TWO TYPES OF COMPANY REGISTER AS PRIVATE LIMITED COMPANY ARE

• ONE PERSON COMPANY
• PRIVATE LIMITED COMPANY

ONE PERSON COMPANY

Section 2(62) of Companies Act defines a one-person company as a company that has only one person as to its member. Furthermore, members of a company are nothing but subscribers to its memorandum of association, or its shareholders. So, an OPC is effectively a company that has only one shareholder as its member.

Such companies are generally created when there is only one founder/promoter for the business. Entrepreneurs whose businesses lie in early stages prefer to create OPCs instead of sole proprietorship business because of the several advantages that OPCs offer.

Features of a One Person Company

Here are some general features of a one-person company:

• Private company: Section 3(1)(c) of the Companies Act says that a single person can form a company for any lawful purpose. It further describes OPCs as private companies.
• Single-member: OPCs can have only one member or shareholder, unlike other private companies.
• Nominee: A unique feature of OPCs that separates it from other kinds of companies is that the sole member of the company has to mention a nominee while registering the company.
• No perpetual succession: Since there is only one member in an OPC, his death will result in the nominee choosing or rejecting to become its sole member. This does not happen in other companies as they follow the concept of perpetual succession.
• Minimum one director: OPCs need to have minimum one person (the member) as director. They can have a maximum of 15 directors.
• No minimum paid-up share capital: Companies Act, 2013 has not prescribed any amount as minimum paid-up capital for OPCs.
• Special privileges: OPCs enjoy several privileges and exemptions under the Companies Act that other kinds of companies do not possess.

Privileges of One Person Companies

OPC enjoy the following privileges and exemptions under the Companies Act:

• They do not have to hold annual general meetings.
• Their financial statements need not include cash flow statements.
• A company secretary is not required to sign annual returns; directors can also do so.
• Provisions relating to independent directors do not apply to them.
• Their articles can provide for additional grounds for vacation of a director’s office.
• Several provisions relating to meetings and quorum do not apply to them.
• They can pay more remuneration to directors than compared to other companies.

PRIVATE LIMITED COMPANY

A private limited company is a company which is privately held for small businesses. The liability of the members of a Private Limited Company is limited to the amount of shares respectively held by them. Shares of Private Limited Company cannot be publically traded.

Characteristics of Private Limited Company

• Members– To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
• Limited Liability– The liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
• Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.
• Index of members– A private company has a privilege over the public company as they don’t have to keep an index of its members whereas the public company is required to maintain an index of its members.
• A number of directors– When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
• Paid-up capital– It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which may be prescribed from time to time.
• Prospectus– Prospectus is a detailed statement of the company affairs that is issued by a company for its public. However, in the case of a private limited company, there is no such need to issue a prospectus because this public is not invited to subscribe for the shares of the company.
• Minimum subscription– It is the amount received by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business. In the case of a private limited company, shares can be allotted to the public without receiving the minimum subscription.
• Name– It is mandatory for all the private companies to use the word private limited after its name.

Procedure to register Private Limited Company

Once a name for the company is decided, the following steps have to be taken by the applicant:

Step 1: Apply for DSC (Digital Signature Certificate) and DIN (Director Identification Number)

Step 2: Apply for the name availability

Step 3: File the MOA and AOA to register the private limited company

Step 4: Apply for the PAN and TAN of the company

Step 5: Certificate of incorporation will be issued by ROC with PAN and TAN

Step 6: Open a current bank account on the company name