Minimum Paid-Up Capital for Private Limited Company

Jan 21, 2025
Private Limited Company vs. Limited Liability Partnerships

The concept of "Minimum Paid Up Capital" is key to understanding how a private limited company is financially structured. In simple terms, paid-up capital is the money that a company receives from its shareholders in exchange for ownership (shares). 

In most cases, in India, there’s no fixed minimum paid-up capital for private limited companies. Even though it’s not a legal requirement to have a high paid-up capital, having a reasonable amount can make the company appear more financially sound, which could be crucial for attracting investors or lenders down the road.

Table of Contents

Eligibility Criteria for Private Limited Company Registration in India

  1. Number of Directors

A private limited company must have at least two directors. The directors can be Indian citizens, and one of them must be a resident of India.

  1. Shareholders

A minimum of two shareholders is required to register a private limited company. Shareholders can be individuals or corporate entities, with a maximum of 200 shareholders allowed.

  1. Citizenship Requirements

While directors must be Indian citizens, shareholders can be from any nationality. The company must have at least one Indian director to ensure it meets the statutory requirements.

  1. No Minimum Capital Requirement

Unlike earlier regulations that prescribed a minimum paid-up capital, the current rules under the Companies Act of 2013 do not mandate a minimum paid-up capital for private limited companies. Companies are free to decide on a capital structure according to their requirements.

Purpose of an Authorised Capital

Authorised capital is the financial ceiling within which a company can issue shares to its investors. It is the maximum amount of capital a company is permitted to raise by issuing shares, as stated in its Memorandum of Association (MOA)

The private limited company;s authorised capital provides clarity on the company's financial structure, preventing any future confusion over the number of shares it can issue and the value it represents.

Salient Features of an Authorised Capital 

The defining features of authorised capital include:

  • Fixed Limit: The company cannot issue shares beyond this limit without altering the MOA.
  • Inflexibility: Authorised capital is typically set at the time of company registration and can only be changed by passing a special resolution and amending the MOA.
  • Not Necessarily Paid: Authorised capital is not the actual amount received by the company; it’s simply the potential limit for share issuance.

Understanding authorised capital is essential because it affects how companies structure their finances and plan for future growth.

Pvt Ltd Company Registration CTA

Significance of Minimum Paid-Up Capital for Private Limited Company

The minimum paid-up capital plays a critical role in ensuring that the company has sufficient funds to carry out its initial operations and that it has a solid financial standing. While India no longer imposes a minimum requirement, the paid-up capital has important practical implications for a business.

  • Debt Reliance vs. Equity Investment: A company’s paid-up capital affects how much debt it can take on and the level of equity investment it can seek from external investors.
  • Growth Potential: A higher paid-up capital might signal stronger financial health, enabling better growth prospects, as it indicates the company has substantial backing.
  • Market Health Indicator: Paid-up capital can serve as a reflection of market confidence and can influence the company’s ability to attract investments.
  • Equity vs. Debt: While equity involves selling shares to raise capital, which gives shareholders ownership stakes and voting rights, debt involves borrowing funds which must be repaid with interest but does not dilute ownership.

Different Types of Capitals for Private Limited Companies

A private limited company can have different types of capital, including:

  • Issued Capital: The total value of the shares issued to shareholders.
  • Subscribed Capital: The portion of issued capital that shareholders agree to purchase.
  • Called Up Capital: The portion of subscribed capital that the company demands from shareholders at a given time.
  • Paid-up Capital: The amount shareholders have actually paid for their shares.
  • Uncalled Capital: The part of subscribed capital that the company has not yet demanded.
  • Reserve Capital: A portion of the company’s capital that is reserved for specific uses and cannot be called upon unless approved.
  • Authorised Capital: The maximum capital a company is authorised to raise through the issuance of shares. It sets the upper limit for the company’s equity base.

Each of these capital categories plays a significant role in structuring a company's equity and determining its financial health.

