Chapter II - Incorporation of Company and Matters Incidental Thereto
Section 3A
Section 3A: members severally liable in certain cases
Section 3A addresses a company that carries on business after its membership falls below the statutory minimum. Liability arises only for a person who remains a member, knows of the shortfall, and is within the post-six-month period described by the section.
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Need advice on Section 3A?
This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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.
Introduction
The provision does not erase corporate personality. It imposes an additional debt consequence on members who knowingly continue business after the minimum-member shortfall has lasted more than six months.
Key takeaways
Minimum count
The trigger is fewer than seven members in a public company or fewer than two in a private company.
Time and knowledge
The company must continue business for more than six months with that shortfall, and liability attaches to a member cognisant of it.
Debt window
The member is severally liable for company debts contracted during the relevant post-six-month period.
Check the company type and member register
Establish the date membership fell below seven or two, as applicable. Keep the statutory register and share-transfer history to identify when the shortfall began and ended.
Identify the liability period
The six-month period must pass while business continues with too few members. The section then looks to debts contracted while a knowing person remained a member during that continuing business.
Test the individual member's knowledge
A person must be a member in the relevant period and cognisant of the shortfall. Membership alone, without the section's time and knowledge conditions, does not establish this particular liability.
Practical checklist
Do
- Record the exact date membership dropped below the applicable minimum and any restoration date.
- Reconcile debt contracts after the six-month threshold with the members and their knowledge evidence.
Avoid
- Do not assign every company debt to every former member.
- Do not treat the first day of reduced membership as the start of Section 3A's personal-liability period.
Glossary
- Severally liable
- Each person to whom Section 3A applies may be pursued for the whole covered debt.
- Cognisant
- Aware of the company's continued business with fewer than the required number of members.
Frequently asked questions
Does a temporary fall below the minimum immediately make members liable?
No. Section 3A requires business to continue for more than six months while the member count remains below the applicable minimum, along with the member's knowledge.
Which debts are covered?
The provision concerns company debts contracted during the period after those six months when the knowing person is a member and the company carries on business with the shortfall.
Need help applying this provision to your situation?
Contact BizeneedLast updated 9 October 2026