Section 3 Formation of company – Companies Act 2013

Amended and updated notes on section 3 of Companies Act 2013. Detail discussion on provisions and rules related to formation of company.

Amended and updated notes on section 3 of Companies Act 2013. Detail discussion on provisions and rules related to formation of company.

Chapter II (Sections 322) of the Companies Act, 2013 (CA 2013) deals with the provisions related to incorporation of company and matters incidental thereto. Section 3 of CA 2013 provides for formation of company.

Recently, we have discussed in detail section 2 (Definitions) of CA 2013. Today, we learn the provisions of section 3 of Companies Act 2013 read with the Companies (Incorporation) Rules, 2014.

Section 3 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 902(E) issued dated 27.03.2014. This notification was come into force from 1st April, 2014 i.e. the commencement date of section 3 is 1-4-2014.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.II
Chapter NameIncorporation of Company and matters incidental thereto
Section No.3
Section NameFormation of company
Monthly Updated EditionCompany Law PDF

Section 3 of Companies Act 2013: Formation of company

Section 3 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.

(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 may be 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.

Read Rule 3 and Rule 4 of the Companies (Incorporation) Rules, 2014.

(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.

Exception/ Modification/ Adaptation:

1) In sub-section (2) of section 3, the following proviso shall be inserted, namely: –

“Provided that a Specified IFSC public company shall be formed only as a company limited by shares.”.Notification No. G.S.R. 08(E) dated 4th January, 2017.

2) In sub-section (2) of section 3, the following proviso shall be inserted, namely: –
“Provided that a Specified IFSC private company shall be formed only as a company limited by shares.”. –Notification No. G.S.R. 09(E) dated 4th January, 2017.

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