Asked July 22, 2013

requirement for incorporation of the company

  • 3 Answers

How many minimum persons are required for the incorporation of a company ? What should be their designation ?

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The minimum number of members required for the incorporation of private company is 2 and that of a public company is 7. you can either make them directors or mere shareholders...

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Rachana Rautray

As per the Companies Act, 1956 the minimum requirement is 2 for a private company and 7 for a public company, however as per the new Companies Bill which is due to passed in the Rajya Sabha soon allows for a company to be incorporated also by one person and these persons can be either directors or shareholders. 

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Incorporation of Company: Minimum Number of Persons

As per clause 3 of the Companies Bill (“Bill”), a public company may be formed by seven or more persons and a private company be formed by two or more persons. In case of a One Person Company, as the name suggests, a single person can by subscribing his name to a memorandum, and complying to the requirements of the Bill (when enacted the “Act”) can incorporate a company, provided certain additional conditions are satisfied.

As regards the Companies Act, 1956, section 12 providing for the provisions relating to the forming of an incorporated company, states, that any seven or more persons (in case of a public company) and two or more persons (in case of a private company), can incorporate a company provided some additional conditions are satisfied.

Incorporation of Company: Designation of PersonsThe Bill or the Companies Act, does not provide for any guidance on what may be the designation of the founding members of a company.

It is more likely that the founding members of the Company will be in “control” of the Company. To that extent, guidance may be sought from Section 2 (1)(za) of the Issue of Capital and Disclosure Requirements Regulations, 2009 (commonly known as the “ICDR Regulations”).

Section 2(1)(za) amongst others, state that a “promoter”  includes the person or persons who are in control of the company. Thus it may not be wholly incorrect to refer to the members incorporating the company as the “Promoters” of the Company. Also it is not unusual for companies to have their promoters also acting as a non-executive director, acting as the Chairman.

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