Meaning of Unincorporated Companies
Unincorporated Companies are such entities which are carrying on business but are not registered as a 'Company' under the Companies Act. These entities can be partnership firms or association of persons or any other similar entities which consists of more than 2 persons (owners).
Provisions under the Companies Act 2013
Section 464 of the Act read with Rule 10 of the Companies (Miscellaneous) Rules, 2014 prescribes that -
- Limitation on Number of Persons carry on business
"No association or partnership shall be formed, consisting of more than 50 persons for the purpose of carrying on any business that has for its objects the acquisition of gain by the association or partnership or by individual members thereof, unless it is registered as a company under the Act or is formed under any other law for the time being in force. Provided that the number of persons which may be prescribed under this sub-section shall not exceed 100."
- Non-Applicability of the Law
The above provisions are not applicable in the following cases.
(a) a Hindu undivided family carrying on any business; or
(b) an association or partnership, if it is formed by professionals who are governed by special Acts.
- Penalty for Violation of Laws
Contravention of the above said laws will lead to a fine which may extend to Rs. 1 lakh and the persons involved (owners) shall also be personally liable for all liabilities incurred in such business.
- Liability of Members
The liability of the members of these unincorporated companies is unlimited.
The Companies Act 1956
Earlier similar provisions were prescribed under section 11 of the Companies Act 1956.