MCA: Private Companies & LLP
MCA: Private Companies & LLP
Private Company under the Companies Act, 2013
A private company under the Companies Act, 2013 is a type of company that offers limited liability or legal protection for its shareholders but places certain restrictions on its ownership. It is defined by its articles of association, which limit the number of shareholders to 200, prohibit any public subscription to shares or debentures, and restrict the transferability of shares.
Key Features of a Private Company
Limited Liability : Shareholders are only liable for the debts of the company to the extent of their shareholding.
Restricted Share Transfer : Shares cannot be freely transferred. They are usually transferred through a formal process as per the articles of association.
Number of Members : The maximum number of members allowed in a private company is 200, excluding employees and ex-employees who are also members.
Minimum Directors : A private company must have at least two directors.
Name : The name of a private company must end with the words “Private Limited.”
Compliance through MCA Portal
Incorporation : The process of incorporating a private company involves obtaining a Digital Signature Certificate (DSC) for directors, obtaining Director Identification Number (DIN), and filing the incorporation documents (e.g., Memorandum of Association, Articles of Association) online through the MCA portal.
Annual Filings : Private companies are required to file annual returns and financial statements with the Registrar of Companies (RoC) through the MCA portal within prescribed timelines. Annual General Meeting (AGM) must also be conducted.
Board Meetings : Private companies must hold a minimum of four board meetings in a year, with a maximum gap of 120 days between two consecutive meetings. The minutes of these meetings must be maintained and filed with the RoC.
Statutory Registers : Private companies must maintain various statutory registers, such as the Register of Members, Register of Directors, and Register of Charges. These registers must be updated regularly and kept at the registered office of the company.
Compliance Certificates : Private companies are required to obtain compliance certificates from a practising Company Secretary and file them with the RoC annually.
Payment of Taxes : Private companies must comply with all tax-related requirements, such as filing income tax returns, TDS/TCS returns, and GST returns, through the MCA portal or relevant tax portals.
Limited Liability Partnership (LLP)
A Limited Liability Partnership (LLP) is a form of business structure that combines the benefits of a partnership and a corporation. It provides limited liability to its partners, meaning that the partners are not personally liable for the debts and obligations of the LLP. LLP is governed by the Limited Liability Partnership Act, 2008.
Key Features of LLP
Limited Liability : The partners of an LLP have limited liability, which means their personal assets are protected in case of any liabilities of the LLP.
Separate Legal Entity : An LLP is a separate legal entity distinct from its partners. It can enter into contracts, own assets, and sue or be sued in its own name.
Flexible Structure : LLPs have a flexible structure and are easier to manage compared to companies. There are no requirements for minimum capital contribution, and the LLP agreement can be customized to suit the needs of the partners.
Perpetual Succession : An LLP has perpetual succession, which means that the death or departure of a partner does not affect the existence of the LLP.
Taxation : LLPs are taxed as a partnership, with profits being taxed in the hands of the partners. There is no dividend distribution tax applicable to LLPs.
Benefits of LLP
Limited Liability : The main advantage of LLP is that it offers limited liability to its partners, protecting their personal assets.
Separate Legal Entity : Being a separate legal entity, an LLP can own property, enter into contracts, and sue or be sued in its own name.
Flexibility : LLPs offer flexibility in terms of management and operations, as there are fewer compliance requirements compared to companies.
Perpetual Succession : LLPs have perpetual succession, ensuring continuity even in the event of a partner’s death or departure.
Taxation : LLPs are taxed as a partnership, which can result in lower tax liability compared to companies, especially for small and medium-sized businesses.
Difference from Normal Partnership
Limited Liability : In a normal partnership, the partners have unlimited liability for the debts and obligations of the firm, while in an LLP, the liability of the partners is limited.
Separate Legal Entity : An LLP is a separate legal entity, whereas a partnership is not a separate legal entity from its partners.
Perpetual Succession : An LLP has perpetual succession, which means it continues to exist even if there are changes in the partners, while a partnership dissolves on the death, insolvency, or retirement of a partner.
Compliance through MCA Portal
LLPs are required to comply with various regulations through the MCA portal. Some of the key compliances include :
LLP Agreement : LLPs must file their LLP agreement with the MCA at the time of incorporation and any subsequent changes to the agreement.
Annual Filings : LLPs are required to file annual returns and financial statements with the MCA within prescribed timelines.
Change in Partners : Any changes in partners or designated partners of an LLP must be intimated to the MCA through the portal.
Statutory Registers : LLPs must maintain various statutory registers, such as the Register of Partners, Register of Charges, and Register of LLP Agreement, and update them regularly.
Compliance Certificates : LLPs are required to obtain compliance certificates from a practising Company Secretary and file them with the MCA annually.
Payment of Fees : LLPs must pay the prescribed fees for various filings and compliances through the MCA portal.