Authorised Capital Differs from Paid-Up Capital

There is often confusion between authorised capital and paid-up capital. Here’s a detailed comparison of authorised capital vs. paid-up capital:

Aspect Authorised Capital Paid-up Capital
Definition The maximum amount of share capital a company is legally allowed to issue. The actual amount of share capital that shareholders have paid to the company.
Requirement for Business Not necessarily issued in full; acts as a cap. For operational expenses and compliance; must be reflected in company accounts.
Modification Can be increased by altering the MOA and passing a special resolution. Can only increase if the company issues additional shares and shareholders pay for them.
Example If authorised capital is ₹10,00,000, the company cannot issue shares beyond this amount. If out of ₹10,00,000 authorised, ₹5,00,000 is issued and paid by shareholders, the paid-up capital is ₹5,00,000.

While authorised capital sets the upper limit, paid-up capital reflects the actual funds available for business use.

Various Sources of Paid-Up Capital for a Private Limited Company

Paid-up capital can be sourced from various methods:

  • Par Value of the Shares: The nominal value assigned to each share, typically very low.
  • Premium/Discount Value of the Stock: Shares may be issued at a premium (above the par value) or at a discount (below the par value).
  • Premium Shares: Shares issued at a price higher than their par value, with the difference considered as premium capital.
  • Discounted Shares: Shares issued below their par value, which may be used as an incentive for investment.

Each of these methods impacts the financial structure of the company and can influence investor interest and company growth.

Head to Razorpay Rize’s Private Limited Company Registration to Incorporate your Company!

What is the Requirement of Minimum Paid Up Capital for a Private Limited Company?

Currently, the Companies Act of 2013 does not specify a minimum paid-up capital requirement for private limited companies. This change has provided greater flexibility for entrepreneurs to start businesses without the need to meet strict capital requirements. 

However, it remains crucial to set the minimum paid-up capital for private limited companies that reflects the company’s business model and operational needs.

Conclusion

In conclusion, while there is no mandatory minimum paid-up capital requirement for a private limited company in India, it remains a critical element of the company’s financial structure.

For entrepreneurs and startups, having a well-thought-out capital structure sends a strong signal to stakeholders, such as investors, banks, and potential business partners, about your financial stability and commitment. It demonstrates that your business has the resources to meet its obligations, handle unexpected challenges, and seize new opportunities. 

This is particularly important in building market credibility, attracting investors, and maintaining trust with suppliers and customers.

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)

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  • Freelancers, Small-scale businesses
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  • Businesses looking for single-ownership

Private Limited Company
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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
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  • 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 minimum turnover for a Pvt Ltd company?

There is no minimum turnover requirement for a private limited company in India. A company can operate with zero turnover as long as it complies with regulatory requirements, such as filing annual returns, paying applicable taxes, and maintaining statutory records.

What is the cost of running a Private Limited Company?

The cost of running a private limited company in India varies depending on factors such as compliance, taxation, and operational expenses. On average, the annual costs include:

  • Compliance Costs
  • Professional Fees
  • Other Costs

Can a single person own a Pvt Ltd?

No, a private limited company requires a minimum of two members (shareholders) and two directors. However, one individual can fulfil both roles, while the second shareholder can own a single share, such as a family member or close associate. For businesses looking for sole ownership, One Person Company (OPC) might be a better alternative.

Which is better, an LLP or a company?

The choice between an LLP (Limited Liability Partnership) and a private limited company depends on your business needs:

Private Limited Company LLP
Ownership Shareholders own the company. Partners own the LLP.
Compliance Higher compliance requirements and costs. Lesser compliance and cost-efficient.
Liability Limited to the extent of shares held. Limited to the partner’s agreed contribution.
Fundraising Potential Better suited for raising funds through equity. Not ideal for external investments.

Choose a private limited company for startups seeking funding or scalability and LLP for smaller businesses or professional services.

Can I buy a property in a Pvt Ltd company?

Yes, a private limited company can purchase property in its name. This includes commercial, residential, or industrial properties, which can be used for business operations or as investments. However, the purchase should align with the company’s objectives as stated in its Memorandum of Association (MOA).

What is the minimum paid-up capital of a private Ltd company?

As per the Company Act, there is no mandatory minimum paid-up capital requirement for a private limited company in India. Companies can start with any nominal amount of paid-up capital, depending on their operational needs.

