What are the effects of irregular allotment of shares?

(1) An allotment made by a company to an applicant shall be voidable at the instance of the applicant within one month after the holding of the statutory meeting of the company and not later or, in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting, within one month after the date of the allotment and not later, and shall be so voidable notwithstanding that the company is in the course of being wound up.

(2) If any director of a company knowingly contravenes or permits or authorizes with respect to allotment, he shall be liable to compensate the company and the allottee for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby:

Provided that Proceedings to recover any such loss, damages or costs shall not be commenced after the expiration of two years from the date of the allotment.

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What is the effect of carrying on business by a Company with less than the legal minimum number of members?

If at any time the number of members of a company is reduced, in the case of a private company, below two or, in the case of any other company, below seven and it carries on business for more than six months, while the number is so reduced every person who is a member of the company during the time that it so carries or business during that periods and is cognizant of the fact that it is carrying on
business with fewer than two members or seven members, as the case may be, shall be individually liable for the payment of the whole debts of the company contracted during that time and may be used for the same without joinder in the suit of any other member.

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