A. Introduction
Section 3 of Companies Act 2013 (Act) entails the basic requirements of formation of a company. A company, (whether a company limited by shares or a company limited by guarantee or an unlimited company) may be formed for any legal purpose by:
7 or more persons, in case of a Public Limited Company
2 or more persons, in case of a Private Limited Company
1 person, in case of One Person Company (“OPC”)
by subscribing their names to a memorandum and complying with the requirements as mentioned under the Act.
B. Requirements under formation of OPC
- Memorandum
The memorandum of OPC shall indicate the name of other person (“Nominee”) nominated by the subscriber, who shall in the event of the death of the subscriber or his incapacity to contract shall become the member of the OPC.
- Written Consent
At the time of incorporation of OPC, the written consent of the nominee shall also be filed with the Registrar.
- Withdrawal of Consent
The Nominee may at any time withdraw his consent by giving a notice in writing to the member and the OPC.
The member shall nominate another person within 15 days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the company, along with the written consent of such other person so nominated in Form No. INC.3.
The company shall file with Registrar, such notice of withdrawal, intimation of name of another person (Form No. INC.4) and written consent of such another person (Form No. INC.3) within 30 days of receipt of the notice of withdrawal.
- Intimation of change of nominee by the member
The member of OPC may change the name of the nominee by giving a notice as prescribed under the law. The intimation of change in name of the nominee shall be made by the member to the company. The company shall intimate such change to the Registrar in Form No. INC.4 along with the written consent of the new nominee in Form No.INC.3.
- Death of member
In case of cessation of the membership of the member of OPC, in the event of death or incapacity to contract, his nominee becomes the member of such OPC. Such new member shall nominate within 15 days of becoming a member, another person who shall in the event of his death or his incapacity to contract become the member of such company.The company shall file with the Registrar an intimation of such cessation and nomination in Form No INC.4 within 30 days of the change in membership and with the prior written consent of the person so nominated in Form No.INC.3.
Does change in the name of the nominee amounts to alteration of memorandum?
A change in the name of the nominee shall not be deemed to be an alteration of the memorandum.
C. Section 3A – Members severally liable in certain cases
When the number of members in a company falls below the prescribed limit (i.e 2 in case of a private limited company and 7 in case of a public limited company) and the company carries on it’s business for a period of more than 6 months, every person who is a member of the company during that time shall be severally liable for payment of whole debts of the company contracted during that time and can also be sued for.
However, it is pertinent to note that, the members are made severally liable only when they are cognizant of the fact that the company was carrying on its business for more than 6 months while the number of members were reduced below the prescribed limited.
Glossary
| Term |
Explanation |
| Company limited by shares | A company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them. |
| Company limited by guarantee | A company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up. |
| Cognizant | Having knowledge or awareness |
| Memorandum | Memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this Act. |
| Severally Liable | Where each party is liable only for its own specified obligations. |
| Unlimited Company | A company not having any limit on the liability of its members. |
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