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CA Intermediate · Corporate and Other Laws · Preliminary

Meridian Textiles Ltd has a paid-up share capital of Rs 3 crore and no holding company. Its articles restrict the right to transfer shares, it bars an invitation to the public to subscribe to its securities, and it has 120 members. Under the Companies Act, 2013, how is this company best classified?

Meridian Textiles is a private company. Its articles restrict share transfer, prohibit public invitations for securities, and its 120 members are within the 200-member ceiling. The old Rs 1 crore paid-up capital threshold no longer decides the classification, so it cannot be a public company on that basis.

  1. AA private company, since it restricts transfer of shares and prohibits public invitation, and the 200-member limit is not breachedCorrect
  2. BA public company, since its membership exceeds 50
  3. CA One Person Company, since it has no holding company
  4. DA public company, since its paid-up capital exceeds Rs 1 crore

Explanation

A private company is one whose articles restrict the right to transfer shares, limit members to 200 (excluding employees and certain ex-employee members) and prohibit invitation to the public for securities. Meridian meets all three conditions with 120 members. The Rs 1 crore paid-up capital test is no longer a requirement, so the public-company option is wrong.

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