Private Limited Company (Pvt Ltd): Definition, Meaning, How to Register & Documents Required

What Is a Corporate Identification Number (CIN)?

A Corporate Identification Number or CIN number is a 21-character alpha-numeric code assigned to companies registered under the Registrar of Companies in India. It acts as a unique identifier, reflecting details like the type of company, its state of registration, and year of incorporation.

A CIN is provided to all companies registered in India, including:

• Private Limited Companies (PLCs)
• One Person Companies (OPCs)
• Companies owned by the Government of India
• State Government Companies
• Not-for-Profit Section 8 Companies
• Nidhi Companies, etc.

In contrast, Limited Liability Partnerships (LLPs) are assigned an LLPIN (Limited Liability Partnership Identification Number). The CIN plays a vital role in company identification and compliance with legal obligations.

Importance of Corporate Identification Number

The CIN is critical for identifying and tracking a company’s activities from its incorporation. Assigned by the Registrar of Companies, it ensures every registered company has a distinct identity under the Ministry of Corporate Affairs. This 21-character alpha-numeric code provides key details, such as the company’s registration type, state, and year of incorporation.

For example, a typical CIN might look like U12345MH2024PLC567890, where each segment represents specific company details.

The CIN must be included in all filings, audits, and reports submitted to the ROC or MCA. It is essential for verifying company information during legal and financial transactions, offering transparency and credibility. The CIN acts as the foundation for company identification, ensuring compliance with Indian business regulations.

Breaking Down Corporate Identification Number

A CIN is a 21-character alphanumeric code that reveals key details about a company. It is structured into six sections, each offering specific information that aids in company identification and regulatory tracking by the ROC and the MCA. Here’s a breakdown:

Section-1: Listing Status

The first character indicates whether a company is “Listed” or “Unlisted” on the stock market.

• L: Listed on the Indian stock exchange.
• U: Unlisted.

Section-2: Industry Classification

The following five numeric digits represent the company’s primary economic activity or industry. The MCA assigns each category of economic activity a specific code. For example, 12345 could signify a particular industry, such as technology or healthcare.

Section-3: Registration State

The following two letters identify the state where the company is registered. Examples include:

• TN: Tamil Nadu
• GJ: Gujarat
• UP: Uttar Pradesh

This section functions similarly to state codes in vehicle registration numbers.

Section-4: Year of Incorporation

The next four numeric digits represent the company’s year of incorporation. For example, "2015" signifies that the company was established in 2015.

Section-5: Company Classification

The following three characters indicate the company type. Examples include:

• PLC: Public Limited Company
• NPL: Not-for-Profit Organisation
• SGC: State Government Company

Section-6: Unique Registration Number

The last six digits are the company’s unique registration number, assigned by the ROC to distinguish it from other entities.

CIN number example: U12345TN2015PLC789101

This example shows an unlisted company (U) operating in a specific industry (12345), registered in Tamil Nadu (TN), incorporated in 2015 (2015), classified as a public limited company (PLC), with a unique registration number of 789101.

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Abbreviations in CIN Number

The abbreviations used in Section 5 of the CIN include:

• FLC: Financial Lease Company as Public Limited.
• FTC: Private Limited Company Subsidiary of a Foreign Company.
• GAP: General Association Public.
• GAT: General Association Private.
• GOI: Government of India-owned companies.
• NPL: Not-for-Profit License Company.
• PLC: Public Limited Company.
• PTC: Private Limited Company.
• SGC: State Government-owned Companies.
• ULL: Unlimited Liability Limited Company.
• ULT: Unlimited Liability Trust.

Usage of Corporate Incorporation Number

The CIN is essential for ensuring compliance and maintaining legitimacy. It must be used in the following:

• Invoices: To identify the company in financial transactions.
• Notices: For official communication with stakeholders.
• Letterheads: To reflect the company’s legal identity in correspondence.
• Annual Reports: As a mandatory disclosure for regulatory purposes.
• MCA e-forms: To ensure accurate filing with the Ministry of Corporate Affairs.
• Publications: For transparency in public-facing materials.

