By - King Stubb & Kasiva on March 9, 2023
According to Section 2(38) of the Companies Act, 2013, a private company can be defined as “a company having a minimum paid-up share capital as may be prescribed, and which by its articles the right to transfer the shares of the company is restricted and the number of members of the company are limited”.
Private companies in India are regulated by the Companies Act, 2013 which acts in regulating the total number of members of the company, number of directors of the company, rights of shareholders of the company and lists down methods of raising capital.
The Companies Act, 2013 has laid down various rules and regulatory frameworks governing different activities of Private Companies in India. These are as follows: -
There are various other regulations that regulate the subscribers to the memorandum, qualifications of directors and other details of the company.
Other allied laws which govern the operations of private companies are Securities Contracts (Regulation) Act 1956, Foreign Exchange Management Act, Securities and Exchange Board of India Act 1992 and many more.
According to the laws governing companies in India, there are multiple differences between private and public companies. The differences are as follows:
The incorporation of PLC in India is governed by the Companies Act, 2013. There are various steps in the incorporation of a private company in India which are as follows:
There are a number of compliances that need to be completed by every private company in India according to the Registrar of Companies which is responsible for the administration of statutory rules pertaining to the companies. There are various compliances requirements for private companies in India which are as follows:
There are many other compliances including the appointment of auditors, filing of various forms and abiding by the procedure stated by the Registrar of Companies. Various other taxation compliances must also be completed by the company.
There are various penalties and sanctions which may be levied upon the company in event of non-compliance with statutory guidelines. For instance, a fine of Rs. 1 Lakh to Rs. 5 Lakh may be levied upon the directors of a private company for not following their duties. Similarly, a fine of Rs. 50 thousand to Rs. 5 lakhs may also be levied upon failure to comply with provisions of appointments and qualifications of directors. Other penalties and punishments are also levied upon contravention of different rules.
The compliance mechanism in a private company is of utmost importance due to the reason that many different penalties and other sanctions are imposed upon defaulting parties including directors which may result in the downfall of public image of the company.
Moreover, a proper compliance mechanism results in better focus of the company upon the core business and operational areas without taking any pressure of legal troubles which may arise in the future and gives leverage to the companies to deliver better results.
Therefore, companies should focus on proper compliance mechanisms either by themselves or by engaging professional services.
Various provisions of Companies Act, 2013 such as Section 2(68), Section 149 and other relevant sections are applicable to private companies.
In case of contravention of sections 139 to 146 (both inclusive), the company shall be punishable with a fine which shall not be less than Rs. 25,000/- but which may extend to Rs. 5,00,000/- and every officer in default shall be punishable with a fine which shall not be less than Rs. 10,000/-.
A startup running as a private limited company has to follow a number of compliances as laid down by various statutes and other regulatory bodies. This includes but is not limited to the periodic filing of tax and other returns, holding the board and other meetings, maintaining statutory books and accounts, etc.
King Stubb & Kasiva,
Advocates & Attorneys
Click Here to Get in Touch
New Delhi | Mumbai | Bangalore | Chennai | Hyderabad | Mangalore | Pune | Kochi | Kolkata
Tel: +91 11 41032969 | Email: firstname.lastname@example.org