What is paid-up capital for a private company?

Paid-up capital refers to the amount of money that shareholders have invested in the company by purchasing its shares. It is the actual capital received by the company from its shareholders. For example, if a company issues shares worth ₹10 each and 1,000 shares are subscribed and fully paid, the paid-up capital is ₹10,000. 

What is Authorised capital in a private limited company?

Authorised capital is the maximum amount of share capital that a company is authorised to issue to its shareholders, as stated in its Memorandum of Association (MOA). For example, if the authorised capital is ₹1 lakh, the company cannot issue shares beyond this limit without amending the MOA. 

Related Posts

What is Partnership? Features, Types and Benefits

What is Partnership? Features, Types and Benefits

A partnership is a formal arrangement where two or more parties come together to manage and operate a business. Partnerships are a common way for individuals and entities to pool resources, expertise, and efforts to achieve shared goals. They can take various forms, such as general and limited liability partnerships, each with unique characteristics.

Unlike running a business alone, a partnership fosters teamwork, shared decision-making, and mutual responsibility. In a partnership, profits, liabilities, and operational responsibilities are typically shared among partners according to the terms of a partnership agreement.  It’s a model built on trust and cooperation, making it a popular choice for startups and growing businesses.

In this blog, we’ll explore partnerships, their key features, and why they’re an attractive option for many entrepreneurs looking to build something together.

Table of Contents

Features of Partnerships

Partnerships are defined by several key features:

  • Shared Responsibilities: Partners collaborate on business operations, contributing their expertise, resources, and capital to achieve mutual goals.
  • Shared Resources: Partnerships allow the pooling of financial and intellectual resources, enhancing operational efficiency.
  • Shared Goals: Partners align on strategic objectives to grow the business and share in its success.
  • Flexibility: Partnerships can be structured to suit specific needs, from informal agreements to formal legal contracts.
  • Decision-Making Process: Decision-making is often a collective process, emphasising the importance of trust and mutual understanding among partners.
  • Legal Agreements: While partnerships can be informal, formal agreements provide clarity on roles, profit-sharing, and conflict resolution.
  • Dissolution: Partnerships can be dissolved legally if required, often guided by the terms of the agreement or applicable laws.

Types of Partnerships

There are various types of partnerships, each serving different purposes and offering distinct advantages. For-profit partnerships generally fall into three main categories:

1. General Partnership

In a general partnership, all partners share equal responsibility for the business’s liabilities and profits. Each partner is personally liable for the business’s debts, making it crucial to draft a partnership agreement that outlines profit-sharing, roles, and responsibilities. 

For example, two entrepreneurs starting a retail business together would likely form a general partnership.

2. Limited Partnership

Limited partnerships (LPs) feature both general partners and limited (or silent) partners. General partners manage the business and assume entire liability, while limited partners contribute capital and enjoy liability protection up to the amount they invest. 

An example might be a real estate development project funded by silent investors.

3. Limited Liability Partnership

Limited liability partnerships (LLPs) protect partners’ personal assets by limiting liability for business debts. LLPs are particularly common in professions like law and accounting, where personal liability is a significant concern. 

For example, in a law firm LLP, equity partners own a share of the business, while salaried partners do not hold ownership but receive bonuses tied to performance.

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What is the Partnership Act 1932?

The Partnership Act of 1932 is a legal framework governing partnerships in India. Key provisions include:

  • Definition and Formation: Outlining what constitutes a partnership and the requirements for its formation.
  • Rights and Duties: Defining the rights, responsibilities, and liabilities of partners.
  • Partnership Agreements: Emphasising the importance of clear agreements to avoid disputes.
  • Dissolution: Providing guidelines for legally dissolving a partnership.

The Act ensures transparency and fairness in business partnerships, making it a crucial reference for anyone entering into such arrangements.

Advantages and Disadvantages of Partnerships

Advantages

  • Easy to establish and operate
  • Shared financial and intellectual resources
  • Tax benefits, such as pass-through taxation
  • Flexible business structure

Disadvantages

  • Unlimited liability for general partners
  • Potential for conflicts among partners
  • Limited lifespan unless explicitly agreed otherwise
  • Shared profits

How to Form a Partnership?

