Appointment of Director to Your Company

Nov 28, 2024
Private Limited Company vs. Limited Liability Partnerships

Appointment of a director is a crucial step in establishing a Private Limited Company. A director oversees the company's operations and ensures compliance with legal requirements. 

Additionally, directors play a vital role in protecting shareholder investments and steering the company towards success. In this article, we will delve into the process of appointing a director in a Private Limited Company, the eligibility criteria to be a director and the provisions of the Companies Act 2013 for the appointment of directors.

Table of Contents

Understanding the Role of a Director

Directors are individuals appointed by shareholders to supervise a company's activities, as guided by the Memorandum of Association (MOA) and Articles of Association (AOA). Since a company is a legal entity and cannot act independently, it functions through its directors. The Board of Directors, composed of these individuals, is responsible for the company's management and decision-making.

In a Private Limited Company, directors hold significant importance. They are tasked with making everyday decisions and overseeing the company's administration. Shareholders rely on directors to manage their investments effectively and ensure the company's growth and success.

Types of Directors of a Company

Directors are categorised into various types based on their roles and responsibilities. Let us take a closer look at each type:

Executive Directors

  • Actively involved in the company's daily management.
  • Often hold specific executive roles, such as CEO, CFO or COO.
  • Responsible for implementing the company's strategies and policies.

Non-Executive Directors

  • Do not participate in the company's day-to-day management.
  • Provide independent oversight to the company's board and management.
  • Offer valuable insights and advice based on their expertise and experience.

Independent Directors

  • A subset of non-executive directors with no financial or other vested interests in the company apart from their role as directors.
  • Primary responsibility is to safeguard the interests of the company's shareholders.
  • Ensure transparency and accountability in the company's operations.

Nominee Directors

  • Appointed by third-party authorities or the Government to tackle mismanagement and misconduct.
  • Represent the interests of the appointing authority.
  • Monitor the company's activities and report any irregularities.

Appointment of Director to Private Limited Company

Specific requirements must be met when appointing directors in a Private Limited Company, these are:

  • The maximum directors in a private company is 15. 
  • The minimum directors in a private company is 2.
  • The limit of 15 directors can be exceeded by appointing additional directors through a special resolution with the support of 75% or more shareholders.
  • The appointment of directors must be in accordance with the provisions of the Companies Act 2013.

Provisions of the Companies Act, 2013

The Companies Act 2013 includes several key provisions related to the appointment and roles of directors:

  • Section 149: Details mandatory requirements, such as having a certain number of directors, including a female director and a resident director.
  • Section 152: Specifies the process for appointing directors at the company's general meeting and mandates the use of the Director Identification Number (DIN).
  • Section 161: Provides guidelines for appointing additional, alternate and nominee directors by the Board.
  • Section 164: Lists the disqualifications for becoming a director, ensuring that only eligible individuals are appointed to the board.

By adhering to these provisions, companies can establish a well-structured and compliant board of directors.

Reasons for Adding or Changing Directors in a Company

There are several reasons why a company may choose to appoint new directors/board of directors or change its existing board composition:

  1. Introducing New Talent: As a company grows, it may become necessary to bring new talent to the board to address new challenges and requirements that come with expansion.
  2. Preventing Ownership Dilution: By appointing additional directors, shareholders can delegate more operational responsibilities without relinquishing strategic control.
  3. Addressing Inefficiency of Current Directors: A company may appoint new directors to maintain efficiency if existing directors are underperforming due to personal issues.
  4. Complying with Statutory Requirements: Companies must maintain a specific number of directors according to the Companies Act 2013. They must promptly appoint new directors to comply with legal requirements if the number falls below the minimum.

Eligibility to Be A Director in a Company

To be eligible for appointment as a director, an individual must meet the following criteria:

  • Be at least 18 years old, as minors are not permitted to hold the director position.
  • Not be disqualified under the provisions of the Company Act 2013, which include:
    • Being an undischarged insolvent
    • Having been convicted of an offence involving moral turpitude
    • Having been convicted of an offence under the Companies Act 2013
    • Having been disqualified by an order of a court or tribunal
  • Have mutual consent from the Board of Directors, shareholders and the individual being considered for the directorship.

It is crucial to ensure that the prospective director meets these eligibility criteria before proceeding with the appointment process.

Documents for Director Appointment

When appointing a director, the following documents are required:

  1. PAN card
  2. Identity proof (Voter ID, driver's license, Aadhaar card, etc.)
  3. Residence proof (utility bills, rental agreement, etc.)
  4. Recent passport-sized photograph
  5. Digital Signature Certificate (DSC)

Procedure for Appointing/Add a Director to a Company

The process of appointing a director involves several key steps:

  1. Reviewing the Articles of Association (AOA)

The first step is to review the company's Articles of Association (AOA) to ensure that it includes a clause permitting the appointment or addition of directors. If the current AOA lacks such a provision, it should be amended to include one before proceeding with the director's appointment.