Using the CIN correctly ensures smooth corporate communication and compliance with Indian legal requirements.

Penalty for Non-Compliance of Mentioning CIN Number

Failing to comply with the requirement of mentioning the CIN on official documents can lead to significant penalties. If the requirements are not met, the defaulting company and its officers in default face a penalty of ₹1,000 per day, continuing until the non-compliance is rectified. The maximum penalty for such defaults is capped at ₹1,00,000. These penalties ensure strict adherence to regulatory norms and maintain transparency in corporate operations.

Changing Corporate Identification Number

You cannot directly change the Corporate Identification Number (CIN), but it automatically updates when specific changes occur in your company’s status or structure. These changes include:

• Listing Status: The CIN updates automatically if your company transitions from private to public or is delisted. For example, a Private Limited Company converting into a Public Limited Company will update its CIN to reflect the new listing status.
• Registered Office Location: Moving your company’s registered office to another state will result in an updated CIN to match the new state code. For example, if your company relocates its registered office from Maharashtra to Karnataka, the CIN will change from 'MH' to 'KA'.
• Industry or Sector: A change in your company’s primary business activity will update the industry classification in the CIN. For example, a company shifting from software services to financial services will modify its CIN to reflect the new industry.

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Defining Oppression and Mismanagement

The Companies Act, 2013, does not explicitly define oppression and mismanagement. Instead, their meanings have evolved through judicial interpretations and case law.

In simple terms:

• Oppression involves burdensome, harsh, or wrongful conduct toward minority shareholders. It typically refers to situations where the majority shareholders abuse their power to harm the minority's rights or interests.
  
  
• Mismanagement refers to gross mismanagement of company affairs, which could lead to financial loss or harm to the company’s reputation or operations. It often involves negligence, fraud, or actions taken in bad faith by those in control.

Legal Remedies under Sections 241–246

Sections 241 to 246 of the Companies Act, 2013 empower company members to approach the National Company Law Tribunal (NCLT) if they believe the company’s affairs are being conducted in a manner that amounts to oppression or mismanagement.

If the tribunal is satisfied, it can order remedies such as:

• Regulation of the company’s future conduct
• Removal of directors
• Termination, modification, or setting aside of certain agreements
• Recovery of misappropriated funds
• Preventive actions to safeguard the company’s interests

A Detailed Explanation of Section 241

Section 241 of the Companies Act, 2013 is the core provision that allows members to seek relief from oppression and mismanagement.

Section 241 exists to protect minority shareholders and the company itself from conduct that threatens their interests. It ensures that no shareholder or director misuses their powers to the detriment of others or the company.

Under Section 241, a member can apply to the NCLT if:

• The company’s affairs are being conducted in a manner oppressive to any member(s).
• There has been mismanagement that threatens to cause serious prejudice to the interests of the company, members, or the public.

How can an Application be made under Section 241?

Filing an application under Section 241 involves a specific legal process:

Who Can Apply?

Eligible members include:

• Shareholders holding at least 10% of the company’s issued share capital
• In companies without share capital, at least 1/5th of the total number of members
  In certain cases, members may request NCLT permission to file even if they do not meet the above thresholds (especially where the majority is acting in bad faith).

Grounds for Filing

The application must clearly describe:

• Acts of oppression (specific conduct harming member rights)
• Acts of mismanagement (negligence, fraud, misconduct, etc.)
• Resulting harm to the company or its members

Documentation Required

• Petition/application under Section 241
• Evidence of shareholding or membership eligibility
• Documentary proof of oppressive/mismanaged conduct
• Affidavit verifying the facts
• Court fees as prescribed

Where to File?

Applications must be filed with the relevant bench of the National Company Law Tribunal (NCLT) having jurisdiction over the company’s registered office.

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Who Can File an Application under Section 241 of the Companies Act, 2013?

Eligibility to file under Section 241 depends on the applicant’s status and shareholding:

In addition, the Central Government can also apply under Section 241(2) if it believes the affairs of the company are conducted in a manner prejudicial to public interest.

Frequently Asked Questions

What is the Nature of a One Person Company in India?

