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CS Executive · Company Law and Practice · Introduction to Company Law

Three friends in Pune run a business as an unregistered partnership and want to convert it into a company by registering under Part I of the Companies Act, 2013's provisions on companies capable of being registered (Section 366). They are only three members. Under that section, what kind of company must they register as?

They must register as a private company. Under Section 366, a company with fewer than seven members is required to register as a private company, so a group of only three members cannot register as a public company of any kind.

  1. AA public company limited by shares
  2. BA private companyCorrect
  3. CA company limited by guarantee with a public status
  4. DAn unlimited public company

Explanation

Section 366 provides in its proviso (vii) that a company with less than seven members shall register as a private company. With three members, the friends cannot register as a public company. The other options all assume a public status, which is not permitted for fewer than seven members.

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