There are many companies that can be cover by the laws of our regime, the private limit company is also one of them which is the most prevalent and popular type of corporate legal entity in our country, as we all know that a private limited company is govern by an investment.
From February 23, 2020 Ministry of Corporate Affairs (MCA) to February 23, Private Companies Limited Company to register at least two shareholders with two directors (they can be one person), Companies Act, 2013 read, Companies Inclusion Rules, 2014 . ) Has recently launched Spice + and AGILE-Pro (incorporation forms) to close the procedure, time and cost for the inclusion of a new company through these integrated forms, making it much easier to incorporate the company.
Comparison between private limited company and Section 25 Company
Private limited company
A private limited company incorporation is a business organization run by a small group of people. It is register for predefined objects budgets and owns a group of members called shareholders. Start-ups and businesses with high growth ambitions choose a private company as the right business structure.
In India, a commercial company is recognize as a company by registration under the Companies Act 201. The Board of Governors is the Ministry of Corporate Affairs, widely known as the MCA. The definition of a private company under the Act is given here to understand its basics.
The shareholders are define as the owners of the company. Ownership in a private limited company incorporation is define by share capital. Shares are equal parts of a company’s capital. The ownership ratio is define by the shares held by the owners in the company.
This type of arrangement in shareholding is one of the reasons why investors are attract to the company’s business. Owning equity is a convenient option for them to gain ownership in the business. In addition, stocks can also be issue at a premium to introduce more capital, which simplifies the investment process.
Number of members:
The shareholders of the company are also call as members. For registration of a private limited company in India, at least two members are require. Here, an individual or even a corporate can become a member of the company. The private company incorporation has a maximum number of members. The same is provide as a maximum of 200 members. The exception here is a one person company, where there is only one member.
Section 25 Company
Section 25 Company is one of the popular forms of non-profit organization in India. These are companies form under the Companies Act, 1956, to promote commerce, arts, science, religion, charity or any other useful substance. The profit earn or any other income is use in the promotion of its objectives and it prohibits the payment of any dividend to its members. It can register as a limited liability company without adding the words “limited” or “private limited” to its name.
According to the Companies Act, 1956, the minimum share capital require for a public company is Rs. 5 lakhs and for a private company Rs. 1 lakh. However, a Section 25 company does not need to have any minimum paid-up capital. Further in this category of company it is necessary to maintain an account book with a period of only four years instead of the prescribe eight years for other companies under the Companies Act 1956.
As per the New Companies Bill 2017, Section 25 Company now has become Section 8. The new bill provides for a person or association of persons to be register under the Act as a limit company, whereas the Companies Act 1956 specified should be the only ‘organization’ register as a company. The next clause of the new bill includes its ambitious companies promoted for sports, education, research, social welfare and protection of the environment.
It also provides that a company will only merge with another company register under this section and containing similar substances. The new bill has strict provisions for non-compliance. If a company defaults in complying with any of the requirements stated in this section, the company will not be fine more than one lakh rupees up to one crore rupees.
Benefits of company incorporation
An incorporated company is a legally recognize entity separate from its owners and shareholders, separate from partnership companies.
Section 34 (2) of the Companies Act, 1956 explains that from the date of incorporation of the company, subscribers and members of the Memorandum, by name contain in the Memorandum, the body shall be corporate, capable of exercising all functions. Of an incorporated company and eternal succession and general meeting.
The Companies Act provides that in the event of a company closing, the members of the company are liable to contribute to the assets and liabilities of the company. It is in accordance with Section 34 (2) of the Companies Act.
However, in the case of companies that have been involve, none of its members is legally oblige to contribute anything beyond the nominal value of the shares hold by the member, which is still outstanding. The advantage of having limited liability for its members is one of the main reasons for establishing an involved company.
Article states of the Companies Act states that “any member of the Company who has shares or other interest in immovable property shall be transferred in the manner provided by the articles of association.”
This allows funds to be invest in stocks. This has also done so that members can cash the shares at any time as they wish. It also serves the purpose of providing liquidity to investors. They can sell shares anytime they want, on the open market or stock exchange.
The company incorporate as a recognize legal entity is allow to own its own funds and other assets. “Company property is not the property of shareholders, it is the property of the company.”
‘The company is the real person in which the property is own, and by which it is control, operate and dispose of.’ And thus, if under the law, if the majority shareholder uses the company’s resources for personal reasons, he is liable to hold for the criminal misappropriation of the company’s funds.