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CA Intermediate · Corporate and Other Laws · Incorporation of Company and Matters Incidental Thereto

Meera, Tarun and Kabir, all residents of Pune, wish to form a private company to run a software business. They sign the memorandum, but Kabir has not yet paid for any shares. Under the Companies Act, 2013, what is the legal position regarding the shares each subscriber must take?

Each subscriber to the memorandum must take at least one share and must write against his name the number of shares he is taking while signing. A person cannot subscribe without agreeing to take shares, so Kabir must also commit to at least one share.

  1. AEach subscriber to the memorandum must take at least one share and must write against his name the number of shares he takesCorrect
  2. BOnly one subscriber needs to take shares and the others may join as members later without subscribing
  3. CSubscribers need not take any shares until the company's first annual general meeting is held
  4. DSubscribers may take shares only after the certificate of incorporation is issued and not at the time of signing

Explanation

Every subscriber to the memorandum must take at least one share and must write against his name the number of shares he takes, which is done at the time of subscription. Kabir therefore cannot be a subscriber without agreeing to take shares. Deferring share-taking until after the AGM or incorporation is not permitted.

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