Flex Ltd, a Company incorporated in 2001, has 8 shareholders with a net worth of ₹2 Crore. During the month of August 2018, Flex Ltd got a term loan of ₹10 Crore sanctioned by a scheduled bank which was immediately avail

Section 3A of the Companies Act, 2013 provides that if at any time, the number of members of a company is reduced (in the case of public company below 7 and in case of private company below 2) and the company carries on business for more than 6 months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those 6 months and is cognizant of the fact that it is carrying on business with less than the required number, shall be severally liable for the payment of the whole debts of the company contracted during that time and may be severally sued therefor. Flex Ltd by making a share transfer in January 2018 got its members reduced to 3 (8 - 5 = 3), which is below the statutory minimum of 7 for a public company. Thus, the Company will attract the provisions of Section 3A when a term loan was availed by the Company from a scheduled bank in August 2018 (which is more than 6 months after the reduction in members). Under the circumstances, the remaining three shareholders shall become severally liable for the repayment of the term loan and the concerned scheduled bank can proceed against them individually.