Frequently Asked Questions on Indian Private Limited Company

Q1) What is a Private Limited Company?
Ans) A private limited company is a type of privately held business entity that can have a maximum of 200 shareholders and restricts shareholders from publicly trading shares.

Q 2) How many shareholders are required to incorporate a Private Limited Company?
Ans) To incorporate a private limited company in India, a minimum of 2 (two) shareholders are required, and a maximum of up to 200 (two hundred) shareholders are allowed in a private limited company. The shareholders could be natural persons or companies, including foreign companies.

Q3) What is the capital required to start a Private Limited Company?
Ans) Minimum paid-up share capital of Indian Rupees 100,000 (the US $ 1333.33 approximately converted @ 1 INR=75 USD) is required to form a private company in India. There is no upper limit.

Q4) Is an office premise required for starting a Private Limited Company?
Ans) A physical office address in India where the registered office of the Company will be situated is required. The premises can be a commercial/industrial where communication from the Ministry of Corporate Affairs (MCA) will be received.

Q5) How many directors are required in a Private Limited Company?
Ans) A private limited company must have a minimum of two Directors and can have up to a maximum of fifteen Directors.

Q6) What are the requirements to be a Director?
Ans) The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, foreign nationals can be directors in an Indian Private Limited Company.

Q7) What is Digital Signature (DSC) and Director Identification Number (DIN)?
Ans) Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Company.
Director Identification Number is a unique identification number assigned to all existing and proposed Directors of a Company. All present or proposed Directors must have a DIN, and it never expires, and a person can have only one DIN.

Q8) Can a Foreign National or a Non-Resident Indian (NRI) by a Director in a Private Limited Company?
Ans) Yes, a Foreign National or an NRI can be a Director in a Private Limited Company in India after obtaining DIN. However, at least one Director on the Board of Directors must be a Resident in India.

Q9) Can a Foreign Company or a Foreign Corporation hold shares of a Private Limited Company?
Ans) Yes, Foreign Companies can hold shares of a Private Limited Company in India subject to Foreign Direct Investment (FDI) Guidelines.

Q10) How frequently does a Private Limited Company need to hold Board Meetings?
Ans.) All Private Limited Company in India need to hold at least 4 Board meetings in a financial year (April-March), and the gap between each Board Meeting should not be more than 120 days. A Board meeting can be held anywhere in India or even outside India.

Q11) Is it Mandatory for Directors to attend a Board Meeting of a Company? What is minimum Quorum required to hold a Board Meeting?
Ans.) A Company is a legal entity that transacts business decisions through its Directors. Minimum Quorum is 2 Directors or 1/3rd of the total number of Directors, whichever is greater, are required to be present in the meeting of the Board of Directors. The discussions of the meeting need to be drafted and recorded in the form of “Minutes of the Meeting” and maintained at the Registered Office of the Company as part of statutory records. If minimum Quorum is not present, then Board Meeting cannot be held and is adjourned. Draft minutes of meetings are required to be circulated to all directors within 15 days of meeting for their comments and final minutes to be signed by the chairman of the meeting.

Q12) Does a Director need to attend all Board Meetings held during the financial year?
Ans.) Every Director, including the Foreign Directors, must attend at least one (1) Board meeting held during the financial year.

Q13) What is the compliance regarding intimation of notice to Directors for attending Board Meetings?
Ans.) Directors should be intimated about the date and purpose of the meeting by giving a ‘notice & agenda’ at least 7 days in advance from the date of the proposed Board meeting. Evidence of how notice was dispatched by post/electronically must be kept to show that minimum advance notice was provided.

Q14) What is a Board Resolution? Can a Board Resolution be issued to any external Company/Organisation?
Ans.) Board resolution is a motion at a Company that adheres to a specific format. A board resolution creates and upholds the rules, regulations, and other formal board’s decision. A certified true copy of any board resolution signed by a director can be given to the external agencies as and when required.

Q 15) What is the disclosure of interest by the director?
Ans.) Disclosure of interest is a yearly declaration to be given by every director at a first board meeting of the financial year (April-March) having details of directorship and shareholding in other entities at the time of declaration. Further, whenever there is any change occurred in disclosures already made then at a first board meeting held after such change, shall be disclosed.

Q.16) What are the roles, responsibility and duties of a Director?

Ans) 1) To work in good faith to promote the business and objects of the company;
2) To exercise due and reasonable care, skill and diligence;
3) To avoid undue gain or advantage either to himself or relatives, partners or associates;
4) To delegate powers to duly authorized persons with the consent of the Board of directors;
5) To ensure compliances with the help of regional compliance teams.
6) To abide by existing and new compliances under the Indian law to constitute specific committees where applicable like Corporate Social Responsibility Committee (CSR Committee), Internal Complaint Committee (for prevention of sexual harassment at the workplace) etc.

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