What is an Unincorporated Company? Meaning Explained

Meaning of Unincorporated Companies

Unincorporated companies are such entities which are carrying on business but are not registered as a 'Company' under the corporate law of the country i.e. the Companies Act, 2013 in India.

These entities can be partnership businesses or association of persons or any other similar entities which consists of more than 2 persons (owners).

The law puts restriction on the number of persons who can carry on a profit-oriented-business as an association or partnership without having to register it as a 'company' under the law.

Provisions under the Companies Act, 2013

Refer Section 464 of the Act read with Rule 10 of the Companies (Miscellaneous) Rules, 2014 for detailed provisions.

• Limitation on Number of Persons carry on business

All association or partnership businesses consisting of more than 50 persons are required to register their business as a company under the company law of the country.

Precondition - Such association or partnership must have been formed by individual members thereof for the purpose of carrying on any business that has for its objects the acquisition of gain.

• Non-Applicability

The above provisions are not applicable in the following cases:

(i) a HUF - Hindu undivided family carrying on any business; or 

(ii) an association or partnership, which is formed by professionals who are governed by special Acts.

• Penalty for violation

Contravention of the above mentioned provisions will attract penalty to a fine which may extend to Rs. 1 lakh and the persons involved (owners) shall also be personally liable for all liabilities incurred in such business.

• Liability of members

The liability of the members of these unincorporated companies is unlimited, which means their personal properties can be seized and accounted for meeting the liability of the company.