A Private Limited Company is a company registered under The Companies Act 2013, the shares of which are privately held. It is a registered legal entity having minimum 2 and maximum of 200 members in a company. The liability of members is limited in a Private Limited Company to the number of shares held by them. The shares company are not publicly traded but can be transferred from one individual to another changing ownership resulting from such transfers. It can have a minimum of two and a maximum of fifteen directors. Such types of companies have to use “Private Limited” as part of their names.
A Private Limited Company can be further classified as:
a) Company Limited by Shares
In this type of Private Limited Company, the liability of the members is limited by the memorandum to the amount, if any, unpaid on the shares held by them. Majority of Private Limited Company registered belongs to this category as it’s the most common form of registering a business.
b) Company Limited by Guarantee
In this type of Private Limited Company, the liability of the members is limited by the memorandum to such amount, which the members may undertake to contribute to the assets of the company, in case of it going bankrupt. Such companies may or may not have a share capital. The liability of members is the unpaid amount on shares along with the amount of respective guarantee the member has provided.
c) Unlimited Company
In this type of company, the liability of the members is unlimited which means that in case of the shortfall to pay debts or liabilities of the company, the members are personally liable to the extent of their personal assets. This is a high-risk structure type of company.
Characteristics of the private limited company:
Members– A minimum of 2 members are required to start a Private Limited Company. The maximum number of members is limited to 200 as per the provisions of The Companies Act 2013.
Index of members– A private company does not have to keep an index of its members unlike a public company which is required to maintain an index of its members.
Directors – A Private Limited Company can be formed with atleast minimum of 2 Directors. The maximum number of director is limited to 20 by the Companies Act 2013.
Paid up capital – The minimum paid-up capital of a Private Limited Company has to be atleast Rs. 1 lakh or higher which may be prescribed from time to time. Limited liability of members – In a Private Limited Company, the liability of the members is limited to the unpaid amount on their respective share holdings. The debts and liabilities of the company are considered separate as company is separate legal entity. It’s much safer form of