Company register

Making a company, a Private Limited Company, if it is doing really well in the market brings in two advantages: one, it will aid to raise extra capital or money through selling parts of your shares, and secondly, doing so limits the company’s liabilities. But, the procedure to turn one into a joint stock private company (Ltd) is quite a drawn out one.

First of all, it is required to find the true value of the company so as to divide it into suitable number of shares (nominal value). This is done based on the current performance of the business as well as considering its future prospects or expected performance in the near future by a merchant bank, which the business owner itself has to appoint. Once this much is done, the owner now needs to decide on the number of shareholders and the approximate percentage of shares that has to be distributed amongst the shareholders. Deciding the ownership is a critical job as the person who is in possession of the maximum value of shares will automatically herald the decision making rights. The remaining shares can be distributed or sold to family members or other businesses or to the public. The latter, however, does not happen usually in private limited companies.

As per the Companies Act, not more than 50 persons can be shareowners within the fold of the private limited company, and these should be ‘desirable individuals’ as being stipulated in the Memorandum of Association or MoA.  

The next step is to appoint a board of directors for the company. It is the body that makes decisions and drives the business to the future, and is selected and appointed by the share holders. The selection process has to be democratic, like in the usual government elections, with all those ballet papers, canvassing, nominations etc and no rigging. 

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However, the incorporation process is never complete without the business submitting the following documents, duly filled/completed by the person himself or his intermediary.

• Memorandum of Association that contains the Company Name, Location, and its Address, what the company does, info division of shares, liability amount etc.
•  Article of Association that details to whom the shares are issued to, qualification, role of the directors, shareholders rights, method of audit, division of profit etc.
•  List of director and statement of nominal capital.
•  All other declarations that pledge the company have indeed put into place all measures as required by the Companies Act.

If the Company House approves the incorporation, the business receives ‘a "Certificate of Incorporation", licensing them to operate as a private limited company from then onwards with the ‘Ltd’ term at the end of the company name.

Other obligations of a private limited company include disclosing the annual account to companies house annually – which is open to public scrutiny as well.

Since private limited companies loses does not transfer to its shareholders beyond the money they have invested in the company, it will be easier to attract investors. In fact, this is the biggest advantage in registering as a private limited company on a long run.