Reduction in Number of Members below Statutory Minimum [Section 3A]
# Reduction in Number of Members — Section 3A
(Inserted by Notification dated 3rd January, 2018)
## The Rule
If at any time the number of members of a company falls below the statutory minimum:
Type of Company
Statutory Minimum
Triggering Reduction
Public Company
7
Below 7
Private Company
2
Below 2
## Conditions for Personal Liability
Personal liability of members is triggered when ALL three conditions are satisfied:
1. The number of members has reduced below the statutory minimum.
2. The company carries on business for more than 6 months while the number is so reduced.
3. The person is a member during the period AND is cognisant (aware) that the company is carrying on business with the reduced number.
## Consequence
Every such person:
Shall be severally liable for the payment of the whole debts of the company contracted during that time (i.e., after the 6 months).
May be severally sued for the same.
## Important Points
The liability is for debts contracted after the 6-month grace period, not before.
'Severally liable' = each member individually liable for the entire amount.
The member must be aware of the deficiency — knowledge is essential.
## Memory Aid: '7-2-6'
7 (public) or 2 (private) is the minimum
After 6 months of trading with fewer members → personal liability kicks in
Worked example
### Example 1
Q: ABC Ltd. (public company) had its members reduced to 5 on 1st January 2026. It continued business and contracted a debt of Rs. 10 lakh on 1st September 2026 (i.e., after 8 months). All 5 members were aware of the reduction. Discuss their liability.
A: Since (i) members fell below 7, (ii) business continued for more than 6 months (1st Jan to 1st Sep = 8 months), and (iii) all 5 members were cognisant, Section 3A applies. Each of the 5 members is severally liable for the whole debt of Rs. 10 lakh contracted after the 6-month period.
### Example 2
Q: XYZ Pvt. Ltd. (private company) had its members reduced to 1 on 1st January 2026. It contracted a debt on 1st April 2026 (3 months later). Is the remaining member personally liable?
A: No. The 6-month grace period had not expired when the debt was contracted. Section 3A is not triggered.
⚠️ Common exam mistakes
Stating that personal liability is triggered immediately when members fall below the minimum — it only triggers after 6 months of continuing business
Holding all members liable irrespective of awareness — only those who are 'cognisant' of the deficiency are liable
Treating liability as 'jointly' — it is 'severally' (each member fully liable individually)
Holding members liable for debts contracted BEFORE the 6-month period — liability is only for debts contracted DURING/AFTER the period
Bare-Act text Section 3A · Companies Act, 2013 · click to expand
If at any time the number of members of a company is reduced, in the case of a public company, below seven, in the case of a private company, below two, and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.