Below are the steps for the partnership registration process:

  1. Draft a Partnership Agreement: Clearly outline roles, profit-sharing, and dispute-resolution mechanisms.
  2. Register the Partnership: Depending on the jurisdiction, registration may be required.
  3. Obtain Necessary Licenses and Permits: Ensure compliance with local regulations.
  4. Set Up Operations: Establish the business’s infrastructure and processes.

Partnerships vs. Companies

Choosing the right business structure is one of the most critical decisions for any entrepreneur. While partnerships and companies are both popular choices, they differ significantly in terms of ownership, liability, management, and regulatory requirements. 

Each structure has its own advantages and challenges, making it essential to understand which one aligns best with your business goals.

Feature Partnership Company
Legal status No separate legal entity Separate legal entity
Liability Unlimited (except LLPs) Limited
Profit distribution Shared among partners Distributed as dividends
Management Managed by partners Managed by the board of directors

Partnerships are generally more flexible but come with higher personal risk, whereas companies provide greater liability protection but involve more regulatory requirements.

Related Read: Private Limited Company Vs. Limited Liability Partnerships (LLP)

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 Does a Partnership Differ From Other Forms of Business Organisation?

A partnership differs from other business structures like sole proprietorships, limited liability companies (LLCs), and corporations primarily in ownership, liability, and decision-making.

What Is a Limited Partnership vs. a Limited Liability Partnership?

A Limited Partnership (LP) and a Limited Liability Partnership (LLP) are two distinct types of partnerships:

  • Limited Partnership (LP):
    • Composed of general partners who manage the business and have unlimited liability and limited partners who contribute capital but have liability only up to their investment.
    • Common in investment ventures where limited partners provide funds, and general partners manage the operations.
  • Limited Liability Partnership (LLP):
    • All partners have limited liability, protecting them from personal responsibility for the business’s debts.
    • Ideal for professional businesses like law firms or accounting firms, where partners share management duties but seek protection from personal liabilities.

Do Partnerships Pay Taxes?

Partnerships themselves do not pay income taxes. Instead, they are considered pass-through entities, meaning that the partnership’s profits and losses are passed through to individual partners. 

Each partner reports their share of the partnership’s income on their personal tax return, where they are taxed based on their portion of the profit.

What Types of Businesses Are Best suited for Partnerships?

Partnerships are well-suited for businesses that benefit from shared expertise and resources. Some ideal types include:

  • Professional Services: Law firms, accounting firms, and medical practices, where partners bring specialised skills.
  • Family Businesses: Small family-owned businesses where partners are trusted to work together.
  • Creative Industries: Advertising agencies, design firms, or production companies that require collaborative efforts.
  • Startups: Early-stage businesses that need multiple people to contribute capital, ideas, and effort but do not want the complexity of a corporation.

What is a partnership, and how does it work?

A partnership is a business arrangement where two or more individuals share ownership and management responsibilities, pooling resources to run the business. The partners agree on how profits, losses, and responsibilities will be shared, typically outlined in a partnership agreement.

The partnership can be structured in various ways, such as general partnerships or limited partnerships, depending on the desired level of liability and control. 

What are the different types of partnership working?

There are several types of partnership structures based on liability and management involvement:

  • General Partnership
  • Limited Partnership (LP)
  • Limited Liability Partnership (LLP)
  • Joint Venture

Who is a secret partner?

A secret partner is a business partner who contributes capital and shares in the profits and losses but does not take part in the day-to-day management or operations of the business. Unlike a dormant or silent partner, a secret partner’s identity is not disclosed to the public or clients but is still legally bound by the partnership’s obligations and liabilities.

How many types of partners are there?

In a partnership, there are four main types of partners:

  1. Active Partner: Actively participates in the management of the business and shares in both profits and liabilities.
  2. Sleeping (or Dormant) Partner: Invests capital but does not participate in day-to-day management; however, they share in profits and losses.
  3. Secret Partner: A partner whose identity is kept hidden from the public but participates in the partnership’s activities and shares in profits and liabilities.
  4. Limited Partner: A partner who contributes capital but has limited liability, meaning they are only liable up to the amount they have invested in the business.

