Membership of a company

Definition According to section 41 of Indian Company’s act 1956; the term member of a company means: The subscribers of the memorandum of the company , and Every other person who agrees to become a member of a company and whose name is entered in its register of members.

Who can become a member ? Minor Insolvent Partnership firms Foreigner Companies Agreement with a minor is absolutely void Is member so long as his name is in register of members, he is a member and is entited to vote even though his shares vest in the official assignee Cant be registered as member as it is not a legal person and the partner may not remain constant. A firm however may purchase shares in a company in the individual names of its partners as a joint shareholders But his voting rights may be suspended when he becomes an alien enemy A co. if permitted by its articles can become a member of another company.

How is membership created .? A person can become member of a company in any one of the following ways: By signing the memorandum of association before it is presented for registration. By getting an allotment of shares and having his name included in the register of members. By getting a transfer of shares from an existing member and having the transfer recognized by the company. By obtaining shares in inheritance from a deceased member and getting his name included in the register of members. By allowing his name to remain in the register of members under such circumstances that he cannot later on plead that he in not a member.

How Membership is terminated or ceases ? By death By insolvency By rescission of the contract to purchase shares By Forfeiture of the shares By surrender of shares to the company By transfer of the shares By sale of the shares in execution of a decree of the court or a sale of the shares by the company By repudiating the contract of membership on the ground of misrepresentation in the prospectus On Winding Up Of the shareholder when his shares are registered in the name of his legal representative. On the shares being transferred by official assignee and registered in the name of purchaser On account of non payment of call and interest thereon,if the article so provide. And the transferee on the company’s register of member

RIGHTS OF MEMBERS Statutory rights – Conferred on the members by the Companies Act. These rights cannot be taken away or modified by any provision in the MOA. Some of the statutory rights are as follows: Right to obtain copies of the Memorandum and Articles on request and on payment of prescribed fee. Right of priority to have shares offered Right to transfer shares. Right to vote Right to inspect the register of members Right to receive notice of meetings Right to share in surplus on winding up. Annual accounts

Documentary rights- these are the rights given to the members by MOA and AOA Legal rights : rights which are given to members by general law, eg., in case of any misstatement or concealment of a material fact in a prospectus , a person who has applied for shares on the faith of such prospectus and has been allotted shares can avoid the contract and claim damages under the general law.

Liability of Members The liability of the members of a company depends on the nature of the company. Company with unlimited liability – Each member is liable in full for all the debts contracted by the company during the period he was a member. Company limited by shares – Each member is liable to pay the full nominal value of shares held by him. If he has already paid a part of amount on the shares, his liability is limited to the unpaid amount on the shares in respect of which he is a member. Company limited by guarantee- Each member is liable to contribute the amount guaranteed by him to be paid in the event of the winding up of the company.