  1. Conducting a General Meeting for Director Appointment

The company must formally appoint a director by passing a resolution in a general meeting, either during an Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM). 

To arrange an EGM, the company must conduct a board meeting to pass a resolution for holding the EGM. The resolution to appoint the director must be filed in Form MGT-14 with the Registrar of Companies within 30 days.

  1. Applying for Director Identification Number (DIN) & Digital Signature Certificate (DSC)

The individual selected for directorship must apply for a Digital Signature Certificate (DSC) and a Director Identification Number (DIN) if they do not already possess these. After obtaining the DIN, the prospective director must provide the company with their DIN along with a declaration affirming that they are not disqualified from being a director.

  1. Obtaining Consent from the Prospective Director – Form DIR-2

The individual proposed for directorship must express their consent to serve in this role by submitting Form DIR-2, a formal consent to act as a director. An individual can only be appointed as a company director by explicitly giving their consent. This step is crucial to ensure that the prospective director is willing to take on the responsibilities associated with the position.

  1. Issuing a Letter of Appointment to the Director

After obtaining consent from the prospective director, the company should issue a formal Letter of Appointment. This director appointment should detail the terms and conditions of the appointment, including the director's roles, responsibilities and any remuneration or salary. The Letter of Appointment serves as a legal document that outlines the expectations and obligations of both the company and the director.

  1. Filing Forms DIR-2 and DIR-12 with the ROC

Once the resolution for the appointment of a director is passed and the individual has submitted Form DIR-2, the company can officially appoint them as a director. 

The company must file both Form DIR-2 and Form DIR-12 (detailing the particulars of the director's appointment) with the Registrar of Companies (ROC) within 30 days of the director's appointment. Failing to file these forms within the prescribed time frame can result in penalties and legal complications.

  1. Filing Amendment Applications with GST and Tax Authorities

After appointing a new director, the company must file the necessary applications to update the director's details with various regulatory authorities, including the GST Network (GSTN) and other relevant certificates, to reflect the change in directorship. This step ensures that the company remains compliant with all legal and regulatory requirements related to its directors.

Frequently Asked Questions:

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

How to appoint a director in a company?

To appoint a director in a company, follow these steps:

  1. Review the Articles of Association (AOA) to ensure it allows for the appointment of new directors.
  2. Conduct a general meeting (AGM or EGM) to pass a resolution for the director's appointment.
  3. Ensure the prospective director applies for a Director Identification Number (DIN) and Digital Signature Certificate (DSC).
  4. Obtain consent from the prospective director through Form DIR-2.
  5. Issue a Letter of Appointment to the director.
  6. File Forms DIR-2 and DIR-12 with the Registrar of Companies (ROC) within 30 days of the appointment.
  7. Update the director's details with relevant regulatory authorities, such as the GST Network (GSTN).

What are the criteria for the appointment of a director?

The criteria for the appointment of a director include:

  • Being at least 18 years old.
  • Not being disqualified under the provisions of the Company Act, 2013.
  • Having mutual consent from the Board of Directors, shareholders and the individual being considered for the directorship.

Possessing a valid Director Identification Number (DIN) and Digital Signature Certificate (DSC).

How do you write a Director's appointment letter?

A Director's appointment letter should include the following details:

  • The date of appointment
  • The term of appointment (if applicable)
  • The roles and responsibilities of the director
  • Remuneration or salary details (if any)
  • Expectations regarding attendance at board meetings and other company events.
  • Confidentiality and non-disclosure clauses
  • Termination conditions

What is the manner of appointment of Directors?

Directors are appointed through a formal resolution passed at a general meeting of the company (AGM or EGM). The appointment must be approved by the shareholders and comply with the provisions of the Companies Act, 2013. The appointed director must provide their consent through Form DIR-2 and possess a valid Director Identification Number (DIN) and Digital Signature Certificate (DSC).

How much does it cost to appoint a director?

The cost of appointing a director may vary depending on factors such as:

  • Professional fees for legal and compliance services.
  • Filing fees for Forms DIR-2 and DIR-12 with the Registrar of Companies (ROC).
  • Charges for obtaining a Director Identification Number (DIN) and Digital Signature Certificate (DSC).
  • Any remuneration or salary offered to the director.

It is advisable to consult with a legal professional or corporate service provider to determine the specific costs involved in appointing a director for your company.

How long does a director appointment take?

The timeline for a director appointment may vary depending on factors such as:

  • The availability of the required documents and information.
  • The time taken to conduct the general meeting and pass the appointment resolution.
  • The processing time for obtaining a Director Identification Number (DIN) and Digital Signature Certificate (DSC).
  • The efficiency of filing Forms DIR-2 and DIR-12 with the Registrar of Companies (ROC).

