualifications or adverse remarks of auditors
    • Details of any inquiry, inspections or investigations initiated or conducted
    • Details of acts of material frauds committed against the company and action taken by Company
  4. Financial Position of the Company
    • The capital structure of the company
    • Profits of the company
    • Dividends declared by the company
    • Audited Cash Flow Statement
    • Any change in accounting policies
  5. Required Declaration by Director
  6. Date and Place
  7. Attachments
    • Copy of Board Resolution
    • Copy of Special Resolution
    • Optional attachments, if any
Form PAS-4 Private Placement Offer Letter
Download Form PAS-4 directly from here
Download
Form PAS-4 Private Placement Offer Letter
Download Form PAS-4 directly from here
Download

FAQs

Does the Private Placement Offer Letter carry any right of renunciation?

The Private Placement Offer letter does not carry any right of renunciation. The person to whom the offer is made by the company can either accept the offer or reject the offer.

To how many persons can Private Placement offer be made?

The Private Placement Offer can be made to a maximum of 50 persons through a single offer. However, in a particular Financial year, this offer can be made to an aggregate of 200 persons.

Can a Company make a new Private Placement Offer without completing the existing offer?

No, a Company is not allowed to make another Private Placement offer unless it completes the existing one.

Small Company as per Companies Act 2013

The Companies Act 2013 had introduced the concept of Small Company. It is not specifically registered with the specific name but is simply a Private Company with less amount of investment and less turnover. In a Developing Country like India, such a company plays a significant role.

Small Company under Companies Act 2013

According to Companies Act 2013, Small company means the company which satisfies the following conditions:-

  • It has paid up share capital of not more than 50 lakhs or such higher amount as may be prescribed which shall not be more than 10 crores
  • It has annual turnover of not more than 2 crores or such higher amount as may be prescribed which shall not be more than 100 crores.

    To become a Small Company, a Private Company requires to fulfill both of the conditions prescribed above.

Exceptions in case of Small Companies

A Company is not a Small Company if:-

  1. It is a Public Company.
  2. It is a Holding of another company.
  3. The company is a subsidiary of another company.
  4. The company is a Section 8 Company.
  5. It is a company governed by any Special Act.

Features of Small Company

  • Small company is a Private Company.
  • It has limited Area of operation.
  • It has a fewer number of employees.
  • Companies Act 2013 provides certain benefits to Small Company.
  • It holds a limited amount of Investment.
  • It has Separate legal entity from its owners.
  • The status of a Small Company may change from year to year as capital and turnover changes every year.

Privileges

Companies Act 2013 provides certain benefits to the Small companies which includes:-

  • Every company is required to hold 4 Board Meetings in a year. While a Small Company needs to hold only 2 Board meetings in a calendar year i.e. one board meeting in each half of the calendar year. However the gap between the two board meetings should not be less than 90 days.
  • In case of Small Company, the Annual Return can be signed by Company Secretary alone or if there is no CS, by a single Director only.
  • A Small company does not require to maintain a Cash flow statement as a part of its Financial Statements.
  • Every company needs to change its auditor by rotation according to Section 139(2) of Companies Act 2013. However Small company need not comply this section and hence is exempt from the requirement of this section.
  • A Small Company does not require to report in its Audit Report regarding Internal Financial controls and the operating effectiveness of the company.
  • In case of Small Company, Companies Act prescribes lesser penalties as compared to every other company.


Private Limited Company Registration
Expert assisted plan for incorporation of your Private Limited Company
[Rated 4.8 stars by customers like you]
Private Limited Company Registration
Expert assisted plan for incorporation of your Private Limited Company
[Rated 4.8 stars by customers like you]

FAQs

What is the difference between a small company and private company?

A small company is a private company whose capital does not exceed 50 lakhs or such higher amount as prescribed which shall not be more than 10 crores and turnover does not exceed 2 crores or such higher amount as may be prescribed which shall not be more than 100 crores while a Private company includes a Small Company.

What will be the consequence if my threshold limit for capital and turnover exceeds the limit prescribed for Small Company under the Companies Act 2013?

