Establishing a Private Limited Company in India provides a structured business model with advantages like limited liability, easier access to funding, and enhanced credibility. However, meeting the eligibility criteria is essential to ensure legal compliance and a smooth registration process.

In this blog, we’ll discuss the key eligibility requirements for starting a Private Limited Company in India, including the minimum number of directors, capital requirements, and other critical aspects.

Eligibility Criteria for Private Limited Company

To establish a private limited company, there are a few basic requirements that need to be fulfilled. These include the number of directors and shareholders, as well as some specific residency and digital certification standards. The following provides a detailed overview of these criteria.

• Minimum Number of Directors

A private limited company must have at least two directors to register. This way, the number of directors will ensure that there is full supervision and authoritative decision-making. One of these directors has to be a resident of that country. That person has been residing in the country for more than 182 days during the last calendar year. The directors should be more than 18 years of age and with no criminal records.

• Minimum Number of Shareholders

At least two shareholders are required for registering a private limited company, and its directors can become shareholders, as this provides flexibility both in the matter of ownership and governance. The companies can have upto  200 shareholders, making it appropriate for small-sized closely owned structures.

• Age Requirement for Directors and Shareholders

All the directors and shareholders must be at least 18 years old. There is no age limit but at least everyone involved in the formation of the company should be of legal age.

• Minimum Capital Requirement

Whereas the authorised capital of a private limited company generally takes a minimum amount that can be ₹1 lakh, there are no specific requirements of paid-up capital. This would enable companies to increase authorised capital proportionate to timescales with growth and operation.

• Proof of Registered Office Address

A registered office address is compulsory at the time of incorporation and it shall be the place to which all communications are to be addressed. The registered office may be a commercial, industrial, or residential property and it gives flexibility in choosing a location that meets legal requirements.

• Resident Director Requirement

The law requires at least one director from the country where the company is registered as a resident. A person who spends at least 182 days in the last year of the country must be classified as a resident director; this guarantees representation regarding local compliance matters.

• Digital Signature Certificate (DSC) Requirement

Submission of electronic registration documents necessitates a DSC. During the time of registration, every director should be provided with a DIN for ensuring the guarantee of authentic submission of the electronic documents and their authenticity by secured means.

• Director Identification Number (DIN) Requirement

Each director  should get a Director Identification Number, DIN before incorporation. It is a unique number assigned to the director by a government authority, such as the Ministry of Corporate Affairs in India. This is necessary to trace legal directorships.

Conclusion on Eligibility Requirements for Starting a Private Limited Company

The basic eligibility criteria play a major role in the registration of a successful private limited company. Only after fulfilling these eligibility criteria would an entrepreneur be sure to have an easy process while incorporation and create a very robust base of compliance. Hence, satisfying all of them before going for registration eliminates the probability of the prolongation and sets a basis of having a legitimate compliance structure in business.

FAQs on Eligibility Requirements for Starting a Private Limited Company

Can a foreign national be a director in a private limited company?

Yes, a foreign national can be appointed as a director, provided that at least one director is a resident of the country.

Is it possible to change the registered office address after incorporation?

Yes, a company can change its registered office address by following the official procedure set by the regulatory authority.

Are there any industry-specific eligibility criteria for private limited companies?

Yes, some industries may require additional eligibility criteria, such as special licenses or regulatory approvals.

Is a company secretary mandatory for a private limited company?

A company secretary is not mandatory for small private limited companies but becomes necessary if the company’s turnover exceeds a certain limit (e.g., INR 10 crores).

What happens if eligibility criteria are not met during registration?

If the criteria are not met, the application will be rejected. The company must address the issues before reapplying.

Is there a limit on the number of directors a private limited company can have?

Yes, a private limited company must have at least two directors and can have up to 15, with options to increase if necessary.

How can a private limited company ensure compliance with ongoing eligibility criteria?

Regular board meetings, compliance audits, and staying updated on regulatory changes help companies maintain compliance with eligibility requirements.