Prohibition of association or partnership of persons exceeding certain number (Section 464 of the Companies Act, 2013) :
Section 464 of the Companies Act, 2013 provides for Prohibition of association or partnership of persons exceeding certain number. According to this section:
(i) Maximum number of persons: According to section 464(1) of the Companies Act, 2013, no association or partnership consisting of more than such number of persons as may be prescribed shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association or partnership or by the individual members thereof, unless it is registered as a company under this Act or is formed under any other law for the time being in force.
However, the number of persons which may be prescribed shall not exceed one hundred.
Rule 10 of the Companies (Miscellaneous) Rules, 2014, provides that no association or partnership shall be formed, consisting of more than 50 persons for the purpose of carrying on any business that has for its objects the acquisition of gain by the association or partnership or by individual members thereof, unless it is registered as a company under the Act or is formed under any other law for the time being in force.
Thus, the above provision can be read as under:
No association or partnership consisting of more than 50 persons (as provided under the Rules) shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association or partnership or by the individual members thereof, unless it is registered as a company under this Act or is formed under any other law for the time being in force.
Further, the Act has put a cap of maximum 100 persons. Thus, the number of persons as provided in the Rule 10 cannot exceed the maximum cap of 100 persons.
(ii) Exceptions: The above provision is not applicable to-
(a) a Hindu undivided family carrying on any business; or
(b) an association or partnership, if it is formed by professionals who are governed by special Acts.
(iii) Penalty: Every member of an association or partnership carrying on business in contravention of section 464(1) shall be punishable with fine which may extend to 1 lakh rupees and shall also be personally liable for all liabilities incurred in such business.