Summary: Under Companies Act, 2013, incorporation requires the Memorandum of Association (MOA) and Articles of Association (AOA) to be executed by proposed subscribers. However, the eligibility of a partnership firm to act as a subscriber is contentious. Section 3 of the Act specifies “persons” as subscribers but does not explicitly define the term. While individuals and body corporates qualify as “persons,” partnership firms lack separate legal personality under the Indian Partnership Act, 1932, and are merely collective names for their partners. Consequently, firms cannot hold assets or enter contracts independently. The incorporation process on the MCA21 portal supports subscriptions from individuals, companies, LLPs, and foreign entities but excludes partnership firms. Judicial interpretations and Ministry of Corporate Affairs (MCA) practices affirm that only individual partners or legally distinct entities like LLPs or companies may subscribe. Comparative analysis shows that individuals and body corporates are eligible to subscribe, while partnership firms are not. This restriction is rooted in the firm’s absence of distinct legal status and practical constraints in the MCA’s procedural framework. Therefore, partnership firms cannot subscribe to a company’s MOA or AOA. Partners acting individually can do so, ensuring compliance with legal and procedural norms.
Whether a Partnership Firm Can Subscribe to Memorandum and Articles of Association of a Company under Companies Act, 2013
SHORT SUMMARY:
The process of incorporation of a company under the Companies Act, 2013, commences with the execution and filing of the Memorandum of Association (MOA) and Articles of Association (AOA) by the proposed subscribers. A recurring question among practitioners is whether a partnership firm is legally eligible to act as a subscriber to the MOA and AOA of a company at the time of its incorporation.
This article seeks to examine the legal permissibility of such an action in light of the provisions of the Companies Act, 2013, applicable rules, judicial interpretations, and practical implications from the Ministry of Corporate Affairs (MCA) portal and procedures
- Legal Provisions:
Section 3 of the Companies Act, 2013
“A company may be formed for any lawful purpose by—
(a) seven or more persons, where the company to be formed is to be a public company;
(b) two or more persons, where the company to be formed is to be a private company; or
(c) one person, where the company to be formed is to be a One Person Company…”
The term used here is “persons”, not “entities” or “firms”.
- Definition of “Person”:
The Act does not define “person” specifically for this section, but generally, the term “person” includes natural and legal persons (i.e., individuals and body corporates). However, a partnership firm is not a legal person; it is not a body corporate.
Nature of a Partnership Firm
Under the Indian Partnership Act, 1932, a partnership firm is not recognized as a separate legal entity distinct from its partners. The firm is merely a collective name for its constituent partners, and it is not vested with a legal personality capable of holding assets or entering into contracts in its own name.
Hence, a partnership firm is not a “person” in the legal sense, unlike a company or a limited liability partnership (LLP), which are body corporates and thus have a distinct legal persona.
MCA Practice and Procedural Constraints
The incorporation process through SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) on the MCA21 portal mandates the input of subscriber details either as:
- Individual,
- Company,
- LLP,
- Foreign body corporate.
The portal does not permit a partnership firm as a subscriber category. Therefore, practically as well as legally, a firm cannot be a subscriber.
Moreover, the MCA has not issued any notification or clarification granting partnership firms the status of legal persons capable of subscribing to company formation documents.
Comparison with Other Entities
| Entity Type | Separate Legal Entity | Eligible to Subscribe | Remarks |
| Individual | N/A | Yes | In personal capacity |
| Company | Yes | Yes | Through board-authorized representative |
| LLP | Yes | Yes | Through designated partner |
| Partnership Firm | No | No | Not recognized as a legal person |
| Partners (Individually) | (as individuals) | Yes | Legally valid and accepted practice |
Conclusion
In conclusion, a partnership firm cannot be a subscriber to the MOA and AOA of a company proposed to be incorporated under the Companies Act, 2013, owing to its lack of separate legal personality. Only individual partners, or legally recognized body corporates (such as companies or LLPs), are eligible to subscribe.
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).
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