Private limited company registration is governed by the Ministry of Corporate Affairs, Companies Act, 2013 and the Companies Incorporation Rules, 2014. To register a private limited company, a minimum of two members and two directors are required. It is a type of company that offers limited liability, or legal protection for its shareholders but that places certain restrictions on its ownership. These restrictions are defined in the company's bylaws or regulations and are meant to prevent any hostile takeover attempt.

The major ownership restrictions are:-

  • Shareholders cannot sell or transfer their shares without offering them first to other shareholders for purchase,
  • Shareholders cannot offer their shares to the general public over a stock exchange, and
  • The number of shareholders cannot exceed a fixed figure ( maximum 200)

Some basic features of private limited company

  • Limited Liability
    The greatest benefit of private limited companies is limited liability. If anything happens to the company, its members are not personally affected; members are only liable for unpaid shares.

  • Tax Advantages
    Private limited companies enjoy tax advantages in addition to limited liability. These companies pay corporation tax on their taxable profits and tend to be exempt from higher personal income tax rates.

  • Owning Property
    Private Limited Company being an artificial person, can acquire, own, enjoy and alienate, property in its name. The property owned by a company could be machinery, building, intangible assets, land, residential property, factory, etc., No shareholder can make a claim upon the property of the company - as long as the company is a going concern.

  • Separate Legal Entity
    Private Limited Company is a legal entity established under the Companies Act,2013. Hence, a company has a range of legal capacities including opening of a bank account, hiring of employees, taking on equity or obtaining licenses and more as an independent corporate entity. The members (Shareholders/Directors) of a company have no personal liability to the creditors of a company for company's debts.

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