What is an Illegal Association?

Illegal Association

Under the Companies Act, 1956, not more than 10 persons can come together for carrying on any banking business and not more than 20 persons can come together for carrying on any other of business, unless the association is registered under the Companies Act or any other Indian law. Any association, which does not comply with the above norms, is an illegal association. Therefore, a partnership of more 10 or 20 members, as the case may be, is an illegal association unless the registered under the Companies Act or any other Indian law.

However, you cannot apply this provision in the following cases

1. A Joint Hindu Family business comprising of family members only. But where two or more Joint Hindu families come together for business through partnership, the total number of members cannot exceed 10 or 20 as the case may be, but in computing the number of persons, minor members of such family will be excluded.

2. Any association of charitable, religious, scientific trust or organisation which is not formed with a profit motive

3. Foreign companies.

When the number of members exceeds the prescribed maxi­mum, members must register it under Companies Act or any other Indian law.