LLP Form 3: A Complete Guide

LLP Form 3: A Complete Guide

One of the most important compliance steps when forming a Limited Liability Partnership (LLP) in India is filing LLP Form 3. This form is required to officially document the LLP agreement, which governs the internal operations of the partnership, the roles and responsibilities of partners, profit-sharing ratios, and more. Filing LLP Form 3 with the Ministry of Corporate Affairs (MCA) holds legal significance and must be submitted within a strict timeline of 30 days from the date of incorporation.

In this guide, we’ll walk you through everything you need to know about LLP Form 3, from its purpose and components to filing steps, fees, penalties, and new updates under the LLP Amendment Rules 2023.

Table of Contents

What is LLP Form 3?

LLP Form 3 is a mandatory form that captures the LLP agreement, the foundation document that outlines the operational framework of a Limited Liability Partnership. This agreement defines the relationship among partners, including their roles, decision-making powers, profit and loss sharing arrangements, and more.

It serves as a legal document that governs how the LLP will be run and must be submitted to the MCA to make the LLP agreement officially valid.

Purpose of Filing LLP Form 3

Filing LLP Form 3 is essential because it:

  • Legally documents the LLP agreement with the government
    Defines the rights, duties, and responsibilities of all partners
  • Establishes clarity on how the LLP will operate
  • Ensures regulatory compliance with the MCA
    Helps prevent internal disputes by clearly stating each partner’s role and profit-sharing ratio

Without a properly filed LLP Form 3, the LLP risks facing legal and operational complications.

When to File LLP Form 3?

LLP Form 3 must be filed within 30 days from the date of incorporation of the LLP.

In addition to the initial filing, any changes or amendments made to the LLP agreement, such as changes mentioned below, must also be reported by filing a fresh Form 3 within 30 days of the amendment date.

  • Partner details
  • Capital contribution
  • Profit-sharing ratio
  • Management structure

Key Components of LLP Form 3

LLP Form 3 is designed to capture critical aspects of the LLP agreement, including:

  • Capital contributions of each partner
  • Profit-sharing ratios
  • Roles and responsibilities of partners
  • Management structure and authority levels
  • Decision-making processes
  • Dispute resolution clauses
  • Procedures for adding or removing partners
  • Meeting protocols and voting rights

These elements ensure the LLP operates smoothly and fairly for all stakeholders.

Steps to File LLP Form 3

Here’s a step-by-step guide to filing LLP Form 3 online:

  1. Log in to the MCA portal.
  2. Download the latest version of LLP Form 3 under the “MCA Services > LLP E-Forms” section.
  3. Fill in the required details of the LLP agreement:
    • LLP name and LLPIN
    • Date of agreement
    • Partner details and their contributions
      Rights, responsibilities, and governance structure
  4. Attach the signed LLP agreement as a PDF
  5. Upload any other mandatory documents (as specified)
  6. Validate and pre-scrutinise the form using the MCA tool
  7. Sign digitally (DSC) by a designated partner
  8. Submit the form and make the payment online

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Filing LLP Form 3 for LLP Incorporation and Changes in LLP Agreement

LLP Form 3 is divided into two key sections:

1. Initial Filing of LLP Agreement (Section 1):

Used at the time of incorporation, this section requires details like:

  • Nature of business
  • Partner contributions
  • Profit-sharing ratios
  • Decision-making and meeting procedures

2. Filing Amendments to LLP Agreement (Section 2):

Used when there’s a change in:

  • Capital contribution
  • Partners or their roles
  • Profit-sharing arrangements

You must provide:

  • Amendment date
  • Number of changes
  • SRN (Service Request Number) of related forms previously filed

Before proceeding to either section, you must enter basic details like LLPIN, registered address, and jurisdiction.

Additional Disclosure Requirements – Revised Form No. 3 (LLP Rules 2023)

The LLP (Amendment) Rules, 2023 introduced stricter disclosure norms in Form No. 3 to enhance transparency, especially when a corporate body is a partner.

