A little understanding of Law regarding Companies:
Members required for the Formation of a Company
The Minimum number of members required for the formation of a Public Limited Company is seven, however, for the formation of a Private Limited Company even two would suffice. These members could be subscribing their names to a memorandum of association and by complying with the other requirements of the Companies Act form an incorporated company. Also as per Section 2(62) of the Companies Act, 2013, a one person company is can also be foamed. The company name would accordingly have the last word of its name as “Limited” or “Private Limited”. Interestingly, a charitable company may also be exempted from having the last word as “Limited” provided it satisfies certain conditions laid down in the Act itself.
If at any time, after the formation of a company, the number of members of a public limited company falls below the prescribed seven or in case of private limited company below two and the company carries on the business for more than six months then each members becomes severally liable for the payment of the debts of the company.
Company: A Legal entity
In view of the various judicial pronouncements a company is deemed to be a separate legal entity and is distinct from the members who have formed it. Under exceptional circumstances however the courts are empowered to look into actual purpose/formation of the company and this is commonly referred to as “lifting of the corporate veil of the company”.
Registration; a mandatory requirement
The registration of company is compulsory as per the companies act particularly in view of the law prohibiting the formation of a company, association or partnership of more than twenty persons without getting registration.
Shares of a company
A company can be limited either by Shares or by Guarantee, i.e. by limiting the liability of the members to the amount unpaid on the shares or on a fixed determined/undertaken guaranteed amount. The shares or other interest of any member of the company are considered as a moveable property and transferable. The share capital of a company comprises of the “Preferential share capital” as also the “Equity share capital”.
Director of a company
Subject to exceptions, a Public limited company is supposed to have a minimum of three numbers of Directors and a private limited company a minimum of two numbers of directors. In case of a public limited company are one third of the directors are excepted to retire by rotation at every annual general meeting. No person is permitted to be a director of more than fifteen companies at the same time. The directors of accompany are collectively referred to as “Board of Directors”.