What is a Public Limited Company?A Public Limited Company is a Company limited by shares in which there is no restriction on the maximum number of shareholders, transfer of shares and acceptance of public deposits. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 7.
What is a Private Limited Company?A Private Limited Company is a Company limited by shares in which there can be maximum 50 shareholders, no invitation can be made to the public for subscription of shares or debentures, cannot make or accept deposits from Public and there are restriction on the transfer of shares. The liability of each shareholder is limited to the extent of the unpaid amount of the shares face value and the premium thereon in respect of the shares held by him. However, the liability of a Director / Manager of such a Company can at times be unlimited. The minimum number of shareholders is 2.
Which is the best choice? The choice of form will depend on circumstance of each case. Private Limited Company has lesser number of compliances requirements. Therefore, generally where there is no requirement of raising of finances through a public issue and the ownership is intended to be closely held by limited number of persons, Private Limited Company is the best choice.
What should be the minimum paid-up capital of a Limited Company?The minimum paid up capital at the time of incorporation of the Company has to be INR 1,00,000 (US$ 2200 approx).There is no upper limit on having the authorised capital and the paid up capital. It can be increased any time, by payment of additional stamp duty and registration fee.
What is authorised capital and paid up capital.The authorised capital is the capital limit authorised by the Registrar of Companies upto which the shares can be issued to the members / public, as the case may be. The paid up share capital is the paid portion of the capital subscribed by the shareholders. The minimum authorised capital at the time of incorporation of the Company has to be INR 1,00,000 (US$ 2200 approx) / INR 5,00,000 (US$ 11000 approx) for private limited/public limited company respectively.
What is the procedure in obtaining a name approval for the proposed Company?An application in Form No. 1A needs to be filed with the Registrar of Companies (ROC) of the state in which the Registered Office of the proposed Company is to be situated. A fee of INR 500 (US$ 10.20) has to be paid for the same. The application is required to be signed by one of the promoters. The details to be state in the said application are as follows:1. Four alternative names for the proposed company. (The name can be coined names from the objects of the proposed company or the names of the directors, etc. but should definitely be indicative of the main object of the company. Justification for the name needs to be specified along with the application)2. Names and addresses of the promoters (Minimum 7 for a public company while 2 for private company).3. Authorised Capital of the proposed company.4. Main objects of the proposed company.5. Names of other group companies. On submitting the application, the ROC scrutinises the same and sends the approval / objections in about 10 days to the applicant. On fulfilling of the objections a formal letter of name approval is issued.
What is the Memorandum of Association (MOA) and the Articles of Association (AOA) of a company and what is the procedure in their regard?On receipt of the name approval letter from the ROC the MOA and the AOA are required to be drafted. The MOA states the main, ancillary / subsidiary and other objects of the proposed company. The AOA contains the rules and procedures for the routine conduct of the proposed company. It also states the authorised share capital of the proposed company and the names of its first / permanent directors. After the MOA and AOA are required to be stamped. A stamp duty of INR 200 (US$ 4.10) is required to be paid on the MOA while on the AOA it is payable @ 0.15% of the authorised share capital.