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Membership of A Company

Membership of a company involves acquiring membership through subscribing to the memorandum, allotment of shares, or transfer of shares from existing members. Membership ends through transfer, death, forfeiture, surrender, or winding up of the company. The rights of members include receiving notices, attending meetings, voting, inspecting documents, and applying for investigations. The liabilities of members depend on the type of company but can include unlimited or limited liability. A member is defined as someone in the register, while a shareholder owns shares but is not necessarily a member.

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Anupam Choudhury
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442 views10 pages

Membership of A Company

Membership of a company involves acquiring membership through subscribing to the memorandum, allotment of shares, or transfer of shares from existing members. Membership ends through transfer, death, forfeiture, surrender, or winding up of the company. The rights of members include receiving notices, attending meetings, voting, inspecting documents, and applying for investigations. The liabilities of members depend on the type of company but can include unlimited or limited liability. A member is defined as someone in the register, while a shareholder owns shares but is not necessarily a member.

Uploaded by

Anupam Choudhury
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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MEMBERSHIP OF A

COMPANY
 Acquisition of membership
 Termination of membership
 Rights of members
 Liabilities of members
 Difference between member and shareholder
Definition of Member

 the terms shareholders and members are commonly used as synonyms

 Section 2(55) - a subscriber to the memorandum and deemed to have agreed to become a
member, is to be entered as a member in the register
 A person whose name is entered in the register of members of a company becomes a
member of that company (agrees in writing)
 every person holding shares of the company and whose name is entered as a beneficial
owner.
How to become the member of a company?

 Sec. 2(55)(i) - If a person subscribes the memorandum of association of a company, he


becomes a member by signing it.
 By allotment – Agrees in writing to take shares in the company by allotment.
 By transfer – Purchase shares of a company in the open market and then apply to the
company to register him as a member.
 By transmission (Sec.56) – On the death of a member, his shares transmitted to his
executor or to anyone entitled under law and registered under the latter’s name in the
company’s register. Transmission different from transfer. No transfer deed, execution,
attestation or stamp duty needed.
Who may be a member?

 Person who is major and of sound mind. Minor – May be allotted shares but incurs no
liability (Palaniappa Mudaliar v. Offi)cial Liquidator -1942). Persons of unsound mind
and insolvents not allowed.
 Company as member – a legal person – can invest in another company only if
authorized by the MoA.
 Trade union – registered under the Trade Unions Act, 1926.
 Partnership – not a person. Cannot buy shares on its own name.
 Deity – Not allowed. Shri Ganpati Panchayatan Sansthan Trust v. Union of India (2011)
– demat account
Cessation of Membership

 Transfer
 Death
 Forfeiture
 Surrender
 Winding up of company
 In accordance with provisions of the AoA of the company
Rights of Members

 Right to receive notice of meetings, attend, to take part in the discussion and vote at the
meetings.
 Right to receive copies of the Annual Accounts of the company.
 Right to inspect the documents of the company such as register of members, annual returns,
etc.
 Right to participate in appointments of directors and auditors in the Annual General
Meetings.
 Rights to apply to the Government for ordering an investigation into the affairs of the
company.
 Right to apply to the Court for winding up of the company.
Liabilities of Members

 Depends on the nature of the company


 If unlimited liability – every member is liable in full for all the debts of the company
contracted during his/her membership
 When limited by guarantee – each member bound to contribute in the event of winding up
a sum specified in the liability clause in MoA.
 Most companies – limited liability – bound to contribute the full nominal value of his
shares. Liability ends with it.
Difference between member and shareholder

MEMBER SHAREHOLDER
 A person whose name is entered in the register  The person who owns the shares of a company
of members of a company, is the registered is known as shareholder.
member of the company.  Not defined
 Section 2 (55) defines it.  The holder of a share warrant is a shareholder.
 The holder of a share warrant is not a member.  The company limited by shares can have
 Every company must have a minimum number shareholders.
of members.  After signing the memorandum, a person can
 The person who signs the memorandum of be a shareholder only when the shares are
association with the company becomes a allotted to him.
member.

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