Section 464 of the Companies Act, 2013
Section 464 of the Companies Act, 2013
"Prohibition of association or partnership of persons exceeding certain number"
📘 Bare Act Summary:
Section 464 prohibits the formation of an association or partnership of more than a certain number of persons (currently 50, as prescribed in Rule 10 of Companies (Miscellaneous) Rules, 2014) for the purpose of carrying on any business for profit, unless the entity is:
Registered as a company, or
Formed under any other law (e.g., LLP Act, 2008, cooperative societies, etc.).
🔍 Key Provisions:
Maximum Limit:
No business association or partnership shall consist of more than such number of persons as may be prescribed (not exceeding 100, currently fixed at 50 by Rule 10).
Exceptions:
Does not apply to:
Hindu Undivided Families (HUF)
Entities formed under other laws (like LLPs, Co-operative Societies)
Consequence of Contravention:
The association/partnership becomes illegal.
Every member is personally liable for all liabilities incurred.
Members may be fined up to ₹1 lakh.
🏛️ Purpose:
To:
Prevent large unregulated business groups from operating outside the corporate regulatory framework.
Promote registration and transparency through company or LLP structures.
📌 Practical Implication:
If you're running a business with more than 50 persons as partners or co-owners, you must register it as a company or LLP to stay compliant.
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