A two-member company loses one member due to death. Sole surviving member is left.
(i) Can the Company Continue to Exist?
The company does not automatically dissolve on the death of one member. It remains a legal person — a company's existence does not terminate merely because membership falls below the statutory minimum. However, continuing business in this state carries serious legal consequences.
Under Section 3 of the Companies Act, 2013, a private company requires a minimum of 2 members; a public company requires a minimum of 7 members.
Under Section 3A (inserted by the Companies Amendment Act, 2017): if a company carries on business with fewer members than the statutory minimum for more than 6 months, and the surviving member knows of this, that member becomes severally liable for all debts contracted during that period. The protection of limited liability is thus lost for the remaining member if the deficiency continues beyond 6 months.
(ii) Remedies Available
- Induct new member(s): The simplest remedy — the surviving member should immediately transfer shares to another person or issue new shares to bring membership above the minimum required (2 for private company, 7 for public company).
- Conversion to OPC (One Person Company): If the sole surviving member is an Indian citizen and resident, he/she may apply to convert the company into a One Person Company under Section 18 read with Rule 7A of Companies (Incorporation) Rules, 2014. An OPC is specifically designed for a single-member situation.
- Winding up: Under Section 271(1)(e), the Tribunal may order the winding up of the company if the number of members falls below the statutory minimum. A petition can be filed by the Registrar, a creditor, or a contributory.
Conclusion: The company can technically continue to exist but the surviving member must act within 6 months to either induct new members or convert to OPC, or face personal unlimited liability for company debts. After 6 months, winding up is also a risk.