Clause (55) Member

“Member”, in relation to a company, means—

(i) the subscriber to the memorandum of the company who shall be deemed
to have agreed to become member of the company, and on its registration,
shall be entered as member in its register of members;

(ii) every other person who agrees in writing to become a member of the
company and whose name is entered in the register of members of the
company;

(iii) every person holding shares of the company and whose name is entered
as a beneficial owner in the records of a depository. (Effective from
12.09.2013)

1. Meaning of ‘Member’

Member in relation to a company means —

i. the subscriber to the memorandum of the company who shall be deemed

to have agreed to become member of the company, and on its registration,
shall be entered as member in its register of members;

ii. every other person who agrees in writing to become a member of the
company and whose name is entered in the register of members of the
company;

iii. every person holding shares of the company and whose name is entered
as a beneficial owner in the records of a depository;
As per the definition, a person can’t be treated as member of the company unless
his name is entered in the Register of members of the company.
The term ‘member’ is different from that of ‘shareholder’. A shareholder can be
shareholder by acquiring shares but will not be member till his name entered in the
Register of Members of the company. This definition is relaxed in case of section
244 where even a shareholder is treated as a ‘member’.
In case of a company limited by guarantee and not having share capital the person
who provides the guarantee will become its member as soon as his name is
entered in the Register of Members.
2. Position of registered owner of the shares vis-à-vis beneficial owner

A person whose name is entered in the Register of Member shall be treated as

member irrespective of whether he holds the beneficial interest or not. The holder
of beneficial owner (under section 89) is not recognised as a member.

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3. Subscriber to the shares

A person who agrees to subscribe memorandum of association the company shall

be treated as a member of the company, once the company is registered. His name
shall also be entered in the register of members.

As held in U.P. Oil Mills Co. Ltd. v. Jamna Prasad [[1933] 3 Comp. Cas. 256 (All.)],
“Words ‘shall be deemed to have agreed to become members of the company’ as
occurring in section 30 of the 1913 Act/ section 41 of the 1956 Act [corresponding
to section 2(55) of the 2013 Act] mean that the subscribers of the memorandum of
a company are to be treated as having become members of the company by the
fact of the subscription; by merely subscribing to the memorandum of association a
person becomes member of the company.”

4. Agreement in writing and entry in register

In Balakrishna Gupta v. Swadeshi Polytex Limited [[1985] 58 Comp Cas 563],

Supreme Court has held that unless a person agrees in writing to become member
of the company and unless his name is entered in the Register of Members he
cannot be considered as Member of the Company. No oral application will be valid.
“The privileges of a member of a company can be exercised only by that person
whose name is entered in the register of members”.

In Sree Ayyanar Spinning & weaving mills Limited v. Rajendran V.V.V. [1973 43
CompCas 225 Mad], it was held that there cannot be oral application and an
application in writing has to be submitted for becoming member of the Company.

5. Membership by transfer

In case of a person who acquired shares by acquiring from other person, he will not
become the member till the transfer of shares is registered by the company and his
name is entered in the register of members of the company.

6. Membership by transmission

In Indian Chemical Products Limited v. State of Orissa [1966 SCR 380] it was held
that in case of a transmission of shares unless intimation of transmission is
submitted in writing which constitutes an agreement in writing the legal heir cannot
be admitted as member of the Company.

7. Partnership firm as a member

As per Departments Circular No. 4/72 dated 09.03.1972, a firm not being a person
cannot be registered as a member of the Company.

Such firm can be a member of section 8 company.

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 In the case of partners, a firm as such cannot be registered as a member, but the
partners in their individual names may be registered as joint holders of the shares.
If any change occurs in the partnership and the shares are to continue to remain as
assets of the firm, a transfer of the shares may be effected by means of a regular
instrument of transfer.

8. Company as a member of another company

A company being an artificial person and a body corporate, can acquire shares in
other company provided it is authorised by its memorandum or articles of
association of the company. However, a company cannot buy its own shares.

9. Minor as member

As per the departments clarification vide Circular No. 1968/5614 dated

26.02.1964, it was stated that the minor is not capable of entering into a contract
for acquisition of shares. But he can hold shares in the name of the guardian.
Further, a minor may inherit the shares.

10. LLP as a member of the company

Unlike a partnership firm, LLP is a body corporate as provided in section 3 of the

Limited Liability Partnership Act, 2008. Hence, it can become a member of the
company and hold shares in its name.

11. Society as a member

Department’s Clarification dated 24.11.1962 has clarified that “a society

registered under the Societies Registration Act, 1860 should not be deemed to be
a ‘body corporate’ within the meaning of the aforesaid provisions [Refer to Section
2(7) (i) of the Companies Act, 1956 (currently refer section sub clause (i) of clause
11 of section 2 of the Act, although such a society can be treated as a ‘person’
having separate legal entity apart from the members constituting it and thereby
capable of becoming a member of a company under section 41(2) of the
Companies Act, 1956.”

12. Joint members If more than one person jointly applies for and are allotted shares
in a company, each one becomes a member as held in Narandas Munmohandas
Ramji v. Indian Manufacturing Co. Ltd [(1953) 23 Com Cases 335]

In the case of joint holders, they can insist on having their names registered in such
order as they may require, and they may also require their holdings to be split into
several joint holdings with their names in different orders, so that all of them may
have a right to vote as first named holder in one or other of the joint holdings as
held in Re, Saunders (TH.) & Co. [(1908) 1 Ch 415], and Burns v. Siemens Brothers
Dynamo Works Ltd [(1919) 1 Ch 225]. Where a man purchased shares jointly with
his wife’s name, she became entitled on his death as a surviving joint owner to

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 have the shares registered in her name as held in Deputy Commissioner v. M.D.
Aikman [(1934) 4 Com Cases 218, 223 (Oudh)].

The Department has clarified vide Letter No. FI/24/SE/80, dated 05.09.1980 that
there is no need of transfer deeds for transposition of names i.e. change in the
order of names of joint shareholders provided such request is made by all
shareholders jointly to the Company. However, where the change in the order of
names is required in respect of a part of the holding, execution of a transfer deed
will be required.

In the case of a private company, the private company, may refuse to split any
holdings of shares if such splitting will cause an increase in the number of its
members beyond the statutory maximum provided for a private company by section
3(1)(iii)(b).

13. Nominee joint members.

Where the shares of a company were registered in the joint name of the company
and one of the directors, it was held that the director was a nominee of the
company for that purpose. He could act jointly with the company and not
individually. He had no rights of his own in respect of the shares and was not
entitled to bring proceedings on the basis of being one of the registered holders as
held in Exchange Travel (Holdings) Ltd., Re [(1991) BCLC 728 (Ch D)].

14. HUF as member

HUF is not a juristic person, although it is a person for purposes of the Income-tax
Act, 1961. HUF is represented by its Karta. There is no legal bar on HUF to invest its
money in shares and securities and the Companies Act does not prohibit
membership of HUF. In case of an HUF, the shares can be registered in the name of
‘A’ as Karta of HUF as held in Vickers Systems International Limited v. Mahesh P.
Keshwani [(1992) 13 Com Cases 317 (CLB)].

(To be continued…)

Contents of Geeta Saar, as extracted from ICSI Premier on Company Law, is as per
notified law as on 30th September, 2016.

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