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CA Intermediate · Corporate and Other Laws · Preliminary

Meridian Traders Pvt Ltd, a private company, has paid-up share capital of Rs 3 crore and turnover of Rs 30 crore. Its entire share capital is held by 150 individual members, none of whom is an employee. A director argues the company must be classified as a public company because it has exceeded 100 members. What is the correct legal position under the Companies Act, 2013?

The company remains a valid private company. The Companies Act, 2013 allows a private company up to 200 members, excluding employee-members and counting joint holders as one. With 150 members it is within the limit, and turnover does not affect private company status.

  1. AIt becomes a public company automatically once members exceed 100
  2. BIt cannot be a private company since turnover exceeds Rs 25 crore
  3. CA private company can have at most 200 members, so it remains valid; the limit is 200 excluding employee-members and certain joint holdersCorrect
  4. DA private company can have at most 50 members, so it must convert to a public company

Explanation

Under the Act, a private company's maximum membership is 200 (excluding present and past employee members and joint holders counted as one). With 150 members the company stays within the limit. Turnover and paid-up capital do not restrict private company status, so the other options are wrong.

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