If the capital of a Small Company or turnover exceeds the threshold limit, it is no more considered as a Small Company and it can no more enjoy the privileges granted to a Small Company under the Act.

MGT-14 : Filing of Resolution/Agreement with ROC

Companies are incorporated with the Ministry Of Corporate Affairs (MCA) in India. And the activities of incorporated companies are monitored by the Registrar of Company (ROC). MGT-14 is used to file certain resolutions and agreement passed at the meeting of the Board of Directors/Shareholders/Creditors of the company. The following documents of a company can be filed with the ROC via MGT-14:

  • Resolution(s),
  • Agreement(s),
  • Postal Ballet Resolution(s) under section 110,
  • Proposed resolution under section 94(1).

Who can file MGT-14?

MGT-14 can be filed by any company incorporated under the Companies Act 2013/Companies Act 1956 for the following events/transactions:

  • Alteration of MOA,
  • Private Placement in the company,
  • Alteration of AOA,
  • Alteration of Object Clause of the company,
  • Change in objects of the company in case the company has a un-utilised amount of money raised through the issue of the prospectus,
  • Conversion from private to public company,
  • Conversion from the public to a private company,
  • Issue further shares to persons (whether or not including existing shareholders or employees),
  • Issue of further shares to employees under a scheme of employees’ stock option,
  • Reclassification of Shares of the company,
  • Issue of sweat equity shares
  • To apply to a court to wind- up the company
  • Issue of Global Depository Receipts in any foreign country
  • Voluntary winding up of the company under section 304,

Information Required to file MGT-14

The following information is required to file MGT-14:

  • CIN of the company,
  • Type of Event,
  • Date of Notice and Date of Passing Resolution for an event,
  • Details of the resolution/agreement passed on that event,
  • Supporting/Attachments.

Steps to file MGT-14

  1. Access the MCA Portal

    Go to mca.gov.in, and login with your Credentials for filing MGT – 14

  2. Login to your account

    Next, Login to your account on MCA by entering your credentials there.

  3. Click on Upload e-Forms

    You will find a option to upload e-forms there. click on that option.

  4. Click Normal Forms > Browse

    Click on Normal Forms and click on Browse to upload saved MGT-14.

  5. Save SRN & make payment.

    Once the form is uploaded successfully, SRN (Service Request Number) will be generated. Save the SRN to make payment of form fees. The form will be processed once the payment of form fees is done.

MGT-14 gets processed by the authority concerned and not by Straight Through Process. Hence an email will be sent to the company once form gets successfully processed.
Tip
MGT-14 gets processed by the authority concerned and not by Straight Through Process. Hence an email will be sent to the company once form gets successfully processed.

Fee of MGT-14

MGT-14 needs to be filed within 30 days from the date of passing the resolution/agreement. In the case of IFSC MGT-14 needs to be filed within 60 days. The fee of form depends on the company capital structure:

  • A company having a share capital,
  • A company not having a share capital.

In the case of a company having a share capital

Nominal Share Capital Fee Applicable
Less than 1,00,000 INR. 200
1,00,000 to 4,99,999 INR. 300
5,00,000 to 24,99,999 INR. 400
25,00,000 to 99,99,999 INR. 500
1,00,00,000 or more INR. 600

In the case of a company not having a share capital

Fee Applicable
Rupees INR. 200 per document

Additional Fees

Period of Delays All Forms
Up to 30 days 2 times of normal fees
More than 30 days and up to 60 days 4 times of normal fees
More than 60 days and up to 90 days 6 times of normal fees
More than 90 days and up to 180 days 10 times of normal fees
More than 180 days 12 times of normal fees

Additional fees are applicable when a form is filed after 30 days from the event date. In the case of IFSC, additional fees will be applicable after 60 days from the date of the event.

FAQs

Who needs to file MGT-14?

MGT-14 needs to be filed by all the companies for the following resolutions:
> Board Resolution passed by the company other than Private Limited Company,
> Special Resolution passed by all the company.

Can I file one MGT-14 for all the events/agreement of the company?

No. For each event/agreement, separate MGT-14 needs to be filed with the ROC.

