## Section 3 — Formation of Company

A company may be formed for any lawful purpose by:

Type of Company	Minimum Persons
Public company	7 or more persons
Private company	2 or more persons
One Person Company (OPC)	1 person

### Formation Mechanism

By:

1. Subscribing to a memorandum, AND

2. Complying with the requirements of the Companies Act, 2013.

### Types of Company by Liability

A company formed under Section 3 may be:

Limited by shares — liability limited to unpaid value of shares.
Limited by guarantee — liability limited to amount members guarantee on winding up.
Unlimited company — no limit on members' liability.

### Visual Summary

```

Purpose: ANY LAWFUL PURPOSE

Subscribe to MoA + Comply with Act

+-------+---------+

v v v

Public Private OPC

(7+) (2+) (1)

```

Worked example

### Example 1

Example: 5 persons want to form a public company. Can they? — NO. Public company requires minimum 7 subscribers. They can either add 2 more subscribers OR form a private company (2+ subscribers required).

### Example 2

Example: A single individual, Mr. P, wants to start a corporate business with limited liability and not involve any other shareholder. — He can incorporate a One Person Company (OPC) under Section 3(c), subscribing alone to the MoA, with a nominee named under Section 4.

⚠️ Common exam mistakes

Confusing minimum subscriber requirement of 7 (public) with the unlimited maximum for public company members.
Forgetting that the purpose must be 'lawful' — illegal objects cannot be incorporated even with required subscribers.
Assuming OPC can only be a private company limited by shares — Section 3 itself allows any of the three liability types subject to OPC-specific rules.

Bare-Act text Section 3 · Companies Act, 2013 · click to expand

Section 3 — Formation of Company: A company may be formed for any lawful purpose by — (a) 7 or more persons in case of a public company; (b) 2 or more persons in case of a private company; or (c) 1 person, where the company to be formed is to be an OPC, by subscribing to a memorandum and complying with the requirements of this Act. Such company may be either a company limited by shares, or a company limited by guarantee, or an unlimited company.

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