Consequences of Non-compliance of Section 3(1)(iii) of the Companies Act, 1956

(a) restricts the right to transfer its shares, if any ; (b) limits the number of its members to fifty not including - (i) persons who are in the employment of the company ; and (ii) persons who, having been formerly in the employment of the company, were members of the company while in

(a) restricts the right to transfer its shares, if any ; (b) limits the number of its members to fifty not including - (i) persons who are in the employment of the company ; and (ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased

private company" 1[means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed, and by is articles, -] (a) restricts the right to transfer its shares, if any ; (b) limits the number of its members to fifty not including - (i) persons who are in the employment of the company ; and (ii) persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased ; and (c) prohibits any invitation to the public to subscribe for any shares in, or debentures of, the company ; 2[(d) prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives:]

Where the provisions, under clause (iii) of Sub-section (1) of Section 3 of the Companies Act, 1956, are required to be included in the articles of a company in order to constitute a private company, but default is made in complying with any of those provisions, the company shall cease to be entitled to the privileges and exemptions conferred on private companies, by or under the Act and the Act shall apply to the company as if it was not a private company [Refer Section 43]. However the Central Government, on being satisfied that the infringement of these conditions was accidental or due to inadvertence or that on other grounds, it is just and equitable to grant relief, to the company, it may relieve the company from consequences of such default. Thanks