Typically, the entire process of appointing a director can take anywhere from a few days to a couple of weeks, subject to the company's diligence and compliance with legal requirements.

What documents are required for a director appointment?

The documents required for a director appointment include:

  • PAN Card
  • Identification Proof (Voter ID, Driving Licence, Aadhaar Card, etc.)
  • Proof of Residence (utility bills, rental agreements, etc.)
  • Passport Size Photograph
  • Digital Signature Certificate (DSC)
  • Consent to act as a director (Form DIR-2)
  • Declaration of non-disqualification

Akash Goel

Akash Goel is an experienced Company Secretary specializing in startup compliance and advisory across India. He has worked with numerous early and growth-stage startups, supporting them through critical funding rounds involving top VCs like Matrix Partners, India Quotient, Shunwei, KStart, VH Capital, SAIF Partners, and Pravega Ventures.

His expertise spans Secretarial compliance, IPR, FEMA, valuation, and due diligence, helping founders understand how startups operate and the complexities of legal regulations.

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Related Posts

Difference between Private Limited Company, OPC and LLP in India

Difference between Private Limited Company, OPC and LLP in India

Are you an aspiring entrepreneur ready to make your business official? If so, one of the critical decisions you'll need to make is choosing the right business structure. From Private Limited Companies (PLCs) to Limited Liability Partnerships (LLPs) to One Person Companies (OPCs), each structure offers its own set of advantages and considerations.

In this blog, we'll explore the nuances (features & differences) of these three popular business structures - Private Limited, LLP, and OPC—and provide insights to help you make an informed decision that aligns with your entrepreneurial goals.

Table of Contents

Difference between Private Limited, LLPs & OPCs

Private Limited Company Limited Liability Partnership One Person Company
Governing Act Governed by the Companies Act Governed by the Limited Liability Partnerships Act Governed by the Companies Act
Suitable For Financial Services, Tech Startups, Medium Enterprises Consultancy firms, Professional Services Franchises, Retail Stores, Small Businesses
Shareholders/Partners Minimum Shareholders - 2
Maximum Shareholders - 200
Minimum Partners - 2
Maximum Partners - Unlimited
Minimum Shareholders - 1
Maximum Shareholders - 1
(Maximum Directors can be 15)
Nominee Not required Not required One Nominee mandatory
Minimum Capital Requirement No minimum capital requirement, but it is often advised to set the authorized capital at INR 1,00,000 (One Lakh) No minimum capital requirement, but it is often advisable to consider an initial capital of INR 10,000 No minimum paid-up capital requirement exists. However, the minimum authorized capital required is INR 1,00,000 (One Lakh)
Tax Rates The basic tax rate, excluding Surcharge and Cess is 25% The standard fixed rate is 30% on their generated earnings. The applicable Tax rate would be 25%, excluding cess and surcharge
Fundraising Easier to raise funds from Investors Raising funds can be challenging Limited options for Fundraising
DPIIT Recognition Eligible for DPIIT recognition Eligible for DPIIT recognition Ineligible for DPIIT recognition
Transfer of Shares Shares can be easily transferred by amending AOA Transfer of partnership rights may require the consent of other partners and is generally more complex Transfer of shares isn't possible; it can only be done in case of transfer of ownership
ESOPs Can issue ESOPs to the Employees Unable to issue ESOPs to the Employees Unable to issue ESOPs to the Employees
Agreements Duties, Responsibilities, and other basic clauses outlined in MOA and AOA Duties, Responsibilities, and other basic clauses outlined in the LLP Agreement Duties, Responsibilities, and other basic clauses outlined in MOA and AOA
Compliances
  • More compliance costs
  • Mandatory 4 Board Meetings
  • Mandatory Statutory Audits
  • Mandatory filings includes Annual financial statements in form AOC-4 and annual returns in Form MGT-7, etc.
  • Less Compliance Costs
  • No Mandatory Board Meetings
  • Statutory Audits are not required if turnover is less than 40 Lakhs, or capital contribution is less than 25 Lakhs.
  • Mandatory filings include Annual financial statements in Form 8 and annual returns in Form 11.
  • Less Compliance Costs
  • Minimum 2 Board Meetings
  • Mandatory Audits
Foreign Directors/Partners NRIs and Foreign Nationals can be Directors NRIs and Foreign Nationals can be Partners No foreign directors are allowed
Foreign Direct Investment Eligible through Automatic route Eligible through Automatic route Not eligible for FDI
Mandatory Conversion No mandatory conversion No mandatory conversion If annual turnover exceeds Rs. 2 Crores or paid-up capital exceeds Rs. 50 lakhs, then mandatory conversion into a private limited company

Now that we've introduced the differences between these three types, let's explore their features and registration processes more thoroughly. This will help you determine which one is the most suitable for your business needs.