When should MGT 14 be filed?

eForm MGT 14 needs to be filed with the ROC within 30 days from the date of passing of resolution or formulating the agreement

Form GNL-2 : Submission of Documents with ROC

Companies are incorporated with the Ministry Of Corporate Affairs (MCA) in India. And the activities of incorporated companies are monitored by the Registrar of Company (ROC). The companies need to file certain documents with the ROC in the normal course of business. Form GNL-2 can be filed when there is no prescribed eform available for filing that document. It is commonly used by the companies for the following:

  • Submitting Prospectus of Company before the fresh issue of shares,
  • Submitting Offer Letter (PAS-4) in case of Private Placement,
  • Furnishing Circular for inviting deposits in the company,
Ask an Expert (Incorporation)
Talk to an expert via call, whatsapp or messages. Ask questions about different types of entity, which entity to incorporate, different compliance involved, etc.
[Rated 4.8 stars by customers like you]
Ask an Expert (Incorporation)
Talk to an expert via call, whatsapp or messages. Ask questions about different types of entity, which entity to incorporate, different compliance involved, etc.
[Rated 4.8 stars by customers like you]

Who can file GNL-2?

Form GNL-2 can be filed by any company incorporated under the Companies Act 2013/Companies Act 1956 for the following transactions:

  • Prospectus
  • Information Memorandum
  • Private placement offer letter
  • Record of a private placement offer to be kept by the company
  • Circular for inviting deposits
  • Circular in the form of advertisement for inviting deposits
  • Form 149 of the Companies (Court) Rules, 1959
  • Form 152 of the Companies (Court) Rules, 1959
  • Form 153 of the Companies (Court) Rules, 1959
  • Form 154 of the Companies (Court) Rules, 1959
  • Form 156 of the Companies (Court) Rules, 1959
  • Form 157 of the Companies (Court) Rules, 1959
  • Form 158 of the Companies (Court) Rules, 1959
  • Form 159 of the Companies (Court) Rules, 1959
  • Others

Information Required to file GNL-2

The following information is required for filing GNL-2:

  • CIN of the company,
  • Type of Document to be filed with GNL-2,
  • Details of the documents being filed,
  • Date of event,
  • Date of passing resolution relating to the document,
  • Supporting Attachments i.e, copy of prospectus or copy of private placement offer letter.

Steps to file GNL-2

  1. Access MCA Portal.

    Go to the MCA Portal and Login with your credentials.

  2. Click on Upload e-Forms

    On the MCA Portal, click on My Workspace and then click on Upload e-Forms.

  3. Upload the saved GNL-2.

    Click on Normal Forms and click on Browse to upload the saved GNL-2 File.

  4. Save the SRN to make payment of form fees.

    Once the form is uploaded successfully, SRN (Service Request Number) will be generated. Save the SRN to make payment of form fees. The form will be processed once the payment of form fees is done.

Form GNL-2 gets processed by the authority concerned and not by Straight Through Process. Hence an email will be sent to the company once form gets successfully processed.
Tip
Form GNL-2 gets processed by the authority concerned and not by Straight Through Process. Hence an email will be sent to the company once form gets successfully processed.

Fee of GNL-2

Form GNL-2 needs to be filed within 30 days from the event date. The fees are applicable based on the capital structure of the company:

  • In the case of a company having a share capital,
  • In the case of a company not having a share capital.

In the case of a company having a share capital

Nominal Share CapitalFee Applicable
Less than 1,00,000INR. 200
1,00,000 to 4,99,999INR. 300
5,00,000 to 24,99,999INR. 400
25,00,000 to 99,99,999INR. 500
1,00,00,000 or moreINR. 600

In the case of a company not having a share capital

Fee Applicable
Rupees INR. 200 per document

Additional Fees

Period of DelaysAll Forms
Up to 30 days2 times of normal fees
More than 30 days and up to 60 days4 times of normal fees
More than 60 days and up to 90 days6 times of normal fees
More than 90 days and up to 180 days10 times of normal fees
More than 180 days12 times of normal fees

Additional fees are applicable when a form is filed after 30 days from the event date.

