Number of Members falling below statutory minimum : Consequences

Minimum Number of Members Required in a Company

Section 3 of the Companies Act 2013 clearly specifies and requires a Registered / Incorporated Company, be it a company limited by shares, or a company limited by guarantee, or an unlimited company, to have atleast Seven members in the case of a public company and atleast Two members in the case of a private company.

Consequences of Reduction in the number of members below minimum

Earlier as per Section 45 of the Companies Act 1956, it was prescribed that if at any time the number of members of a company falls below the minimum number as mentioned above, and the Company carries on business for more than 6 months with members below m, then in such a situation every member of the company who is well aware of the fact that the Company is carrying on business with members fewer than the required minimum limit shall be :

(1) liable for the payment of the whole debts of the company contracted during that time, and

(2) may be severally sued.

Note: The Burden of Proof will be on the Member who claims to have no knowledge of such reduction in the number of members below minimum.

Under the new companies act 2013, there is no specific provision as to the consequences as mentioned above in case the number of members falls below required numbers.