Members severally liable in certain cases Section 3A

 3A. Members severally liable in certain cases

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.

Brief facts of the  Section 3A

Trigger Conditions (The Minimum Member Rule)

The rule is activated if a company's membership drops below the statutory minimums:

• Public Company: Fewer than 7 members.
• Private Company: Fewer than 2 members.

2. The Six-Month Grace Period

• The company carries on business with reduced members for more than 6 months.
• Note: The penalties and liabilities detailed below do not apply to the first 6 months of operating below the minimum.

3. Who Becomes Liable?

Not every single person associated with the company is held responsible. Personal liability only targets a member who meets both criteria:

• They remain a member of the company after the 6-month grace period has expired.
• They are cognisant (aware) of the fact that the company is operating below the legal minimum number of members.

4. The Legal Consequence (Severally Liable)

• Piercing the Corporate Veil: The company loses its limited liability protection for those specific individuals.
• Several Liability: Each qualifying member becomes personally and individually liable for the whole of the company's debts. Creditors can sue a single member for the entire amount owed.
• Temporal Restriction: This personal liability only applies to debts contracted during the time the company operated after the 6-month window (not debts incurred before the drop in members, or during the first 6 months of the drop).