FAQs

Is Form GNL-2 required to be filed if new e-form PAS-6 for filing private placement offer letter (PAS-4) and record of private placement(PAS-5) is filed?

No need to file GNL -2. Instead only PAS-6 need to be filed

In case of appointment of Auditor for the A.Y. 2014-15, which Form is required to be filed?

ADT – 1 i.e notice to the ROC by company for the appointment of Auditors is required to be filed as an annexure to GNL-2

What documents are to be annexed while uploading Form GNL-2?

Annex the ADT 1 (Digitally Signed)+ Resolution Copy + Letter from Auditor in the optional attachment tab of the GNL-2 and submit it to ROC

Removal of Director

Shareholders have to elect persons for managing the affairs of the company such persons are directors of the company. Directors in a company may need to resign or his removal of a director may be done by the board or shareholders.

1. RESIGNATION OF DIRECTOR:

The director will submit the resignation to the board. Company has to take the following steps:

  • Firstly, the company will hold a Board Meeting to accept the resignation of the director.
  • Also, after passing the resolution, director has to file Form DIR-11 along with board resolution and resignation letter.
  • Also the board has to intimate ROC about the resignation of the director within 30 days in Form DIR-12.
  • Then, after filing all the forms name of the director will be removed from the master data of the company on MCA.

2. REMOVAL OF DIRECTOR BY BOARD:

The company has the authority to remove a director by passing an Ordinary Resolution only if the Central Government or the Tribunal has not appointed such director.

  • A Board Meeting will be called by giving seven days’ notice to all directors informing about the removal of the director.
  • During the Board Meeting, a resolution for holding Extraordinary general meeting will be passed along with a resolution for removal of the director subject to the approval of shareholders.
  • Further, general meeting will be held giving 21 days clear notice and members have to vote on the matter.
  • Further, the resolution will be passed if the decision is in the majority.
  • Before passing the resolution, the director has opportunity of being heard.
  • After passing of resolution Form DIR-11 and DIR-12 will be filed along with board resolution and ordinary resolution.
  • After filing the forms name of the director will be removed from MCA.

3. REMOVAL OF DIRECTOR BY SHAREHOLDERS:

Shareholders holding not less than 1% of total voting rights or holding shares not less than five lakh rupees paid up can issue a special notice for removal of director.

  • Such special notice shall be given at least 14 clear days before the date of meeting at which resolution for removal of director is to be considered.
  • A notice convening the meeting should be sent to all members.
  • If not possible publish an advertisement in a circulated newspaper not less than 7 days before the meeting.
  • Notice shall also be sent to director whose removal is to be considered.
  • Moreover, the director has right to be present at the meeting and has right to be heard.
  • Also, Members will pass a ordinary resolution to remove the director.
  • Further, file Form DIR-12 with the ROC within 30 days of passing the resolution along with special notice received from shareholder, special notice given to the director concerned, a notice of EGM to other shareholders and copy of ordinary resolution passed at EGM.

4. IN CASE DIRECTOR DOES NOT ATTEND 3 BOARD MEETINGS IN ROW:

If director does not attend a board meeting for 12 months even after giving notice for all meetings it will be deemed that he has vacated the office also, DIR-12 will be filed and his name will be removed from MCA.


FAQs

What are the compliance’s for resignation/removal of director?

– DIR-9: A report by a company to ROC for intimating the disqualification of a director
– DIR-11: Notice of Resignation of a director to Registrar(By the director)
– DIR-12: Notice of Resignation of a director to Registrar(By the company)
– DIR-5 : Application for surrender of DIN
– DIR-10: Form of application for removal of disqualification of directors.

What are the rules for the removal of a director?

Section 169 of Companies Act, 2013 talks about the removal of a director by members. Following are few rules to be followed for the removal of a director.
– An ordinary resolution is required to remove a director.
– Director appointed by Tribunal under section 242 shall not be removed.
– Independent director if reappointed for the second term shall be removed by Special Resolution only.

How long does it take to remove a director from a company by a member?

The member who proposes the dismissal must give the company ‘Special Notice’ of a resolution to remove a director at least 14 days prior to the meeting at which the director may be removed.

