What happens if number of members of public limited company becomes less than 7

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This topic contains 1 reply, has 2 voices, and was last updated by Dr. Ashok Dhamija Dr. Ashok Dhamija 7 months ago.

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  • #1663

    Anonymous
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    The minimum number of members in a public limited company being 7, what happens if one member dies and the number of shareholders becomes less than 7? What is the legal position of the company? What can be done?

  • #1924

    Under the old Companies Act, 1956, there was a specific provision contained in Section 45 of that Act, laying down the consequences of the number of members (i.e., shareholders) of a public company falling below the minimum required number of seven and this section was as under:

    45. Members severally liable for debts where business carried on with fewer than seven, or in the case of a private company, two members.—If at any time the number of members of a company is reduced, in the case of a public company, below seven, or in the case of a private company, below two, and the company carries on business for more than six months while the number is so reduced, every person who is a member of the company during the time that it is so carries on business after those six months and is cognizant of the fact that it is carrying on business with fewer 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 there for.”

    However, under the new Companies Act, 2013, I have not been able to find any corresponding provision laying down what happens if the number of members in a public company falls below seven (7).

    But since the minimum requirement for number of shareholders is 7 in respect of a public company, if it falls below this number then either the number will have to be increased to 7 or above (by introducing new members) or the company will have to be wound up.

         


    Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles.

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