Companies Act Section 3 — Formation of company
CHAPTER II INCORPORATION OF COMPANY AND MATTERS INCIDENTAL THERETO
Commercial / Corporate
Summary
Sub-section (1) states that a company can be formed for any lawful purpose. The number of people required to form the company depends on the type of company being created.
Under clause (a) of sub-section (1), seven or more persons are required to form a public company. Under clause (b) of sub-section (1), two or more persons are required to form a private company. Under clause (c) of sub-section (1), one person is required to form a One Person Company, which is a type of private company. In all cases, the persons must subscribe their names to a memorandum and comply with the registration requirements of the Act.
The first proviso to sub-section (1) requires that the memorandum of a One Person Company must name another person, with that person's prior written consent in the prescribed form, who would become the member of the company if the original subscriber dies or becomes incapable of contracting. This written consent must also be filed with the Registrar at the time of incorporation, along with the memorandum and articles.
The second proviso to sub-section (1) states that the nominated other person may withdraw their consent in the manner prescribed.
The third proviso to sub-section (1) allows the member of a One Person Company to change the name of the nominated other person at any time by giving notice in the prescribed manner.
The fourth proviso to sub-section (1) places a duty on the member of a One Person Company to inform the company of any change in the name of the nominated person, by indicating it in the memorandum or otherwise, within the prescribed time and manner. The company must then inform the Registrar of such a change within the prescribed time and manner.
The fifth proviso to sub-section (1) clarifies that any change in the name of the nominated person is not considered an alteration of the memorandum.
Sub-section (2) states that a company formed under sub-section (1) can be one of three types. Under clause (a) of sub-section (2), it can be a company limited by shares. Under clause (b) of sub-section (2), it can be a company limited by guarantee. Under clause (c) of sub-section (2), it can be an unlimited company.
Official Text
(1) 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 One Person Company that is to say, a private company, by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration:
Provided that the memorandum of One Person Company shall indicate the name of the other person, with his prior written consent in the prescribed form, who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company and the written consent of such person shall also be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles:
Provided further that such other person may withdraw his consent in such manner as may be prescribed:
Provided also that the member of One Person Company may at any time change the name of such other person by giving notice in such manner as may be prescribed:
Provided also that it shall be the duty of the member of One Person Company to intimate the company the change, if any, in the name of the other person nominated by him by indicating in the memorandum or otherwise within such time and in such manner as maybe prescribed, and the company shall intimate the Registrar any such change within such time and in such manner as may be prescribed:
Provided also that any such change in the name of the person shall not be deemed to be an alteration of the memorandum.
(2) A company formed under sub-section (1) may be either—
(a) a company limited by shares; or
(b) a company limited by guarantee; or
(c) an unlimited company.