Increase in Authorized Capital

The “Authorized Capital” is the maximum amount of share capital that a company can issue to its members/shareholders. For an increase in Authorized Capital there is a specified procedure.

Moreover, the amendment is obligatory in capital clause of Memorandum of Association after passing special resolution of board to increase the authorized capital of the company.

What is the procedure to increase authorized capital?

  1. Check Articles of Association authorization.

    Check whether Articles of Association authorizes the company to increase the share capital. If not, proceedings need to be done with the objective of altering them.

  2. Convene a Board Meeting.

    Convene a Board Meeting so as to enable the board to call for Extraordinary general meeting(if not passed at Annual General Meeting) to get approval from shareholders so as to increase authorized share capital.

  3. Send notice to call extraordinary general meeting.

    Send notice to call an extraordinary general meeting of shareholders with clear agenda, explanatory statements and also resolutions to be passed to alter Memorandum of Association and Articles of Association so as to increase authorized share capital.

  4. Pass the resolution for increasing authorized share capital.

    Pass the resolution for increasing authorized share capital of company and also do corresponding alterations in MoA and AoA by Special resolution.

  5. Authorize the board to file necessary forms.

    Authorize the board to file necessary forms as well as resolutions with ROC.

  6. File e-form SH-7

    Also, File e-form SH-7 within 30 days of passing Ordinary Resolution with ROC by paying the requisite fee. Further, after consulting the AoA the company has to convene a board meeting.

    Notice for general meeting is to be given to every member of the company not less than 21 days of commencement of meeting with place,date,day, time, as well as business to be transacted at the meeting.

    After the notice EGM is convened and the members vote in favour or in against increasing the authorized share capital of company and during the meeting alteration takes place.
    Then, after holding EGM members of the board pass an ordinary resolution.

How to alter Memorandum and Articles of Association?

A company by special resolution can increase its authorized share capital by altering the Memorandum of Association.

Further, Clause V of the Memorandum of Association and Clause 4 of the Articles of Association has to be altered. If the company is not authorized to amend the articles of association then it has to be amended by passing a special resolution and on every alteration of articles a copy of order approving such alteration has to filed with registrar with a printed copy of altered articles within period of 15 days.

Also, a notice is given to the registrar within period of 30 days of such alteration along with altered Memorandum.

Filing e-form SH-7

As per Section 64, when a company alters its share capital, or an order is passed by Government for increasing the authorized capital or company redeems any redeemable preference shares the notice of such alteration, increase or reduction shall be filed by the company with Registrar in Form SH-7 along with a fee on MCA Portal.

One needs to attach following documents :

  • Notice of Extraordinary General Meeting.
  • Certified True Copy of ordinary resolution.
  • Altered Memorandum of Association.
  • Also, altered Articles of Association.

Filing e-form MGT-14

A company has to file with concerned ROC certain resolutions as well as agreements after passing the resolutions at meeting.

Further, the particulars of such resolutions are to be file along with this form within 30 days of passing resolution.

Moreover, copy of every resolution or agreement along with explanatory statement under section 102 has to be annexed to the notice calling the meeting in which resolution is proposed with registrar in 30 days.

One has to attach following documents with the form:

  • Firstly, Certified true copy of resolution along with explanatory statement under section 102.
  • Secondly, Altered MoA as well as Altered AoA.

FAQs

Whether Stamp Duty is applicable on increase in Authorized Capital?

Yes, Stamp Duty is payable on increase in Authorised capital.
Further, It is applicable as per the Stamp Act/Rules of concerned State/Union Territory.

What is the difference between authorized capital and paid up capital?

Authorized capital is the maximum capital that the company can raise through the sale of its shares.
Whereas, Paid up capital is part of called up capital which actually shareholders have paid and received by company.
Also, It can never be more than Authorized capital.

What is minimum Authorize share capital?

According to the definition under the Companies Act, the authorized capital of a company is the maximum amount of share capital for which shares can be issued by a company. Moreover, Rs 1 lakh initial minimum authorized capital is mandatory currently.

How to calculate authorized shares?