New requirements include filling Table 19(a) with:

  • Body Corporate Partner (Yes/No) – Indicates if the partner is a corporate entity.
  • Partner/Nominee ID – DPIN, PAN, or Passport number of the individual or nominee.
  • Additional ID Details – Supporting information related to the identification number.
  • Corporate Type – Type of body corporate (e.g., company, LLP).
  • Corporate ID – CIN, LLPIN, FCRN, FLLPIN, or other ID numbers.
  • Additional Corporate Details – Extra info related to the above IDs.
  • Corporate Name – Legal name of the body corporate partner.
  • Designation – Whether the person is a Partner or Designated Partner.
  • Contribution Form – Mode of contribution (Cash/Non-cash/Conversion).
  • Contribution Value – Monetary value of the contribution.
  • Profit Share % – Profit sharing ratio assigned to the partner.
  • Type of Change – Whether the entry reflects an addition, deletion, change, or no change.

These disclosures ensure better governance and accountability within LLPs.

Fees for Filing LLP Form 3

The fee for LLP Form 3 varies based on the contribution amount:

Contribution Amount Government fee
Up to ₹1 lakh ₹50
₹1 lakh–₹5 lakh ₹100
₹5 lakh–₹10 lakh ₹150
₹10 lakh–₹25 lakh ₹200
₹25 lakh–₹1 crore ₹400
Above ₹1 crore ₹600

Note: Additional charges apply for late filing, which can accrue up to ₹100 per day of delay without any cap.

Penalty for Non-Filing Form 3 LLP

Failing to file the LLP Form 3 on time results in:

  • Late filing fees of ₹100 per day
  • Potential rejection of other compliance forms
  • Inability to legally enforce the LLP agreement
  • Legal complications and MCA notices
  • Difficulty in onboarding new partners or raising capital

Common Mistakes to Avoid

Avoid these common errors when filing LLP Form 3:

  • Entering incorrect partner details
  • Uploading unsigned or outdated LLP agreements
  • Missing the 30-day deadline
  • Not updating the form after changes in the LLP agreement
  • Skipping mandatory fields in Table 19(a) (as per 2023 rules)

Pro Tip: Always validate and preview the form before submission, and keep a copy of the SRN for future reference.

Conclusion

LLP Form 3 is an important compliance document that legally records your LLP agreement with the Ministry of Corporate Affairs. It captures critical aspects like partner roles, profit-sharing arrangements, and decision-making protocols that define how your LLP functions.

If you’re forming an LLP or planning amendments to your existing agreement, don’t overlook LLP Form 3. Stay compliant to not only avoid hefty penalties but also build a solid foundation for the growth and scalability of your LLP.

Frequently Asked Questions

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

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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 are the LLP Form 3 and Form 4?

  • LLP Form 3 is used to file the LLP Agreement and any changes made to it. It defines the structure, roles, responsibilities, and terms between the partners.
  • LLP Form 4 is used to inform the Ministry of Corporate Affairs (MCA) about appointments, changes, or resignations of designated partners or partners in an LLP.

Is Filing Form 3 necessary for the Limited Liability Partnership?

Yes, filing Form 3 is mandatory. The LLP Agreement must be legally submitted to the MCA within 30 days of incorporation. Failure to do so may result in penalties and legal non-compliance.

What are the LLP Form 3 non-filing fees?

If LLP Form 3 is not filed on time, the late filing fee is ₹100 per day until the default continues. There is no maximum cap, which means the penalty can accumulate significantly if delayed.

What is Form 3 used for?

Form 3 is used to:

  • File the initial LLP Agreement with the MCA.
  • Report any changes to the existing LLP Agreement (e.g., change in capital, profit-sharing ratio, or partner roles).

What is the due date for filing Form 3 for LLP?

The due date is within 30 days from:

  • The date of LLP incorporation (for the initial agreement) or
  • The date of any modification made to the LLP Agreement.

What is the penalty for Form 3 LLP?

The penalty for not filing Form 3 within the prescribed time is:

  • ₹100 per day of delay, with no upper limit, as per MCA rules.
  • This can lead to substantial fines and can delay other compliance activities or changes to the LLP structure.

