Section 3 of Companies Act, 2013: Formation of a Company
Section 3 lays down the basic legal framework for forming a company in India. It identifies the minimum number of persons required for a public company, private company and One Person Company, and states the permitted liability structures of a company formed under the Act.
Meaning and scope of Section 3
Section 3 is titled "Formation of company". In practical terms, it answers two threshold questions: how many subscribers are required to form each principal class of company, and whether the company will be limited by shares, limited by guarantee or unlimited.
Minimum persons required to form a company
| Type of company | Minimum persons under Section 3(1) | Basic position |
|---|---|---|
| Public company | Seven or more persons | The subscribers form the company by subscribing their names to the memorandum and completing registration requirements. |
| Private company | Two or more persons | A private company must also satisfy the statutory characteristics applicable to a private company under the Act. |
| One Person Company (OPC) | One person | An OPC is a private company with only one person as its member and requires nomination arrangements prescribed by law. |
Section 3(1): formation for a lawful purpose
A company can be formed only for a lawful purpose. The required subscriber or subscribers must subscribe to the memorandum and comply with the Act in relation to registration. The memorandum is the constitutional document that, among other matters, records the company's name, State of registered office, objects, liability and capital particulars where applicable.
One Person Company and nominee requirement
An One Person Company is defined in Section 2(62) as a company having only one person as a member. Section 3 contains special provisions for nomination so that another person may become the member on the death of the sole member or the sole member's incapacity to contract.
The nominee's prior written consent is required in the prescribed manner. The nominee may withdraw consent, and the OPC member may change the nominee in accordance with the prescribed procedure. A change of nominee is not treated as an alteration of the memorandum merely because the nominee's name changes.
For an actual incorporation or nominee change, use the current MCA V3 service and the forms or webforms presently prescribed on the MCA portal, because electronic filing processes and form architecture may be revised from time to time.
Section 3(2): types of liability
A company formed under Section 3(1) may have any one of the following liability structures:
- Company limited by shares: members' liability is limited to the unpaid amount, if any, on the shares held by them.
- Company limited by guarantee: members undertake to contribute the amount stated in the memorandum in the circumstances provided by the Act.
- Unlimited company: there is no statutory limit in the memorandum on the liability of members in the manner applicable to a limited company.
How Section 3 works with other incorporation provisions
Section 3 establishes who may form the company and its possible liability structure. It should be read with Section 4 on the memorandum, Section 5 on articles, Section 7 on incorporation, and, where relevant, Section 8 for companies with charitable objects.
Practical incorporation overview
- Choose the appropriate class and liability structure of the proposed company.
- Identify the required subscriber or subscribers and proposed directors.
- Select and reserve an eligible company name through the applicable MCA incorporation service.
- Prepare the memorandum and articles in the applicable form.
- For an OPC, complete the prescribed nominee consent and nomination requirements.
- File the incorporation application and linked filings through the MCA portal with the prescribed documents, declarations and fees.
- On approval, the Registrar issues the certificate of incorporation in accordance with the Act and applicable rules.
This overview is informational. The exact filing set depends on the type of company, proposed capital, subscribers, directors, registered office and the MCA services in force on the filing date.
Official legal resources
India Code - Section 3, Companies Act, 2013
Ministry of Corporate Affairs - MCA Portal
Last reviewed: 16 September 2026. Readers should verify the latest MCA notifications, rules and filing requirements before making a statutory filing.