As per the definition provided in the Companies Act 2013, an OPC is a private limited company with only one member. The sole shareholder of the OPC holds 100% of the company's shares and is entitled to all the profits generated by the business. The full form of OPC is "One Person Company," emphasising its single-member structure.

The importance of OPC lies in its ability to provide a formal corporate structure to sole proprietors and small business owners. By registering as an OPC, entrepreneurs can enjoy the benefits of a separate legal entity while maintaining complete control over their business operations. This unique combination of sole ownership and corporate features makes OPC an attractive choice for many budding entrepreneurs in India.

Benefits of OPC Company

Next up, let us understand why an OPC company will be right for you:

1. Benefits of Being Small Scale Industries

One of the key advantages of a one person company is its eligibility to be registered as a Micro, Small or Medium Enterprise (MSME). By obtaining MSME registration, OPCs can avail various benefits provided by the government, such as:

• Priority sector lending from banks
• Collateral-free loans up to ₹10 lakhs
• Subsidy on patent registration
• Reimbursement of ISO certification expenses
• Concession on electricity bills
• Exemption from excise duties

These MSME benefits can significantly reduce the financial burden on small businesses and help them grow faster.

2. Single Owner

Unlike partnership firms or private limited companies, an OPC has only one owner who holds all the shares and has complete control over the company's decision-making process. This streamlined ownership structure offers several benefits for OPC company, such as:

• Faster decision-making without the need for consensus among multiple partners or directors
• Flexibility to adapt quickly to changing market conditions
• Ability to maintain confidentiality of business strategies and plans
• Elimination of potential conflicts among partners or shareholders

3. Credit Rating

OPCs find it easier to obtain loans and credit facilities from banks and financial institutions than sole proprietorships. This is because OPCs have a separate legal identity and their financial statements are available in the public domain, allowing lenders to assess their creditworthiness more accurately. A good credit rating can help OPCs secure funding at competitive interest rates, providing a significant advantage over unregistered businesses.

4. OPC Benefits under Income Tax Law

OPCs enjoy certain one person company tax benefits under the Income Tax Act, 1961. Some of these advantages include:

• Lower corporate tax rate of 25% for OPCs with an annual turnover of up to ₹250 crores.
• Exemption from Minimum Alternate Tax (MAT) for OPCs with an annual turnover of up to ₹5 crores.
• Ability to carry forward and set off losses for up to 8 years.
• Deduction of up to ₹1.5 lakhs under Section 80C for investments made by the OPC owner.

These tax benefits can help OPCs optimise their tax liabilities and retain more profits for reinvestment in the business.

Received Interest Rate on any Late Payment

Under the MSME Development Act, 2006, OPCs registered as MSMEs are entitled to receive interest on delayed payments from their buyers. If a buyer fails to make payment within 45 days of accepting the goods or services, the OPC can charge an interest rate of three times the bank rate notified by the Reserve Bank of India (RBI). This provision helps ensure timely payments and improves the cash flow situation for small businesses.

6. Increase in Trust and Status

By registering as an OPC, small businesses can enhance their credibility and reputation in the market. The formal corporate structure and public disclosure of financial statements instil greater trust among customers, suppliers and other stakeholders. This increased trust can lead to better business opportunities, higher customer loyalty and improved bargaining power in commercial transactions.

7. Easy Funding

Apart from institutional funding, OPCs can also raise capital from individual investors. The Companies Act allows OPCs to issue shares to up to 200 shareholders, providing an alternative route for raising funds. This option can be particularly useful for OPCs with high growth potential, as they can attract angel investors or venture capitalists to fund their expansion plans.

8. Limited Liability

One of the most significant benefits of OPC is the limited liability protection it offers to the owner. Unlike sole proprietorships, where the owner's personal assets are at risk in case of business liabilities, an OPC provides a corporate veil that separates the owner's personal assets from the company's obligations. In the event of any legal disputes or financial losses, the liability of the OPC owner is limited to the extent of their investment in the company.

