Membership

Definition of Member
• Section 2 (55)
• The subcribers to the MOA 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 person who agrees in writing to become a member of the
company and whose name is entered in its register of members shall
be a members of the company,
• Every person holding shares of the company and whose name is
entered as beneficial owner in the records of a depository.
• On the basis of the two pre-requisites for a person to become a
member of a company
• i. the agreement in writing to take shares of the company.
• ii. The registration of his name in its register of members.
• A person can agree to take shares of a company either as the
subcribers at the initial stage of its formation or in any of the
following manner :
a. By subscribing to its further or new shares
b. On transfer of its shares from any existing shareholders
c. On acquisition of its shares by devolution ( transmission to legal
heirs, merger)’
d. On conversion of convertible debentures or loans as per terms of
issuance
Member Vs Shareholder
Modes of acquiring membership
• By subscribing to the MOA
• By agreement and registration – Registration of name of a persone to
be a members may arise by application or allotment, by transfer, by
transmission of shares by death, insolvency etc , by estoppel
Who can be a member
• Minor
• Company
• A Partnership Firm
• A foreigner
• Tradeunion – All India Bank Officers Vs The Dhanlakshmi Bank Ltd
• Public Office = through executive action
Joint membership
Rights of a Shareholder
• Two rights
• Individual Rights and Corporate rights
• Individual rights are enforced by the member individually whereas
Corporate rights are enforced by majority
Rights of a member
• Contractual rights – by virtue of contract – meeting , receive dividends
, right of pre emption , return of capital

• Statutory rights
Statutory Rights
• A person who is a shareholder of a company has many rights under the
Act. Some rights are
• 1. the right to vote at all meeting (S – 47)
• Right to requisition an extra ordinary general meeting of the company
(S – 100)
• The right to receive notice of a general meeting (Section 101)
• The right to appoint proxy and inspect register . Sec 105
• In case of body corporate a member the right to appoint a
representative to attend a general meeting on its behalf (section – 113)
E
• Issue of shares
• Transfer of share ( section 44)
• To participate in the removal of directors by passing an ordinary
resolution (Section 169)
Expulsion of member
• Bajaj Auto Ltd Vs N.K Firodia (1971) 41 Comp. Cas 338 – Company
cannot by amending AOA expel a member – ultra vires and void

• K.Leela Kumar Vs Government of India (1997) 27 CLA 145 (Mad) –

Company is empowered to suspend a member temporarily provided
the power is contained in its articles and the same is exercised bona
fide by its managing committee.
Other Cases
• Herdilia Unimers Ltd Vs Renu Jain (1995) 4 Comp L.J 45 (Raj) – It was
held that the moment the shares were allotted and share certificate
signed and the name in the register of members the allotee became
the shareholder irrespective of the allottee receiving the shares or
not.

• Sant Chemicals p Ltd Vs Aviat Chemicals (PP Ltd ( 2000 ) 25 SCL 473
(Bom) – A person whose name is not entered into the register of
members of the company cannot be treated as member or deemed
member.
• Lalithamba Bai Vs Harrisons Malayalam Ltd (1988) 63 Comp . Cas
662 (Ker) – It was held by Kerala High court both the modes under
section 2 (55) of the act are cumulative . Both the conditions like by
subscribing to MOA and by registration and agreement are necessary
to become a member of the company
Dematerialization and Rematerialiazation
• The Depositories Act 1996 envisages dematerialiazation in the
depository mode. In such case the securities are held in a depository
like NSDL and CDSL and shall be dematerialized. The ownership of the
securities shall be reflected through the book entry . The securities
outside the depository shall be represented by physical scripts.

• Section 4 to 10 of Depositories act