Private Limited Company: Features

In India, the Private Limited Company stands as the predominant choice for company registration, governed by the Companies Act of 2013 under the jurisdiction of the Ministry of Corporate Affairs (MCA). This structure is favoured by startups and businesses aspiring for growth and stability, owing to its adaptable ownership model and efficient management practices.

Outlined below are some key characteristics of a Private Limited Company:

1. Limited Liability

  • Shareholders enjoy limited liability, safeguarding personal assets from business debts.

2. Separate Legal Entity

  • Regarded as a distinct legal entity from its shareholders, allowing it to engage in contracts, own assets, and litigate under its name.

3. Ownership

  • Owned by shareholders who possess shares in the company, with ownership transfer facilitated through share transactions.

4. Management

  • Managed by appointed Directors, while day-to-day operations are overseen by management, with significant decisions often requiring shareholder approval.

5. Shareholders

  • Requires a minimum of two shareholders and can accommodate a maximum of 200.

6. Regulation and Compliance

  • Governed by the Companies Act and regulated by the Ministry of Corporate Affairs, mandating compliance with annual financial filings, general meetings, and statutory record maintenance.

7. Investment and Funding

  • Attracts investment and funding relatively easily due to its defined ownership structure and limited liability feature.

Private Limited Company: Registration in India

The Ministry of Corporate Affairs (MCA) has introduced a streamlined and online process for company incorporation known as Simplified Proforma for Incorporating Company Electronically Plus (SPICe+), comprising two parts: Part A and Part B.

The steps are as follows:

1. Step 1: Apply for DSC

  • Obtain a Digital Signature Certificate (DSC) from Certifying Agencies (CAs) with either one or two-year validity.

2. Step 2: Apply for Name Approval

  • Apply for name using SPICe+ Part A which facilitates 'Name Reservation' with the provision for two proposed names and one re-submission (RSUB).

Note: While simultaneous application for name approval (Part A) and Incorporation (Part B) through SPICe+ is feasible, only one name can be reserved.

3. Step 3: Apply for Company Registration & Other Applications

  • Following name approval, apply for Company Registration using SPICe+ Part B, which also includes the application for allotment of Director Identification Number (DIN), Permanent Account Number (PAN), Tax Deduction and Collection Account Number (TAN), etc.

4. Step 4: Apply for a Bank Account

  • Open a current account for your company to facilitate seamless financial transactions and business operations.

5. Step 5: File the Commencement of Business Certificate

  • Within 180 days of incorporation, file the Commencement of Business Certificate through Form INC-20A, which is a declaration submitted by the Director of the Company to the Registrar of Companies.

Upon approval of the SPICe+ Form, the Registrar of Companies (ROC) issues the Certificate of Incorporation, confirming the successful registration of your company.

The Certificate of Incorporation includes vital information such as the Company's name, registration number (CIN), date of incorporation, registered office address, and so on.

Example of CIN: U72200KA2013PTC097389

Read more about what each letter in a CIN signifies here.

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Limited Liability Partnerships: Features

A Limited Liability Partnership (LLP) is a business structure that combines features from both traditional partnerships and limited companies. And, LLPs are often favoured by professional services firms, small businesses, and ventures seeking the blend of partnership flexibility and limited liability protection.

Key characteristics of an LLP include:

1. Limited Liability

  • Partners in an LLP benefit from limited liability akin to private limited companies.

2. Separate Legal Entity

  • An LLP exists as a distinct legal entity from its partners, capable of owning assets, entering contracts, and engaging in legal proceedings independently.

3. Ownership

  • Partners own the LLP, with the ownership structure outlined in the LLP agreement. Ownership transfer typically requires consent from other partners.

4. Management

  • Managed by partners or a designated management team as specified in the LLP agreement. Decision-making is often collaborative, with each partner having an equal say.

5. Number of Partners

  • Requires a minimum of two partners, with no maximum limit.

6. Regulation and Compliance

  • Governed by the Limited Liability Partnership Act in India, featuring less stringent regulatory requirements compared to private limited companies. Compliance entails filing annual returns and maintaining statutory records.

7. Flexibility

  • Offers enhanced flexibility in internal management and decision-making processes compared to private limited companies.

Limited Liability Partnerships: Registration in India

Establishing a Limited Liability Partnership (LLP) as a legally recognized business structure involves several crucial steps. Here is a brief and comprehensive outline of the LLP registration process.

1. Step 1: Obtain a DSC

  • Obtain a Digital Signature Certificate (DSC) from Certifying agencies. To know more about the process, click here.

2. Step 2: Apply for Name Reservation

  • Reserve an LLP's name via the LLP-RUN form, overseen by the Central Registration Centre. Up to two names can be proposed.

3. Submit the FiLLiP Form

  • Fill out the FiLLiP form and submit it to the Registrar along with the Subscriber sheet and Director's consent (Form DIR-9).

4. Draft & File the LLP Agreement

  • File the LLP Agreement using Form 3 on the MCA portal within 30 days of registration.

