Members and Shareholders

MEMBERS AND
SHAREHOLDERS
DEFINITION OF A MEMBER
SECTION 2(55)
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
METHODS OF BECOMING A MEMBER
 By subscribing to memorandum
Nominee of OPC?
 By agreement in writing and entering the name in the
register of the company
Both the conditions should be satisfied
(a) By allotment of shares
(b) By transfer of shares
(c) By transmission of shares

 By holding shares and whose name is entered as a
beneficial owner
MEMBERS WITHOUT BEING
SHAREHOLDERS
 Signatories to the memorandum
 Members of company limited by Guarantee
 Transferor of shares
 A person may be liable as member by court
 Forfeiture/ Surrender (within one year)

WHO CAN BECOME A MEMBER?
 As per section 11 of ICA, 1872, whosoever is eligible to
enter a contract can become a member.
Any major person

Sound minded
Is not disqualified from contracting by any law to which he
is a subject.
(Although AOA can restrict)
TERMINATION OF MEMBERSHIP
 Forfeiture of shares
 Sale of shares
 Surrender of shares
 Sale of shares by company
 Death
 Insanity
 Insolvency
 Redemption of preference shares
 Buy-back of shares
 Winding-up
 Tribunal’s order under sec 242 (purchase of shares by other

member)
RIGHTS OF MEMBERS
 Rights to participate in GM
Notice/ Voting/ EGM
 Right to copy of Annual Report
 Right to certain documents and books
MOA/AOA/ Various registers such as register of member,

debenture holders/ Minute books.
 Right to vote and make major corporate decisions
 Right to appoint directors
 Right to appoint auditors
 Shareholder’s right to dividend, right shares and

bonus
 Right to transfer the shares
WHO CAN BECOME A MEMBER?
 1) MINOR
-A minor cannot be a member in the company
-If by ignorance, a minor gets documented in register of
members, the company can repudiate the allotment and
remove his name. A minor can also repudiate but the
company will pay the money back in either case.
-The position changes when the minor attains majority
 In case of partly paid shares to a minor, the company may
refuse to transfer shares to him. If by mistake such a transfer
is register, the company can remove it anytime.
 In case of transmission of shares to a minor, the company
may refuse to register the transmission if the shares are not
fully paid-up.
 2. COMPANY
 A company can become a member of another company,
provided it is authorised by MOA to invest in shares.
 As per section 67 of the Companies Act, 2013, it is
prohibited to purchase its own shares.
 As per section 19 of the CA, 2013, A subsidiary cannot
become a member of its holding company.
Except in following cases:
1) Where the subsidiary is holding shares in the capacity of a
personal representative of a deceased shareholder of the
holding company,
2) Where the subsidiary holds such shares as a trustee
3) Where a subsidiary is a shareholder of the holding company

even before it become a subsidiary company of the holding
company.
 3) PARTNERSHIP FIRM
A partnership firm cannot become the member in other
company except for Section 8 companies.
4) FOREIGNERS
Can become a member but it will cease if he becomes an alien
enemy.
5) INSOLVENT
LIABILITY OF MEMBERS
 Unlimited Liability Company
 Company limited by shares
 Company limited by shares

JOINT MEMBERSHIP
 Number of member
 Register of members
 Voting
 Calls
 Notices
 Dividend
 Transfer
 Nomination

Members and Shareholders

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MEMBERS AND

(b) By transfer of shares

(c) By transmission of shares

 Members of company limited by Guarantee

 A person may be liable as member by court

 Forfeiture/ Surrender (within one year)

Any major person

 Sale of shares by company

 Redemption of preference shares

 Tribunal’s order under sec 242 (purchase of shares by other

 Right to certain documents and books

MOA/AOA/ Various registers such as register of member,

 Shareholder’s right to dividend, right shares and

3) Where a subsidiary is a shareholder of the holding company

 Company limited by shares

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