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Under Section 3A of the Companies Act, 2013, if the number of members of a private company falls below TWO and the company carries on business for more than SIX months while the number is so reduced, every person who is a member of the company during that time and is cognisant of the fact shall be:
Answer & Solution
Correct answer: B.
1. Section 3A of the Companies Act, 2013 is a statutory exception to the principle of limited liability.
2. The Lesson 1 paragraph on "Exceptions to the principle of limited liability" reproduces the rule for both public companies (below 7) and private companies (below 2).
3. A cognisant member is "severally liable for the payment of the whole debts of the company contracted during that time".
4. The six-month period is the trigger for personal liability, not a grace period; carrying on past it without restoring the minimum exposes the cognisant members.
_Source: ICSI CS Executive Paper 2 (Company Law) — Lesson 1: Introduction to Company Law, pp. 2-35._
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