Upon approval of the FiLLiP Form by the Registrar of Companies (ROC), you will receive the Certificate of Incorporation, which has important details such as the LLP's name, registration number (LLPIN), date of incorporation, registered office address, and so on.

Example of LLPIN: AAA-1234

{{llp-cta}}

One Person Companies: Features

One Person Companies (OPCs) present a unique business structure where a single individual can establish and manage a company. Combining aspects of a Private Limited Company and the advantages of Sole Proprietorship, OPCs cater to entrepreneurs and business owners who handle all ownership, operation, and management duties themselves.

1. Sole Ownership

  • An OPC is solely owned and managed by a single individual, referred to as the sole shareholder or member.

2. Limited Liability

  • Like other corporate structures, OPCs offer limited liability protection to the sole owner.

3. Separate Legal Entity

  • OPCs are recognized as separate legal entities independent of the sole owner. This legal distinction enables you to enter contracts, own assets, and participate in legal proceedings under your company’s name.

4. Perpetual Succession

  • Despite having only one member, OPCs feature perpetual succession. A nominee appointed during incorporation typically assumes control in the absence of the sole member.

By combining limited liability, separate legal entity status, and simplified operations, OPCs emerge as an appealing choice for small businesses and startups led by single entrepreneurs.

One Person Company: Registration in India

Due to their similarities with private limited companies, OPCs also employ SPICe+ for their company registration process.

SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) is a comprehensive online form introduced by the Ministry of Corporate Affairs (MCA) in India to streamline and simplify the company registration process.

1. Step 1: Apply for DSC

  • Obtain a Digital Signature Certificate (DSC) from any Certifying Agencies in India.

2. Step 2: Submit Part A of SPICe+ Form (If filled separately)

  • Apply for name approval using Part A of the SPICe+ form, allowing for submission of up to two proposed names and one re-submission.

3. Step 3: Draft the MoA & AoA

  • Draft the Memorandum of Association (MoA) and Articles of Association (AoA) detailing the company's objectives and rules.

4. Step 4: Submit Part B of SPICe+ Form

  • Submit Part B of the SPICe+ form along with necessary documents, including DSC, MoA, AoA, and declarations. Pay the prescribed fee for registration.

5. Step 5: Appoint a Nominee

  • Appoint a nominee director as required by OPC regulations.

6. Step 6: File for the Commencement of Business Certificate

  • Within 180 days of incorporation, file for the Commencement of Business Certificate (Form INC-20A) with the Registrar of Companies.

Upon successful approval of the SPICe+ Form, you’ll receive an email notification from the MCA containing the Certificate of Incorporation (COI) and PAN and TAN details of the Company.

The certificate of Incorporation (COI) includes crucial details such as the Company Name, Registration Number (CIN), Date of Incorporation, Registered Office Address, Company Structure, and more.

{{opc-cta}}

For added clarity, check out our curated collection of sample templates, where you can download and customize most of these above-mentioned templates, as required.

Company Registration with Razorpay Rize

Razorpay Rize provides a wide array of services to facilitate an end-to-end streamlined company registration process, all at the lowest fees and without any hidden charges. Explore the different legal structures below to find the one that’s best for your business.

{{company-cards}}

Our package includes:

  • Company Name Registration
  • 2 Digital Signature Certificates (DSCs)
  • 2 Directors’ Identification Numbers (DINs)
  • Certificate of Incorporation(COI)
  • MoA & AoA [Applicable for Private Limited Companies and OPCs]
  • LLP Agreement [Applicable for LLPs]
  • Company PAN & TAN

*Prices and documents can differ based on the company type.

Find Out Which Company Type to Register

If you operate a small business with limited resources, opting for LLP or OPC registration might be more favourable due to lighter compliance requirements. However, for larger businesses with substantial capital needs, registering as a Private Limited Company provides greater flexibility in raising funds. So, before proceeding with the registration of either a Private Limited Company, LLP, or OPC, it is essential to carefully evaluate the following factors.

  • Business Nature and Size
  • Fundraising Requirements
  • Tax Implications
  • Personal Liability Protection

Ultimately, the choice between a Private Limited Company, LLP, or OPC structure depends on the unique characteristics of your business, including its nature, size, fundraising requirements, tax implications, and personal liability protection.

Still confused about which company type to register with? We’ve got you covered! Introducing our latest tool - "Know Your Company Type."

For the first time in India, answer a quick set of questions about your startup, and this tool will utilize your responses to identify the perfect company registration type for you. Find your ideal fit with just one click!

{{know-your-company}}

In summary, choosing between Private Limited Companies, OPCs, and LLPs depends on your business goals and preferences. Each structure offers unique benefits, whether it's scalability with Private Limited Companies, convenience with OPCs, or simplicity with LLPs. If you have any unanswered questions or want to get started with the company registration process, feel free to get in touch with us!