If you know the number of shares issued and unissued, or those authorized but not sold to shareholders, you can calculate authorized shares
Moreover, shares authorized = shares issued + shares unissued

Appointment of Director

A director is an individual who directs, controls, or manages the affairs of the company. Every company shall have a Board of Directors consisting of individuals as directors. Generally, the Appointment of the director is done by shareholders in general meeting.

Directors are now formally included within the definition of “Key Managerial Personnel” or “KMP” under Section 2(51) of the New Act.

  • Minimum 2 directors in case of Private Limited Company.
  • Minimum 3 directors in case of Public Limited Company.
  • In case of One Person Company minimum one director.
  • A company can appoint maximum 15 directors but if more than 15 directors are appointed special resolution should be passed in General Meeting and approval of Central Government is not required.

What documents are required for Appointment of a Director?

  • Obtain DSC.
  • A person must have Director Identification Number(DIN) which can be obtained by filing DIR-3C on MCA.
  • DOCUMENT PREPARATION:
    • A letter stating his consent as director and disclosure of interest in other companies
    • A declaration that he is not disqualified to become director
    • Notice to call a meeting with an explanatory statement
    • Resolution to be passed at a meeting for appointment of a director
    • Appointment letter is to be issued by the company to the director
  • FILING OF FORM DIR-12:
    • File DIR-12 along with documents such as consent/approval letter
    • Written consent of director for his appointment in DIR-2
    • The interest of director if any in other entity in Form MBP-1
    • Notice with a certified copy of a resolution of meeting to be filed within 30 days

A person can hold maximum 20 number of directorships including any alternate directorship. Number of directorships in public companies/private companies that are either holding/subsidiary company of public company shall be limited to 10.

What are the different types of directors in a company?

  • MANAGING DIRECTOR:
    The managing director is an individual who is entrusted with substantial powers of managing the affairs of the company as per the Memorandum or Articles of Association or by resolution passed in General Meeting or by its Board of Directors.
  • EXECUTIVE DIRECTOR:
    An executive director is responsible for day to day operations and management of the company. He is in full-time employment of the company.
  • ORDINARY DIRECTOR:
    Ordinary director means a “simple director who attends board meetings of the company and participates in matters put before the Board of Directors”.These directors are neither Whole time directors or Managing directors.
  • ADDITIONAL DIRECTOR:
    Additional directors are appointed by Board of Directors between two annual general meetings according to provisions of Articles of Association. They can hold office only up to the next annual general meeting of the company.
  • ALTERNATE DIRECTOR:
    Alternate director is appointed by board of directors in general meeting to act as director during the absence of original director for not less than three months.They are appointed for a person who is Non-Resident Indian or Foreign Collaborators of company.
Private Limited Company (PLC) Registration
Need help with your company registration? We can help you out.
[Rated 4.8 stars by customers like you]
Private Limited Company (PLC) Registration
Need help with your company registration? We can help you out.
[Rated 4.8 stars by customers like you]

FAQs

How are Board of Directors of company appointed?

In public company or private company subsidiary of public company two-thirds of total number of directors are appointed by shareholders and remaining one-third is appointed according to manner described in Articles.
In private company which is not subsidiary of public company the manner of appointment of any or all directors is as per the Articles.in case the Articles are silent the directors are appointed by shareholders.

Can a director be appointed by Board of a company?

The directors of the company are appointed by shareholders in general meeting. The Board of the company if authorised by AoA can appoint a director under the following:
1. Appointment of additional director
2. Appointment of nominee director
3. Appointment of alternate director
4. Appointment of director for filling a casual vacancy

Can an additional director be appointed in a board meeting?

If authorized by Articles of Association, Board can appoint any person as Additional Director other than a person who fails to get appointed as Director in a general meeting. Additional Director can be appointed by passing a resolution in Board meeting or by circulation.

Compliances by Private Limited Company annually

A private limited company recently started up has to follow a number of compliances laid down by statutes and also by other regulating bodies. Moreover, the following checklist is applicable for companies with paid-up capital up to 50 lakh and an annual turnover of last year below 2Cr.

