Points to remember during company incorporation

1.   Can the same person be a Director as well as Shareholder of the Company?

Shareholders and directors have two completely different roles in a company. The shareholders (also called members) own the company and the directors take day to day managerial decisions including tactical and strategically decision making. However, a single person can play both the roles and can act as a shareholder as well as a director of the Company. A person invested (having shares) in the company and also having proficiency on the responsibility of managing or supervising the corporation then the person can individually play both the roles.

2.   Can I use my home address as the Registered Office address of my Company?

All Indian registered companies are required by law to have a registered office address in India. It is the address of a company to which all official letters and reminders will be sent. The registered company address must be in a state in which company is registered.

Therefore, a home address can also be used as the Registered Office address of the Company. It is not compulsorily required that an address where the company is actually situated can only be used as address of the registered office of that company.

3.   Can a Registered Office and an Administrative Office be situated at different places?

Registered Office is the location (or merely the address) where the company has registered as a corporation. All official letters and reminders will be sent at this address only. On the other hand, an administrative office is the office where the actual operations are conducted. It is for the convenience of business activities and infrastructure from where all commercial activities of a company are undertaken. So, either both can lie at the same address or can be situated at a different places too. There are no restrictions for the same.

4.  Do I need to contribute my capital immediately into the bank before incorporating a company?

To open a Company’s Bank Account, it is necessary to have the company PAN Card. Further, PAN can only be applied for only when the company is incorporated. Thus, capital amount is a pre-requisite of the company as it needs to be acknowledged in the subscriber’s sheet, which is required at the time of incorporation. Hence, deposit into the Bank is not possible, and therefore the initial capital infusion may be in cash.

5.   Can a Shareholding Ratio be in 99:1 proportion?

The ideal shareholding pattern of the company is 50:50, for a two shareholder company. But in case you intend to hold the majority stake of the company you can make the proportion to 60:40, 70:30 etc. In case if the other shareholder focuses on having a substantial interest in the company then the proportion would, in all general circumstances  be 80:20. Alternatively, to have complete stake of the company restricted to self, then the proportion has to be 99:1, since there has to be at least two shareholders of the Pvt. Ltd Company.

6.  I am already employed. Can I still be a Director of another Company?

It depends on the terms and conditions of the offer letter which you will receive as an employee of the Company. If you are not bound to any restrictions or if there is no clause in your offer letter which prohibits you to take part in some other company (directly or indirectly), then you can be a Director of other company.

7.   I am already a Director of a privately held company and therefore have a DIN. Do I need to have another DIN to become a Director of another company?

A DIN allotted to any person is valid for the lifetime of the individual like PAN Number and shall not be allotted to any other person during his lifetime. Since you are the director of the Pvt. Ltd. Co. and already having DIN, then you are not required to have another DIN, as the same can be used to become the director of other Companies or designated partners of other LLPs.

8.   Can I have two companies at the same Registered Office?

For startup companies, it is very common to share common workspace to deliver services, thereby sharing the rent of the premises and minimizing outflows in the initial years. In that case, the companies, while getting incorporated under MCA, can use the same registered address proof. In an alternate scenario, an IT professional having two different private limited companies can use his common residential address to fit the purpose.

9. What is the difference between Authorised and Paid Up Capital of a Company?

Authorised Capital is that amount of capital with which a company is registered with the registrar of companies (body responsible for registration of companies). It is the maximum amount of capital which a company can raise through shares i.e. share capital can be maximum up to the authorized capital and not beyond. Authorized capital is also called registered capital or Nominal capital.

On the other hand, the Paid up Capital is that amount of capital (out of called-up capital) against which the company has received the payments from the shareholders so far. In other words, Paid up capital means that capital for which investors have actually paid money.

10.  What is Face Value per Share?

Face value is the nominal, or stated, amount of security. The face value of a bond is the amount the issuer agrees to pay upon maturity. Face value is also the amount upon which interest payments or discount is determined.