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Register your Business at just 1,499 + Govt. Fee

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Register your Private Limited Company in just 1,499 + Govt. Fee

Register your business
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Register your One Person Company in just 1,499 + Govt. Fee

Register your business
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Register your Business starting at just 1,499 + Govt. Fee

Register your business
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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

Register your business

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

Nipun Jain

Nipun Jain is a seasoned startup leader with 13+ years of experience across zero-to-one journeys, leading enterprise sales, partnerships, and strategy at high-growth startups. He currently heads Razorpay Rize, where he's building India's most loved startup enablement program and launched Rize Incorporation to simplify company registration for founders.

Previously, he founded Natty Niños and scaled it before exiting in 2021, then led enterprise growth at Pickrr Technologies, contributing to its $200M acquisition by Shiprocket. A builder at heart, Nipun loves numbers, stories and simplifying complex processes.

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How to Draft a Co-founders Agreement? A complete Guide

How to Draft a Co-founders Agreement? A complete Guide

Starting a company with one or more co-founders is one of the most exciting parts of the entrepreneurial journey. But amidst the rush of building products, finding customers, and chasing early traction, one foundational step often gets overlooked: putting a co-founders agreement in place.

The Co-founders Agreement lays out how the founding team will operate, make decisions, handle equity, resolve disagreements, and plan for the unexpected. Without it, even the strongest partnerships can run into miscommunication, conflict, or costly misunderstandings down the road.

In this article, we’ll break down the key elements of a co-founders agreement, explain why it’s essential from day one, and guide you through the decisions you’ll want to document before your startup grows.

Table of Contents

Understanding the Importance of a Co-Founder Agreement

A co-founders agreement is a governance framework. It provides clarity on expectations, defines legal boundaries, and establishes protocols for decision-making and dispute resolution.

Without it, startups risk misalignment, equity disputes, or founder exits that can derail momentum. Having this agreement from day one ensures:

  • Legal protection for all founders
  • Clear accountability
  • Faster resolution in case of conflicts
  • Long-term business stability

How to Determine Roles?

Before you split the equity or assign job titles, align on why you’re building this company. Once your mission is clear, it becomes easier to define what roles each founder should play.

Not all founders are the same, and not all will lead the same functions. Role clarity prevents overlap, power struggles, and decision-making delays.

Here’s a quick overview of typical leadership roles:

  • CEO (Chief Executive Officer): Sets vision, makes high-level decisions, and manages investors.
  • COO (Chief Operating Officer): Manages day-to-day operations, hiring, and internal workflows.
  • CFO (Chief Financial Officer): Oversees finances, fundraising, and budgeting.
  • President: Often works alongside the CEO, focusing on strategy execution or external relations.
  • CMO (Chief Marketing Officer): Leads branding, marketing, and growth strategy.
  • CTO (Chief Technology Officer): Drives product development and tech architecture.

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How to Split Equity?

One of the trickiest parts of a co-founder agreement is deciding who gets what percentage of the company.

Spoiler alert: Equal splits are often unfair. While it might feel diplomatic to go 50/50 (or 33/33/33), it rarely reflects the actual contributions of each founder. Equity should reward value creation, not just presence.

Consider these factors:

  • Who initiated the idea?
  • Level of early involvement and contribution
  • Full-time vs part-time commitment
  • CEO or leadership responsibilities
  • Prior experience, networks, and domain expertise

It’s advisable to use structured frameworks or equity calculators and ensure all discussions are documented. Vesting schedules (typically four years with a one-year cliff) should also be agreed upon and reflected in the agreement.

Compensation and Salary Expectations

Most early-stage startups operate with limited capital. Founders often defer salaries or draw nominal compensation. However, clarity on current and future remuneration is essential.

The agreement should include:

  • Initial salary (if any) or deferred compensation model
  • Milestones or triggers for compensation reviews (e.g., seed funding, profitability)
  • Equity-to-cash trade-offs, especially for operational founders
  • Provisions for salary revisions approved by a board or mutual consent

Decision-Making and Dispute Resolution

Defining decision rights helps prevent operational gridlock and ensures strategic alignment. The co-founders agreement should outline the following:

  • Voting rights: Specify which decisions require a majority, supermajority, or unanimous consent (e.g., capital raise, hiring key executives, M&A decisions).
  • Dispute resolution mechanisms: Include mediation and arbitration clauses to resolve disagreements outside of court.
  • Deadlock provisions: Outline how to handle situations where founders are split, potentially via third-party adjudicators or rotating authority.
  • Exit protocols: Determine how decisions are made in case a founder decides to leave or is asked to step down.

