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Home › Resources › Methods of becoming a
member in a company

Methods of becoming a
member in a company

Date Posted: 1/31/2012 2:14:25 AM

Posted By: Viona Membership Level: Silver Total
Points: 879

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Company membership

There are two basic ways in which a person may

become a member of a company,namely: by
subscribing to the memorandum of the company or
by agreeing to become a member and therefore the
entry of his name in the company''s register of
▲
members.

▼
Methods of becoming a member
A person may become a member of a company in
either one of the following ways:

i) Subscribing to the memorandum. Section twenty

eight,sub-section one provides that the subscribers
to the company''s memorandum shall be deemed
to have agreed to become members of the
company, and on registration of the memorandum
shall have their names entered in the company''s
register of members.The provision regarding entry
in the register is an administrative directive for the
company''s implementation and non-compliance
which does not affect the pre-existing membership.

ii) Allotment. A person to whom a company''s

shares have been allotted acquires his membership
by virtue of sub-section two of section twenty
eight, being a person who has agreed to become a
member.However,it was held in Nicol''s case that
the membership commences from the moment the
name is entered in the member''s register. If the
company wrongfully refuses to enter the name in
the register, the allotted must take rectification
proceedings for a court order directing the
company to enter the name in its member''s
register.

iii) Transfer. A transfer is a purchase of shares from

a company''s shareholder,and not from the
company itself.A transferee, also acquires his
membership by virtue of sub-section two of section
twenty eight, being a person who has agreed to
become a member. The principle in Nicol''s case
applies to transferees as well.A transferee becomes
a member from the moment his name is entered in
the register of members.

iv) Transmission on death of a member. A

transmission is a legal process by which ownership ▲
of shares in a company changes automatically on
the death of a member to his personal ▼

representative. This is acknowledged in article

twenty nine which provides that "Incase of the
death of a member, the personal representatives of
the deceased where he or she was a sole holder
shall be the only persons recognized by the law as
having any title to his or her interest in the
shares".If the personal representative elects or
decides to be registered himself as the holder of
the shares, the election constitutes the agreement
to be a member. Similarly, he will become a
member from the moment his name is entered in
the register of members.

v) Transmission on bankruptcy of a member. A

bankrupt member''s shares in a company will be
transmitted to his trustee in bankruptcy according
to the principles of bankruptcy law. The company''s
articles may give the trustee an option of being
personally registered as a member, as is provided
for in article thirty. If the trustee elects or decides
to be registered as the holder of the shares, the
election constitutes the agreement to be a member.
Therefore, the provisions of sub-section two of
section twenty eight become applicable - the
trustee in bankruptcy will become a member from
the moment his name is entered in the register of
members.

vi) Compliance with section one hundred and

eighty two, sub-section two.A person who has
consented to be a director, and has given the
statutory undertaking to take and pay for his
qualified shares, is declared by section one
hundred and eighty two, sub-section two to be,"In
the same position as if he had signed the
memorandum."The provisions of section twenty
eight, sub-section one apply to him, and he
becomes a member of the company at the moment
the memorandum of association is registered.
▲
vii) Estoppel.A person who,without having agreed
to be a company''s member, is aware that his name ▼

is wrongly entered in its register of members but

takes no steps to have his name removed therefore
may be estoppel from denying his apparent
membership to somebody who relied on it and
extended credit to the company.

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