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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What is a Shelf Prospectus? Meaning & Provisions Under the Companies Act, India

What is a Shelf Prospectus? Meaning & Provisions Under the Companies Act, India

A shelf prospectus is a legal document under the Companies Act of 2013 that allows a company to issue multiple rounds of securities without filing a new prospectus for each offering.

Once a company gets approval for a shelf prospectus, it can issue securities in tranches over a period (usually one year) without repeating the regulatory approval process. This mechanism is particularly beneficial for businesses that require frequent access to capital markets.

Simply put, a company gets approval for a prospectus and "shelves" it for use when needed. Just like a store keeps items on a shelf, ready to be picked up when required, companies can tap into their shelf prospectus whenever they decide to issue securities within the approved period.

Table of Contents

Shelf Prospectus Meaning

A shelf prospectus is a document issued by companies intending to offer securities in multiple tranches over a specified period without filing a new prospectus for each offering. Governed by the Companies Act of 2013, it serves as a framework to streamline capital-raising activities while ensuring regulatory compliance.

This approach helps all types of companies save time and resources while maintaining transparency in financial disclosures.

What Is The Validity Period of Shelf Prospectus?

As per the Companies Act of 2013 and SEBI regulations, a shelf prospectus is valid for one year from the issue date. During this period, the company can make multiple security offerings without submitting a fresh prospectus.

However, an Information Memorandum must be filed for each subsequent offering to ensure updated financial and operational disclosures.

What Are The Requirements For Shelf Prospectus?

To issue a shelf prospectus, a company must fulfil specific requirements under the Companies Act, 2013:

  • Eligibility Criteria: The company must be a public financial institution, a bank, or a company notified by SEBI.
  • SEBI Approval: Approval from the Securities and Exchange Board of India (SEBI) is mandatory before issuance.
  • Financial Disclosures: The prospectus must include audited financial statements, business details, and risk factors.
  • Regulatory Compliance: The company must adhere to statutory provisions and filing requirements.

Who Can Issue Shelf Prospectus?

Not all companies are eligible to issue a shelf prospectus. As per SEBI regulations, only specific entities can do so, including:

  • Public Financial Institutions such as banks and NBFCs.
  • Scheduled Banks that meet regulatory criteria.
  • Other Companies notified by SEBI, provided they meet compliance standards.

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What Are The Eligibility Criteria For a Company to Issue a Shelf Prospectus?

To issue a shelf prospectus, a company must meet the following key eligibility criteria:

  • Strong Financial Performance: A consistent and positive financial track record is essential.
  • Regulatory Compliance: The company must have a history of timely filings and adherence to statutory norms.
  • Market Reputation: A credible and trustworthy market presence is necessary.
  • Clear Disclosure of Fund Utilization: The company must provide transparency regarding how the raised funds will be used.

5 Incredible Advantages of Shelf Prospectus

A shelf prospectus offers several benefits to companies and investors:

  1. Flexibility: Companies can issue securities as needed without additional regulatory approvals.
  2. Cost Efficiency: Reduces administrative and compliance costs associated with repeated filings.
  3. Faster Time to Market: Companies can respond quickly to market conditions.
  4. Improved Investor Relations: Provides transparency and trust through consistent financial disclosures.
  5. Strategic Financial Planning: Enables better capital-raising strategies over time.

How Does an Investor Benefit from a Shelf Prospectus?

Investors gain multiple advantages from a shelf prospectus:

  • Greater Transparency: A single document offers comprehensive details about the company.
  • Consistent Access to Securities: Investors can participate in multiple offerings from a single prospectus.
  • Time-Saving: Reduces the need to analyse multiple prospectuses for each security issuance.
  • Better Investment Planning: Enables informed decision-making with consistent financial disclosures.

Difference Between Shelf Prospectus and Red Herring Prospectus?