Exit Strategies and Buyout Clauses

Exit events, whether planned or unforeseen, can significantly impact the startup’s equity structure. A co-founders agreement should detail:

  • Voluntary exit protocols: Including share sale rights, notice periods, and replacement planning.
  • Involuntary exit terms: For cause (e.g., misconduct) or no-fault exits (e.g., health issues).
  • Buyout clauses: How shares are valued (e.g., pre-agreed formula, external valuation), who has the first right to buy, and what triggers a forced sale.
  • Non-compete clauses: Restrictions on joining or starting competing ventures post-exit.

Without a clear exit plan, founder departures can become messy, expensive, and emotionally draining.

Non-Disclosure Agreements (NDAs)

Startups thrive on ideas, data, and speed. A loose-lipped founder or ex-founder can derail all of that. To protect your IP, customers, and strategy, include a strong non-disclosure clause in the co-founder agreement. It should cover:

  • What qualifies as “confidential information”?
  • How long the NDA lasts (often 1–3 years post-exit)
  • Consequences of breaching the NDA

Founders should also agree on how sensitive materials like business plans, prototypes, and user data are handled upon exit.

Death, Disability, and Divorce Clauses

Contingency planning for life events is often overlooked but is essential to safeguard the business. Your agreement should include:

  • Death clause: Specifies who inherits equity, buyback options for the company, and whether heirs receive any operational role.
  • Disability clause: Details how long a founder can be inactive before reevaluation and whether shares can be repurchased or roles reassigned.
  • Divorce clause: Ensures founder shares don’t get transferred to a spouse, with provisions for company buyback to retain control.

These clauses protect both the business and surviving founders from unforeseen legal and financial disruptions.

Frequently Asked Questions

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Private Limited Company
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Limited Liability Partnership
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One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
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Private Limited Company
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1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What are the points of a co-founder agreement?

A co-founder agreement typically includes the following key components:

  • Equity Ownership & Vesting Schedule
  • Roles & Responsibilities
  • Compensation & Salary Terms
  • Decision-Making Protocols
  • Dispute Resolution Mechanisms
  • Exit Clauses & Buyout Terms
  • Confidentiality (NDA) Provisions
  • IP Assignment
  • Death, Disability, and Divorce Clauses

What are the 3 main reasons you should want a co-founder?

  1. Complementary Skills
    A strong co-founder brings expertise you may not have, be it in tech, operations, sales, or strategy, helping you build faster and smarter.

  2. Shared Responsibility & Emotional Support
    Entrepreneurship is a rollercoaster. Having someone equally invested in the highs and lows provides mental resilience and shared accountability.

  3. Stronger Investor Appeal
    Many investors prefer teams over solo founders. A balanced co-founding team signals collaboration, diverse thinking, and execution capability.

Is a founder's agreement legally binding?

Yes, a founder’s agreement or co-founders agreement is legally binding if it’s properly drafted and signed by all parties. It is treated like any other contract under contract law and can be enforced in court or through arbitration, depending on the jurisdiction and terms stated.

What is the difference between a founder and a co-founder agreement?

Founder Agreement and Co-founder Agreement are often used interchangeably, but there can be subtle differences based on context:

  • Founder Agreement usually refers to an agreement between a solo founder and the company, often covering IP assignment, vesting, and equity terms.

  • Co-founder Agreement refers to a contract between multiple founders of the same startup, defining how they work together, split ownership, make decisions, and handle disputes.

In practice, for teams of two or more founders, a co-founder agreement is more relevant and comprehensive.

Mukesh Goyal

Mukesh Goyal is a startup enthusiast and problem-solver, currently leading the Rize Company Registration Charter at Razorpay, where he’s helping simplify the way early-stage founders start and scale their businesses. With a deep understanding of the regulatory and operational hurdles that startups face, Mukesh is at the forefront of building founder-first experiences within India’s growing startup ecosystem.

An alumnus of FMS Delhi, Mukesh cracked CAT 2016 with a perfect 100 percentile- a milestone that opened new doors and laid the foundation for a career rooted in impact, scale, and community.

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Conversion of Private Limited Company to Public Limited Company: Step-by-Step Guide

Conversion of Private Limited Company to Public Limited Company: Step-by-Step Guide

For most growing businesses, starting out as a Private Limited Company (Pvt Ltd) feels like the natural choice- it offers the safety net of limited liability, manageable compliance requirements, and the flexibility to focus on building the business without too much red tape. But as the business scales, ambitions grow bigger. You might want to raise significant capital, bring in a larger investor base, or even dream of going public someday. That’s when converting into a Public Limited Company starts making real sense.

So, what changes when you move from private to public?

  • Access to Public Funds: Unlike a private company, a public limited company can tap into larger funding avenues through IPOs or private placements, opening doors to serious growth capital.

  • Ease of Share Transfer: In a public company, shares are freely transferable, making it easier for investors or shareholders to buy, sell, or exit, boosting liquidity and appeal.

  • No Member Cap: Private companies are capped at 200 shareholders, but public companies have no such limit, giving you the freedom to expand your ownership base.

