Given the easy accessibility of credit from NBFCs and banks and a conducive start-up ecosystem, many individuals are embracing their dreams of entrepreneurship. If you are about to start your own private limited company, you must know that it must be registered with the Registrar of Companies as per the Companies Act, 2013 rules. While this process is relatively easy, there are certain pitfalls you must avoid to ensure a smooth registration experience.
Ten mistakes to avoid in private limited company registration
Overlooking company name research
Name eligibility is governed by various legal frameworks like the Companies Act, of 2013, the Trademark Act, of 1999, the Names and Emblems Act, of 1950, and the Companies Incorporation Rule of 2014. The gist is that your company’s name should not mirror any existing company or trademark. Similarly, using names that indicate government patronage is also restricted. Selecting a name that doesn’t comply with these regulations can cause delays in the registration process.
Choosing an incorrect company structure
Before you register your business as a private limited company, you must consider whether it is the most suitable structure for your venture. This means evaluating your business goals, industry, and scaling plans. Understand the various other business structures like sole proprietorship, partnership, and LLPs to see if they align better with your goals.
Submitting incomplete documents
Once you’ve completed Part B of the SPICe+ Form, you must attach supporting documents. These documents include PAN and identity proof of director, address proof for the registered office, signed affidavit from subscribers, eMoA and eAoA, etc. Failing to submit any one of the essential documents will stand the approval process and the Registrar of Companies holds the right to reject the application.
Mistakes in director appointments
Many private limited companies make hasty decisions with director appointments. Not all shareholders need to be directors. Your board of directors needs to be a diverse and experienced team that’s capable of making vital decisions for the company. Therefore, you should consider who to appoint as director before listing them on the registration form.
Being unaware of post-registration compliance
While the private limited company registration is handled by the Union Ministry of Corporate Affairs, the post-registration regulations of the state apply. These rules can include professional tax registration, compliance with various state-specific business laws, and more. Failing to understand state laws about post-registration laws can result in penalties.
Providing incorrect office address
Another common mistake is entering an incorrect office address. Many business owners enter an outdated address or incorrect details while filling out the SPICe+ Form. If the registered office address does not match the official documents, the registration approval process can be delayed.
Not acquiring NOC from property owners
If you have a registered office situated in a rented or leased property, obtaining an NOC from property owners is essential. This is an important mandate according to the list of documents necessary for private limited company registration. Obtaining a no-objection certificate from the owner also helps avoid future conflicts.
Neglecting a shareholder’s agreement
While private limited companies in India do not require a shareholder’s agreement to register, it is still wise to have one in place. A shareholder’s agreement contains essential information about the names and addresses of shareholders, details about share allotment, regulations regarding the transfer of shares, and more. Without a properly drafted and duly signed shareholder’s agreement, there can be disputes among shareholders in the future. To preempt this, it’s best to draft one before you incorporate the venture.
Procuring DSCs
DSCs or Digital Signature Certificates are essential for completing the private limited company registration online. Company subscribers and directors need class 3 DSCs to sign and authorize the registration forms. Starting the process without obtaining DSCs can be problematic.
Complete incorporation after name reservation on time
Another common mistake is forgetting the deadline for incorporation once your company name is approved. According to the existing regulations, you must complete Part B of the SPICe+ Form within 20 days of receiving name approval in Part A. However, many business owners forget this deadline exists. If that happens, you will have to start the process from scratch again.
Conclusion
Registering a private limited company in India offers various perks like easier onboarding on online marketplaces, simplified access to capital, and more. However, to leverage these perks, you must complete the registration process correctly without errors. The list of mistakes outlined above can help you achieve this goal.