Parameter Shelf Prospectus Red Herring Prospectus
Purpose Used for multiple securities offerings over time Used for IPOs before the issue price is finalised
Validity Period Valid for one year from the issue date Valid only for a single IPO
Flexibility Allows multiple issuances without a new prospectus Only valid for a one-time offering
Information Contains comprehensive details about the company and financials Lacks finalised share price details
Regulatory Requirement Requires filing of Information Memorandum Needs SEBI approval before IPO launch

Financial Securities and Shelf Prospectus

A shelf prospectus allows companies to issue various types of financial securities, including:

  • Equity Shares: Ownership stakes in a company.
  • Debentures: Debt instruments issued by companies.
  • Bonds: Fixed-income securities providing periodic interest payments.

This streamlined approach reduces delays and administrative hurdles for issuing these securities over multiple tranches.

What Is an Information Memorandum?

An Information Memorandum is a document containing essential details about a company’s financials, operations, and business strategy. It is a key resource for investors, offering in-depth insights into the company's capital-raising plans.

When a company issues securities under a shelf prospectus, it must file an Information Memorandum before each offering to ensure updated and accurate disclosures.

Procedure to Fill Form PAS-2

Form PAS-2 is required to be filed as per the Companies (Prospectus and Allotment of Securities) Rules, 2014. Here’s how to fill it:

  1. Company Details: Enter the name, registered office, and CIN.
  2. Security Details: Specify the type and number of securities being offered.
  3. Offer Details: Mention the issue price, purpose, and utilisation of funds.
  4. Financial Statements: Attach recent audited financial reports.
  5. Declaration: Ensure proper authorisation and sign the form.

Procedure to Upload Form PAS-2

Once Form PAS-2 is completed, follow these steps to upload it to the MCA (Ministry of Corporate Affairs) portal:

  1. Prepare the Form: Ensure all required fields are filled out correctly and attach the necessary documents.
  2. Log in to the MCA Portal: Use company credentials to access the e-filing section.
  3. Upload the Form: Select Form PAS-2, attach supporting documents and verify details.
  4. Payment of Fees: Pay the prescribed filing fee through the portal.
  5. Submit and Confirm: After submission, a confirmation receipt and acknowledgement are generated.

Conclusion

For companies, a shelf prospectus eliminates the repetitive, time-consuming regulatory hurdles that come with multiple capital raises.

Instead of drafting and filing a new prospectus each time, businesses can plan their fundraising strategically, issuing securities when market conditions are favourable. This saves time, reduces administrative costs, and provides the flexibility needed to stay competitive.

For businesses, this means less paperwork, faster fundraising, and more flexibility to raise funds when needed. For investors, it provides greater transparency and clarity, helping them make better financial decisions.

By using a shelf prospectus wisely, companies can focus on growth, and investors can confidently explore opportunities—making it a win-win for everyone in the financial market.

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Frequently Asked Questions

What is meant by Shelf Prospectus?

A Shelf Prospectus is a type of prospectus that allows a company to issue securities in multiple tranches over a period of time without needing to file a separate prospectus for each offering. It provides flexibility for companies to raise funds as needed, reducing administrative burdens and costs.

What is Shelf Prospectus in Company Law Section 1?

In the context of Company Law (India - Companies Act, 2013, Section 31), a Shelf Prospectus is a prospectus issued by public financial institutions, banks, or listed companies for raising capital through multiple offerings. The prospectus remains valid for a specified period, and the company only needs to file an Information Memorandum before each tranche of issuance.

Does the Shelf Prospectus Require a Different Prospectus for Each Offering?

No, a Shelf Prospectus eliminates the need to file a separate prospectus for each offering. Instead, an Information Memorandum is submitted before each issuance, updating investors with relevant details about the specific tranche.

Is Shelf Prospectus Valid for Years?

In India, a Shelf Prospectus is typically valid for one year from the date of filing). Within this period, the company can issue securities in multiple tranches without filing a fresh prospectus each time.

Why Would a Company File a Base Shelf Prospectus?

A company files a Base Shelf Prospectus to:

  • Streamline Fundraising: Raise capital efficiently over time without repetitive regulatory approvals.
  • Reduce Costs: Minimize administrative and legal expenses associated with frequent filings.
  • Enhance Flexibility: Issue securities when market conditions are favourable.
  • Ensure Compliance: Maintain transparency while avoiding delays in capital raising.

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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