BY: MS.

SHUCHI SINGHAL
MEMBERSHIP IN COMPANIES
Meaning: The case of companies limited by guarantee or unlimited companies which may not have a share capital, have no shareholders but they do have members. Similarly, a share warrant holder is a shareholder, but not a member as his name is struck off from the Register of Members. The subscribers to Memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its Register of Members. Every other person who agrees in writing to become a member of a company and whose name is entered in the Register of Members shall be a member of the company. Thus, a person can be become a member or shareholder of a company in any one of the following ways: 1. By being a subscriber to the Memorandum. 2. By agreeing in writing to become a member. 3. By taking a transfer from a member, and 4. A proposed director who has signed & filed an undertaking to take & pay for qualification shares. Who may become a member? 1. 2. 3. 4. 5. A person who is competent Foreign nationals: A foreigner may become a member of the company. A Company: A company being a legal person may, if authorized by its Articles. Joint Hindu Family: Joint holders of shares: In the case of a public company, every joint holder of share is a member of a company. But in a private company, joint shareholders are not considered as individual members, but as a single member. 6. Married Woman 7. Registered Society 8. Minor through the natural guardian: The name of guardian will be entered in the Register of Members. In the case, the guardian will act as a trustee for the minor. 9. A partner of firm: A partnership firm is not recognized by the law as a person and as such, it cannot become a member of a public company, in its own name. 10. An insolvent: 11. Mortgagee of shares: A company obtains loans from anyone, by mortgaging its shares; the mortgagee (creditor) shall be deemed as a member of a company in respect of the shares held by him and be made liable to the company. 12. A person of fictitious name: 13. A Subsidiary company: (i) A legal representative of a deceased member of the company of which it is a subsidiary company. (ii) A trustee of the shares of the holding company where such a subsidiary company has no insurable interest in the trust, and (iii) A subsidiary company; which was a member of an holding company, before the commencement of the present Act of 1956.

Method of acquiring membership: A person may become a member of a company in any of the following ways: 1. By purchasing qualification shares [Sec. (266)(2)] 2. By application and allotment [Sec. (412)] 3. By transfer of shares 4. By allotment of shares for consideration other than cash. 5. By conversion of share warrants into share certificates.

These notes are prepared by MS. SHUCHI SINGHAL 85, Shri Gopal Nagar, Gopalpura By Pass, 5177216, 3241216

Termination or Cessation of Membership A person may cease to be a member of a company in any of the following ways: 1. By transfer of his shares to another person according to the procedure laid down by the Articles. 2. By forfeiture or he surrenders his shares to the company. 3. By death or becoming lunatic, bankrupt or insolvent. 4. By repudiation of contract on the ground of misrepresentation in prospectus. 5. By the company exercising its lien on shares and sell the shares of a shareholder to someone else. 6. By the liquidation of the company. 7. By the issue of share warrants in exchange of fully paid up shares. 8. By redemption of redeemable preference shares. 9. By acquisition of shares by order of a Court 10. By irregular allotment of shares to a member. 11. By commencement of a winding up process of the company. 12. By the company purchases is own shares from the minority shareholders under the orders of C.L.B. Right of Members: I. Individual Rights: 1. Right to receive share certificate and duplicate copy thereof on payment of prescribed fee (Sec.113) 2. Right to inspect the register of members, register of debenture holders and copies of annual returns (Sec.163) 3. Right to receive notices of the meetings, attend and vote at the meeting (Sec. 172) 4. Right to receive dividend declared by the company 5. Right to appeal to the Central Government in case the company fails to hold the annual general meeting in time. (Sec.180) 6. Right to appeal to the court for the issue of winding up order (Sec. 439) II. Collective Rights: 1. Right to demand for holding a poll at the companys meeting. (Sec.169) 2. Right to participate in appointments of auditors and directors, in general meetings (Sec. 224 & 225) 3. Right to elect or remove the directors of the company at the annual general meetings. 4. Right to exercise the following functions by passing ordinary resolutions: (i) Increasing the authorised capital of the company (ii) Re-organisation of capital (iii) Conversion of shares into stock, or vice-versa (iv) To pass a resolution in the statutory meeting in respect of statutory report. 5. Right by passing special resolutions for alteration of Articles and Memorandum, reduction in share capital, payment of interest out of capital, and winding of the company. Liabilities of Members: The extent of liabilities of members depends on the nature of the company. 1. Liabilities of members in unlimited liability companies 2. Liability of members of companies limited by guarantee 3. Liability of members of limited liability companies

S.No. 1.

2.

Distinction between a Member and a Share-holder Basis Difference Member Share-holder Registered share- Every registered member may not Every registered share-holder is holder as a a member of the company. be a share-holder because the member company may not have share capital Membership In a company limited by shares, a A person becomes a registered without shares person can remain as a member shareholder only when been without having shares for the time transferred or registered in his being, When the process of transfer name. is in progress. These notes are prepared by MS. SHUCHI SINGHAL 85, Shri Gopal Nagar, Gopalpura By Pass, 5177216, 3241216

3.

Deceased or Insolvent member

4.

Rights related to meetings

A deceased or an insolvent person continues to be a member of the company so long as his legal representative gets the shares registered in his name All the members of a company have the rights to receive notices of the meetings, and attend and vote at the meetings. Name of each member of a company is entered in the register of Members

A deceased or an insolvent member can not remain as a shareholder.

5.

Name in the register of member Dividend

6.

It is not essential that each number may get dividend. Companies without share capital do not have such provision.

A share warrant holder is a share-holder, but he has no right to receive notices of meeting and, attend and vote, as he is not a member It is not necessary that name of each share-holder is entered in the register of members (so far as the transfer is not registered) Each share-holder of a public company gets dividend when it is declared and paid by the company.

Register of Members and Index of members Sec. 150 Register of members Every company is bound to maintain a register of its members and enter therein the following particulars: (i) Name and address, occupation, if any of each member; (ii) If the company has a share capital, the number of shares held by each member and extent to which the shares have been paid up; (iii) The date on which the name of a person was entered in the register as a member; & (iv) The date on which a person ceased to be a member. Index of Members (Sec. 151): Every company with more than 50 members shall keep an index of members together with the register of Members. The index shall contain a sufficient indication to detect the entries relating to a member. Foreign Register of Members (Sec. 157 and 158) If authorized by the Articles, a company which has issued shares or debentures to persons resident in other country (outside India), the company may keep a branch register in that country. Such register is called Foreign Register of Members Every entry in the Foreign Register is required to be transmitted to home office (in India) and a duplicate register has to be maintained by the company in the home office.

These notes are prepared by MS. SHUCHI SINGHAL 85, Shri Gopal Nagar, Gopalpura By Pass, 5177216, 3241216

Notes

These Notes are prepared by MS. SHUCHI SINGHAL 85, Shri Gopal Nagar, Gopal Pura by pass, 5177216, 3241216