Question

The 2013 Companies Act has increased the limit of the number of members in Private Company from 50 to

• A. 100
• B. 200
• C. 300
• D. 150

Hint:

For company law, it is essential to know the key differences between the 1956 Act and the 2013 Act. The increase in the maximum number of members for a private company from 50 to 200 is one of the most fundamental and frequently asked changes.

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
A private company is a type of company that has certain restrictions on its membership and share transferability. One of the key defining features is the maximum number of members it can have. This limit was changed by the Companies Act, 2013, from the one that existed under the previous Companies Act, 1956.
Step 2: Detailed Explanation:
- Under the Companies Act, 1956, Section 3(1)(iii) defined a private company. One of the conditions was that it must, by its articles, limit the number of its members to fifty (50).
- The Companies Act, 2013, which replaced the 1956 Act, brought about significant changes. The definition of a "private company" is now given in Section 2(68).
- As per Section 2(68)(ii) of the Companies Act, 2013, a private company is one which by its articles "limits the number of its members to two hundred (200)".
The proviso to this clause clarifies that when counting these 200 members, joint holders of a share are treated as a single member, and persons who are in the employment of the company (and former employees who were members while employed) are not to be included.
Therefore, the limit was increased from 50 to 200.