In this guide, we’ll break down exactly what it takes to convert your private company into a public one under the Companies Act, 2013, and walk you through the compliance steps and practical things you need to be ready for once you’ve made the leap.

Table of Contents

Procedure for Conversion into a Public Limited Company

Converting a private limited company into a public limited company in India is governed by the Companies Act, 2013, and involves a formalised legal process. Here’s a step-by-step guide:

1. Convene a Board Meeting

2. Issue Notice for EGM

  • Send notices to all shareholders, directors, and auditors at least 21 days before the meeting.
  • The notice should include the agenda, draft resolutions, and explanatory statements.

3. Hold the Extraordinary General Meeting (EGM)

  • Pass a Special Resolution to approve the conversion from private to public.
  • Approve necessary alterations in the MoA (removal of “Private”) and AoA (removal of restrictive clauses on share transfer and member limits).

4. Filing with Registrar of Companies (RoC)

Submit the following forms with the Ministry of Corporate Affairs (MCA) portal:

  • MGT-14: Filing of special resolutions within 30 days of passing them.
  • INC-27: Application for conversion, along with certified copies of resolutions, amended MoA/AoA, and EGM minutes.

5. Scrutiny and Approval by RoC

The Registrar reviews the application and, upon satisfaction, issues a Fresh Certificate of Incorporation reflecting the change in company status from private to public.

Related Read: Private Company Vs Public Company: Key Differences Explained

Post-Conversion Requirements

Once the company has been converted into a public limited company, several post-conversion formalities must be completed to align with regulatory and operational standards:

1. Update Statutory Documents

  • Obtain a new PAN reflecting the updated company name.
  • Revise all statutory records, financial statements, and company stationery (letterheads, invoices, website, etc.).

2. Inform Bankers and Financial Institutions

  • Update your company’s status with existing banks and financial institutions.
  • Amend authorised signatories if required.

3. Intimate Regulatory Authorities

  • Notify relevant authorities such as tax departments, GST authorities, and regulatory bodies, if applicable.

4. Compliance with Public Company Norms

  • Increase the number of directors to a minimum of 3 (as required for a public company).
  • Appoint independent directors and comply with applicable listing regulations (if planning for a stock exchange listing).
  • Adhere to enhanced disclosure norms, audit requirements, and corporate governance standards.

5. Prepare for Capital Raising (Optional)

  • If planning an IPO, start preparing for SEBI compliance, drafting offer documents, and engaging with merchant bankers.

Frequently Asked Questions (FAQs)

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Register your Limited Liability Partnership in just 1,499 + Govt. Fee

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Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


One Person Company
(OPC)

1,499 + Govt. Fee
BEST SUITED FOR
  • Freelancers, Small-scale businesses
  • Businesses looking for minimal compliance
  • Businesses looking for single-ownership

Private Limited Company
(Pvt. Ltd.)

1,499 + Govt. Fee
BEST SUITED FOR
  • Service-based businesses
  • Businesses looking to issue shares
  • Businesses seeking investment through equity-based funding


Limited Liability Partnership
(LLP)

1,499 + Govt. Fee
BEST SUITED FOR
  • Professional services 
  • Firms seeking any capital contribution from Partners
  • Firms sharing resources with limited liability 

Frequently Asked Questions

What Is the Form for Conversion of a Private Company into a Public Company?

The primary form used for the conversion of a private limited company into a public limited company in India is Form INC-27. It must be submitted along with supporting documents like the altered Memorandum of Association (MoA), Articles of Association (AoA), special resolution copy, and EGM minutes.Additionally, Form MGT-14 (for filing special resolutions) must also be filed within 30 days of passing the resolution at the EGM.

Can a Private Limited Company Go Public?

Yes, a Private Limited Company can go public by converting itself into a Public Limited Company.

After conversion, the company must comply with public company regulations under the Companies Act, 2013, including increased disclosure norms, appointment of independent directors (if applicable), and adherence to corporate governance standards.

What Section of the Companies Act, 2013 Governs Conversion of a Public Company into a Private Company?

The conversion of a Public Company into a Private Company is governed by Section 14 of the Companies Act, 2013.

  • Section 14(1) deals with altering the Articles of Association (AoA) to include provisions applicable to a private company.
  • Such a conversion requires passing a special resolution and obtaining approval from the Tribunal (NCLT) as mandated under Section 14(2).

Sarthak Goyal

Sarthak Goyal is a Chartered Accountant with 10+ years of experience in business process consulting, internal audits, risk management, and Virtual CFO services. He cleared his CA at 21, began his career in a PSU, and went on to establish a successful ₹8 Cr+ e-commerce venture.

He has since advised ₹200–1000 Cr+ companies on streamlining operations, setting up audit frameworks, and financial monitoring. A community builder for finance professionals and an amateur writer, Sarthak blends deep finance expertise with an entrepreneurial spirit and a passion for continuous learning.

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