The Compliances for Private Limited Company can be categorized as follows:

  • Firstly, Registrar related compliance
  • Secondly, Non-Registrar compliance

Registrar related compliance

The company has the authority to remove a director by passing an Ordinary Resolution only if the Central Government or the Tribunal has not appointed that director.

Appointment of Auditor(E-form ADT-1):

Board has to appoint first Statutory Auditor in first board meeting within 30 days of incorporation.

Subsequent auditors will be appointed for 5 years in AGM.

Thereafter in every year AGM, shareholders ratify the auditor however, there is no need to file ADT-1.

Holding Board Meeting:

The first board meeting is to be held within 30 days of incorporation.

Minimum 2 meetings are mandatory, one in each half calendar year with a minimum gap of 90 days in between.

Holding Annual General Meeting(AGM):

Annual General Meeting of a newly incorporated company should be held within 18 months from date of registration or 9 months from date of closing of financial year whichever is earlier and there should be a minimum gap of 15 months between 2 AGMs.

E-forms filing requirements:

MGT-7: First Annual Return shall be filed within 60 days of holding AGM for the period of 1st April to 31st March.

AOC-4: File Financial Statement that is Balance sheet along with Profit and Loss Statement and Directors Report.

MBP-1: In the First Meeting of Board every director of the company shall disclose his interest in other entities. Fresh MBP-1 is obligatory if there is a change in his interest.

DIR-8: Every director in each financial year has to file with company disclosure of non-disqualification.

Directors Report:

It should be filed covering all information and should be signed by “Chairperson” authorized by the board and when not authorized then by at least 2 directors.

Statutory registers as well as Books of Accounts:

  • Statutory registers
  • Minutes book:
    • Board Meeting minutes book
    • Likewise, General meeting minutes book(AGM, EGM, Creditors meeting, Postal Ballot)
  • Register of attendance of a director at Board/Committee meetings
  • Books of accounts as well as financial statements
  • The company will send to the members of the company approved Financial statement, Directors’ report and Auditors’ report at least 21 clear days before the AGM.

The company will send to the members of the company approved Financial statement, Directors’ report and Auditors’ report at least 21 clear days before the AGM.

Non-Registrar compliance

  1. Filing of periodical returns(Monthly, Quarterly, Annual returns-TDS, GST)
  2. Payment of periodical dues(TDS TCS payment, GST liability)
  3. Assessment of advance tax liability and also its payment periodically
  4. Filing of Income Tax Returns
  5. Also, Filing of Tax Audit Report.
Private Limited Company (PLC) Registration
Need help with your company registration? We can help you out.
[Rated 4.8 stars by customers like you]
Private Limited Company (PLC) Registration
Need help with your company registration? We can help you out.
[Rated 4.8 stars by customers like you]

FAQs

What are the compliance’s for resignation/removal of director?

Besides Annual Compliance,there are various other compliances which are mandatory as and when any event takes place in the company:
– Change in authorized or Paid-up Capital of the company
– Allotment of new shares or transfer of shares
– Giving Loans to directors or other companies
– Appointment of Managing or Whole-time director and also payment of remuneration
– Appointment or change of statutory auditors of the company
– Opening or closing of bank accounts or change in bank signatories

Which form should a Company file to intimate the ROC about the appointment of an auditor?

A Private Limited Company should file Form ADT- 1 on MCA. Form ADT-1 is the form for appointment of auditor to intimate the ROC i.e. Registrar of Companies. As per Sec 139 (1) of the new Companies Act, 2013 it is mandatory for the Company to file Form ADT-1 once it appoints the auditor.

Which companies are required to appoint auditor?

Every company has to appoint an individual or a firm as an auditor at the first annual general meeting. Also, the company can appoint an auditor for each financial year or for 5 consecutive financial years.

What are the documents required for company registration?

Here is a list of all the documents mandatory for company registration. You need to get ready before you sit down for the process of company registration with Quicko.

Directors: Indian Nationals

The following documents are required for company registration for Indian Nationals acting as Directors, during Company registration in India:

PAN Card: A self-attested copy of PAN Card of proposed Directors of the Company will be required for Company Registration.

