Incorporation of a Private Limited Company in India: A complete legal guide

Incorporating a private limited company is a popular choice among Indian entrepreneurs due to the benefits of limited liability, separate legal identity, and access to funding. The process is governed by the Companies Act, 2013 and regulated by the Ministry of Corporate Affairs (MCA). Below is a step-by-step explanation of the incorporation process, structured under clear headings for ease of understanding. 

Obtaining Digital Signatures (DSC)

The first step is acquiring Digital Signature Certificates (DSCs) for all proposed directors and shareholders who will sign electronic documents. These are mandatory for filing forms online with the MCA. DSCs can be obtained through licensed certifying authorities upon submission of identity and address proof. 

This blog is a part of our Business Legal Structures in India and Their Incorporation: A Complete Legal Guide and India Desk Legal Services also.

Director Identification Number (DIN)

Every proposed director must have a Director Identification Number (DIN). If a director does not already possess one, a DIN is automatically allotted when the SPICe+ incorporation form is filed. There is no need to apply for it separately. 

Name Reservation Using SPICe+ Part A

The next step is to reserve the company’s name using SPICe+ Part A. Applicants can propose two names in order of preference. The MCA will verify the availability and ensure it is not identical or similar to existing companies, LLPs, or trademarks. Upon approval, the name is reserved for 20 days. 

Filing the Incorporation Application (SPICe+ Part B)

Once the name is approved, you move on to SPICe+ Part B, which includes: 

1. 1. Registered office details; 
   2. Capital structure; 
   3. Details of directors and subscribers; 
   4. Declaration of compliance; and 
   5. Details of PAN, TAN, and other registrations. 

SPICe+ is an integrated web form that consolidates various incorporation-related services into one streamlined application. 

Drafting and Submitting Charter Documents: MoA and AoA

The Memorandum of Association (MoA) defines the company’s main objectives, while the Articles of Association (AoA) lay down the rules for internal governance. These can be filed electronically using forms INC-33 (eMoA) and INC-34 (eAoA) and must be signed digitally by subscribers and witnesses. 

Submitting Linked Forms: AGILE-PRO-S and INC-9

AGILE-PRO-S includes applications for: 

1. 1. 1. GST registration; 
      2. ESIC and EPFO registration; 
      3. Professional tax (in applicable states); and 
      4. Bank account opening. 

Form INC-9

is a declaration by all subscribers and first directors confirming that they are not guilty of any offences under the Companies Act, 2013. 

These forms are filed alongside the SPICe+ form, making the process highly efficient. 

Government Fees and Stamp Duty

Government fees depend on the authorised share capital of the company. Additionally, stamp duty on the MoA and AoA varies by state. These must be paid online at the time of filing the SPICe+ forms. 

Issuance of Certificate of Incorporation

Once all documents are verified and approved by the Registrar of Companies, the company is issued a Certificate of Incorporation (COI). This document includes the Corporate Identity Number (CIN) and confirms that the company is legally incorporated. The PAN and TAN are also issued along with the COI. 

Filing Form INC-20A: Declaration of Commencement of Business

Within 180 days of incorporation, the company must file Form INC-20A with the MCA. This declaration states that the company has received the subscription money from its shareholders and is ready to commence business operations. Failure to file INC-20A can attract penalties and even strike-off of the Company. 

Post-Incorporation Compliance

After incorporation, the company must: 

1. 1. Open a current bank account in its name; 
   2. Appoint a statutory auditor within 30 days; 
   3. Hold its first board meeting within 30 days; 
   4. Maintain statutory registers and records; and 
   5. File applicable tax and labour registrations. 

Ensuring compliance from the outset avoids legal and financial troubles later. 

Why Choose a Private Limited Company?

Compared to other structures like LLPs or sole proprietorships, a private limited company offers several advantages: 

1. 1. Limited liability for shareholders; 
   2. Separate legal entity; 
   3. Perpetual succession; 
   4. Easier to raise equity funding; and 
   5. Greater credibility among clients and investors. 

However, it also comes with stricter compliance requirements, such as annual filings and audits, which must be maintained regularly. 

Conclusion: A Streamlined Digital Process

Thanks to the SPICe+ system, incorporating a company in India has become more efficient and largely paperless. While the process may still seem complex to a first-time entrepreneur, engaging a Chartered Accountant, Company Secretary, or legal professional can significantly ease the burden and help ensure legal compliance.