Establishing a Current Account for a Private Limited Company

A current account serves as the go-to choice for professionals, businesses, associations, trusts, societies, and institutions alike, offering a plethora of advantages over traditional savings accounts. With its flexibility and unrestricted transactions, it’s the preferred banking option for businesses, traders, professionals, and institutions.

Typically, businesses steer clear of standard savings accounts due to their inherent restrictions and limitations. Entrepreneurs opt for current accounts instead, enjoying the freedom from transaction limits and the added benefit of maintaining liquidity.

The significance of initiating a current account for a PLC

Upon incorporation, a Private Limited Company (PLC) is issued a PAN number. Subsequently, it’s advisable for the PLC to initiate a bank account under the company’s name, leveraging the separate legal entity status.

While not obligatory, opening a current account in the company’s name proves beneficial. It ensures that all company transactions are conducted through the designated current account, distinguishing business finances from those of directors or promoters. Additionally, a PLC has the option to maintain multiple current accounts, further optimizing financial management.

Given its legal entity status under Indian laws, a Private Limited Company’s (PLC) current account holds indispensable significance. It serves as a vital tool for tax compliance, facilitating seamless transactions with creditors and debtors, disbursing salaries and dividends, addressing legal matters against the company, and settling accounts during liquidation.

By maintaining a current account under the company’s name, it not only ensures the smooth operation of financial activities but also enhances the trustworthiness and credibility of the company’s financial dealings.

Navigating the Current Account Opening Procedure for a PLC

Opening a current account for a PLC is a straightforward process, as follows:

1. Visit the bank branch or access the bank’s online website to initiate the current account opening procedure. Many banks offer the convenience of opening a current account online.

 

2. Opt for the ‘Business Current Account’ option on the bank’s website. Select the desired type of current bank account after reviewing its features. Then, click on the ‘Apply Now’ button and complete the application form. Alternatively, you can obtain the application form offline by visiting the bank branch and filling it out physically.

 

3. Upon filling out the application form, submit it online by clicking the submit button (if applying through the bank’s website). If applying offline, submit the filled application form at the bank branch.

 

4. Following the submission of the application form, a customer care executive from the bank will reach out to the company to finalize further formalities.

 

5. Ensure all required documents are submitted to the bank for opening the current account.

 

6. After completing the KYC verification process, the bank will proceed to open the current account in the company’s name.

Essential Documentation for Initiating a Current Account for a PLC

Required Documentation for Current Account Opening by a PLC encompasses:

– Certificate of Incorporation of the PLC.

– Memorandum of Association (MOA) and Articles of Association (AOA) of the PLC.

– Board Resolution sanctioning the opening of the current account and appointment of authorized personnel to handle account operations.

– Power of Attorney issued to company officers, employees, and managers for conducting business transactions on behalf of the company.

– Directors Identification Number (DIN) of the company’s directors.

– PAN card of the PLC.

– Updated directors’ list in the bank’s prescribed format.

– Proof of registered address, such as:

    – Recent electricity or telephone bill (not older than three months).

    – Registration copy with Employee Provident Fund Organization (EPFO) or Employee State Insurance Corporation (ESIC).

    – Any other government registration/license displaying the company’s address.

– Identification proof of directors and authorized signatories, including:

    – PAN card of directors.

    – Passport.

    – Voter ID card.

    – Driving license.

    – Aadhaar card.

– Evidence of director appointment in case of changes.

– Documentation indicating director resignations if there are Board changes.

– Shareholding pattern of the PLC according to the bank’s format.

– Details of beneficial owners, if applicable.

Advantages of Maintaining a Current Account for a PLC

Unique advantages of holding a current account for a PLC include:

1. Access to Overdraft Facility: The bank extends an overdraft facility to current account holders, aiding in fulfilling the business’s working capital requirements.

 

2. No Minimum Transaction Requirements: There are no stipulations on minimum transactions, providing flexibility to the current account holder.

 

3. Streamlined Business Transactions: The current account facilitates the organization of business transactions and simplifies the taxation process.

 

4. Credit Card Transaction Tools and Online Banking Support: Current account holders receive access to credit card transaction tools and comprehensive online banking support.

 

5. Unrestricted Deposits and Withdrawals: Current account holders enjoy freedom in deposits and withdrawals to cater to the business’s cash flow requirements.

 

6. Increased Number of Free Cheques: A higher number of free cheques are typically available each month, reducing transaction costs for the PLC.

 

7. Convenient Transfers and Deposits: Current accounts enable convenient transfers and deposits across different branches, facilitating easy collection of payments from smaller customers.

 

8. No Interest Earnings: Unlike savings accounts or recurring deposits, current accounts do not accrue interest. However, they offer convenience at the expense of relatively higher charges.