Further, PAN or Permanent Account Number is a unique 10 digit identification number issued by Department of Income Tax in India.

Moreover, Ministry of Corporate Affairs shall use the name written on PAN Card for any matters or communications relating to the company or its director.

Hence, in case of any errors in name mentioned in PAN Card or change of name due to marriage or any other reason, PAN Card must be changed before applying for the incorporation of the company.

Address Proof: A self-attested copy of the Address Proof of Directors of Company will also be required for Company Registration. Also, It should have the name of the Director as mentioned in his PAN Card and his most current address. Also the document must not be older than 2 months from the date of submission.

The following documents are valid as address proof for Indian Nationals :-

  • Passport
  • Either Election Card or Voter Identity Card
  • Ration Card
  • Driving License
  • Electricity Bill
  • Telephone Bill
  • Aadhaar Card
  • Bank Statement

Directors: Foreign Nationals

The following documents are mandatory for Foreign Nationals acting as Directors, during Company registration in India:

Passport: Passport is a compulsory proof of identity required in case a foreign director wishes to act as a director in an Indian Company and must be Notarised or Apostilled in the country in which it was issued.

If passport is in foreign language, it must be translated to English by an official translator and Notarised.

Note that, if the Passport does not contain the date of birth of the holder, then a duly Certified/Attested/Notarized or Apostilled document indicating the date of birth must be provided.

Address Proof: A Notarised or Apostilled address proof having the most current address must be submitted by the Director, also having the name as mentioned in the passport. The document should not be older than 1 year from date of submission.

The following documents are valid as address proof for Foreign Nationals :-

  • Government Issued document containing address as well as identity
  • Driving License
  • Bank Statement
  • Also, Residence Card
  • Electricity Bill as well as Telephone Bill

Shareholder: Indian / Foreign Nationals

The Identity Proof and Address Proof as listed above for directors must also be provided for all shareholders of company.

It includes persons acting as subscribers to Memorandum of Association (MOA) as well as Articles of Association (AOA).

The subscribers to MOA and also AOA can be same as the directors of the company.

Shareholder: Corporate entity or artificial judicial person

If any of the shareholder is a Body corporate, then, a Certificate of Incorporation of the Corporate, i.e., Company, LLP, etc. should be attached alongwith a resolution passed to subscribe to shares of the company under incorporation.

Company: registered office address

In addition to the documents containing identity proof as well as address proof for Directors must be provided

Also, proof to confirm the registered office address of the Company is mandatory.

The following documents are mandatory as proof of registered office of the company, during the registration process or within 30 days of incorporation of the company

  • The registered document of the title of the premises of the registered office in the name of the company, i.e. Sale Deed, Banakhat, etc..
  • The notarized copy of lease / rent agreement in the name of the company, printed on a Stamp Paper along with a copy of rent paid receipt not older than one month from date of submission
  • The authorization letter/ No Objection Certificate (NOC) from the Landlord (Name as mentioned in the Electricity Bill/ Gas Bill/ Water Bill/ Property Tax Receipt or Sale Deed) to use the premises by the company as its registered office, also
  • Any utility bills like telephone, gas, water, electricity, etc. containing the address of the company’s registered office premises in the name of the owner, which is not older than two months from date of submission.

In addition to the above documents,professional shall draft MOA and AOA which must be signed and also notarized by the owners/promoters of the company and submitted during the process of incorporation of the company.


Incorporation of Company
Need help with company incorporation? We can help you.
[Rated 4.8 stars by customers like you]
Incorporation of Company
Need help with company incorporation? We can help you.
[Rated 4.8 stars by customers like you]

FAQs

What are the effects of the incorporation of a company?

Incorporation distances the owners of a company from its affairs.
Moreover, This protects owners from financial liability if a company fails or is sued. As a corporate entity, any financial losses that occur come out of the company’s assets and not the owners’ personal assets. These same protections exist when a company issued.

What are the documents mandatory for Pvt Ltd company registration?

The documents requirements are as follows:

Pan Card.
– Further, ID proof- Any one (Voter ID / Aadhar Card/Driving License / Passport)
– Furthermore, Address Proof- Anyone (Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement)