Section 3A of CA 2013 : Section 3A: Members Severally Liable In Certain Cases

Explanation using Example

Imagine a private company named QuickTech Pvt. Ltd., which originally had three directors and shareholders. Over time, two directors decide to leave the company, reducing the number of members to just one. Despite this, the remaining director continues to operate the business for over six months without adding another member to meet the minimum requirement of two members for a private company.

During this period, QuickTech Pvt. Ltd. enters into various contracts and accrues debts. Under Section 3A of The Companies Act, 2013, because the company continued to operate with less than the statutory minimum number of members for more than six months, the remaining director is now personally and severally liable for the debts incurred by the company after the six-month period.

If a supplier to QuickTech Pvt. Ltd. is not paid for goods delivered during this time, they can sue the remaining director personally to recover the owed amount, since the director was aware that the company was operating with an insufficient number of members.