Section 3 of CA 2013 : Section 3: Formation Of Company

Explanation using Example

Imagine that Sarah and John want to start a software development business. They plan to keep the company privately held and intend to involve only themselves as the initial members. According to Section 3 of The Companies Act, 2013, they can form a private company as they are two or more persons (clause b). They subscribe their names to the memorandum of association and comply with the registration requirements to legally establish their company.

In another scenario, if Sarah decides to start a business on her own and wants complete control, she might opt to form a One Person Company (OPC). She will subscribe her name to the memorandum of the OPC and nominate another person, with his written consent, to become the member of the company in the event of her death or incapacity. This complies with the provisions of Section 3, specifically for an OPC (clause c).

Furthermore, Sarah's company could be structured as a company limited by shares, meaning the liability of its members is limited to the amount unpaid on their shares (subsection 2, clause a).