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Number Of Members Falling Below Statutory Minimum: Consequences

Minimum Number of Members Required in a Company

Section 3 of theCompanies 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

Section 3A of the Companies Act 2013 prescribes that:—

If at any time the number of members of a company is reduced, in the case of a public company, below seven, in the case of a private company, below two, and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.

Extra Notes for Readers

(1) If any member claims to be not aware of the reduction resulting in breach of law, then in the court of law, 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.

(2) Similar provisions were prescribed under Section 45 of the erstwhile Companies Act 1956.

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