9. One Person Company Tax Benefits

In addition to the income tax benefits mentioned earlier, OPCs also enjoy several other tax advantages. For instance, OPCs with an annual turnover of up to ₹2 crores can opt for the presumptive taxation scheme under Section 44AD of the Income Tax Act. Under this scheme, the OPC is required to pay tax on only 8% of its total turnover, reducing the compliance burden and tax liability significantly.

10. MSME Benefits

As discussed earlier, OPCs registered as MSMEs are eligible for various government schemes and subsidies. Some additional benefits include:

• Preference for government tenders
• Assistance in marketing and export promotion
• Subsidies for participating in international trade fairs
• Skill development and training programs for employees
• Access to credit guarantee schemes

These benefits can provide a much-needed boost to small businesses, helping them compete with larger players in the market.

11. Ease of Management

Managing an OPC is relatively simpler compared to other business structures. With a single owner and no board of directors, decision-making is faster and less complicated. 

Additionally, OPCs have fewer compliance requirements under the Companies Act. For instance, OPCs are not required to hold annual general meetings or prepare cash flow statements. This reduced compliance burden allows OPC owners to focus more on their core business activities.

Eligibility Criteria for OPC

To register as an OPC, the following eligibility criteria must be met:

• The OPC must have only one member who is an Indian citizen and resident. This ensures that the business is managed by someone who understands local regulations and market conditions.
• The sole member must be a natural person, not a company or an institution. This stipulation reinforces the OPC's structure as a personal enterprise.
• The member should not be a minor to ensure legal competency in business dealings.
• The member should be of sound mind and not be declared insolvent by any court. This criterion ensures that the individual can manage the company's affairs effectively.
• The member should not have been convicted of any offence related to company formation or management in the past five years, which helps maintain the integrity of business practices.
• The member should not be a nominee or shareholder in any other OPC.

OPC Registration Process

The OPC registration process involves the following steps:

The registration process for an OPC is streamlined and can be completed online through the Ministry of Corporate Affairs - MCA portal. Here are the essential steps involved:

1. Obtain a Digital Signature Certificate (DSC): The first step is to acquire a DSC for the sole member, which is necessary for signing electronic documents during the registration process.
2. Apply for Director Identification Number (DIN): Following the DSC, the next step is to apply for a DIN, which is required for the proposed director of the OPC.
3. Name Approval: The applicant must submit an application for name approval using Part A of the SPICe+ form on the MCA portal. It is advisable to propose at least two names to ensure one can be approved.
4. Prepare Necessary Documents: Essential documents include: 

• Memorandum of Association (MoA) and Articles of Association (AoA)
• Proof of registered office address
• Consent from the nominee
• KYC documents for both the member and nominee

5. File SPICe+ Form: Once all documents are prepared, submit Part B of the SPICe+ form along with all necessary attachments to complete the application for incorporation.
6. Payment of Fees: Pay the requisite registration fees online, which may vary based on the company's nominal share capital.
7. Certificate of Incorporation: If all details are accurate and compliant with regulations, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, officially recognising the OPC as a legal entity.

This structured approach not only simplifies the registration process but also ensures that all legal requirements are met efficiently, making it easier for entrepreneurs to start their businesses as a One Person Company in India.

Conclusion

OPC offers a unique blend of sole ownership and corporate features, making them an attractive choice for solo entrepreneurs and small business owners in India. The benefits of an OPC company are numerous, ranging from limited liability protection and separate legal identity to tax advantages and easier access to credit. 

Additionally, the reduced compliance burden and simplified management structure make OPCs well-suited for individuals who want to focus on their core business activities without getting bogged down by excessive paperwork.

To register as an OPC, an individual must meet certain eligibility criteria and follow the prescribed registration process. Once incorporated, an OPC can enjoy various benefits available to MSMEs and small-scale industries, helping them compete effectively in the market.

In conclusion, the One Person Company is a progressive business structure that encourages solo entrepreneurship and facilitates the growth of small businesses in India. By providing a formal corporate framework with minimal compliance requirements, OPCs have opened up new avenues for aspiring entrepreneurs to turn their ideas into successful ventures.

Benefits of OPC - FAQs