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Private Limited Company
What is a Private Limited Company?
A Private Limited Company (Pvt Ltd) is a type of business entity in India that is privately owned by a small group of individuals. It is regulated by the Companies Act of 2013 and provides various advantages, including limited liability for its shareholders, recognition as a separate legal entity, and continuity of existence despite changes in ownership.
According to Section 2(68) of the Companies Act 2013, a private company is defined as follows:
A “private company” is a company that has a minimum paid-up share capital as prescribed and, by its articles:
restricts the right to transfer its shares.
limits the number of its members to a maximum of two hundred, except in the case of a one-person company. It is important to note that if two or more people hold one or more shares in the company jointly, they are considered a single member for this purpose.
prohibits any invitation to the public to subscribe to any company securities.
Features Of a Private Limited Company
Separate Legal Entity. A private limited company is a separate legal entity, distinct from its owners. This means that the company can own property, enter into contracts, and can sue or be sued in its own name.
Limited Liability: The liability of shareholders is limited to the amount they have not yet paid on their shares. Personal assets of shareholders are safeguarded in the event of company debts.
Ownership: The ownership is divided into privately held shares by individuals, typically founders, family members, or close associates. These shares cannot be publicly traded.
Number of Members: Minimum 2 members and a Maximum of 200 members (excluding employees who are shareholders).
Number of Directors: A minimum of 2 directors and one of those should have residency in India.
Name: The name of the Private Company should end with Private Limited.
Compliance: Private limited companies are required to comply with statutory obligations, including filing annual returns, maintaining accurate books of accounts, and conducting audits.
Restrictions on Share Transfer: Shares cannot be easily transferred to the public, ensuring better control within a select group.
Perpetual Succession: The company remains in operation even if its shareholders or directors change or pass away.
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