Submitted By:-: Ankita Paliwal Bhavika Jain Silky Gaur Tanuja Bishnoi

Submitted By:-
Ankita Paliwal
Bhavika Jain
Silky Gaur
Tanuja Bishnoi
1
INDEX
1. Definition of a member
2. Member v. Shareholder
3. Modes of acquiring membership
4. Who may become a member?
5. Termination of membership
6. Rights of a member
7. Liabilities and duties of a member
8. Variation of the rights of a member
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Definition of a member
Section 41 of the Companies Act defines a member in
the following words:
1. Subscribers of the Memorandum of a

company
2) Agreement in writing to take shares of the

company; and the registration of his name in
its register of members.
3) Besides, a person may also become a

member of a company through the depository
system. 3
Member vs. Shareholder
. Persons whose names are included in the
Register of members, are the members of
the company.
. They may also be called shareholders of

the company as they have been allotted
shares and are holding them in their own
right. In such a situation, the terms
‘member’ and ‘shareholder’ are used
interchangeably.
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DISTINCTION
1. A person who is holding a share warrant is a shareholder

but he is not a member of the company.
2. In the case of a company limited by guarantee having no

share capital or an unlimited company having no
share capital, there will be only ‘members’ but no
‘shareholders’.
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3. A person who subscribers to the memorandum of
association immediately becomes the member, even
though no shares are allotted to him.
4. There may be situation where a person is the holder of

shares but his name is not entered in the Register of
members yet or vice versa.
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Modes of acquiring membership
A person may become a member or a shareholder
of a company in any of the following ways :
1. By subscribing to the memorandum of

association
2. By agreement and registration

a. by application and allotment.
b. by transfer - the member may acquire shares
from an existing member by sale, gift or some
other transaction.
c. by transmission
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d) by estoppel/holding out - this arises when a
person holds himself out as a member or
knowingly allows his name to remain on the
register when he has actually parted with his
shares.
e) conversion of convertible debentures or

loans into shares on acquisition of shares on
take-overs/ merger/ amalgamation through
Court’s order.
3. By agreeing to purchase qualification

shares 8
Who may become a member?
a) Minor.
It has been held in several Court decisions
that there is no legal bar to minor becoming
a member of a company by acquiring shares
(by way of transfer) provided the shares are
fully paid up and no further obligation or
liability is attached to them.
Minor can become member by transfer or
transmission, but a company may not allow a
minor to be a member by allotment.
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b) Company.
A company being a legal person can become a
member of another company if it is so authorised
by its memorandum to purchase or invest in
shares.
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c) Partnership firm
Since a firm is not a legal person, it cannot be
registered as a member of a company. However,
partners may hold shares as joint members.
Can a LLP become a member?
d) Foreigner
A foreigner can become a member subject to the
provisions of FEMA and other legal provisions.
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e) Hindu Undivided Family (HUF)
An HUF is not a legal person (though it is a
‘person’ under Income Tax Act.), hence, it cannot
be a member of a company.
However, an HUF can hold shares in the name of

its ‘Karta’ (i.e. Manager) e.g. shares cannot be held
in the name of V.K. Sharma HUF, but shares can be
held in the name of
V.K. Sharma – Karta (V.K. Sharma HUF).
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Termination of membership
Membership is terminated
when a person’s name is
removed from the register
of members for some
proper reason.
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Membership is terminated when:
a) he transfers all of his shares;
b) his shares are forfeited, surrendered or sold to enforce
a lien;
c) he holds redeemable preference shares and they are
redeemed;
d) he dies and his legal representative transfers the
shares or secures their registration in his own name;
e) his contract to take the shares is rescinded or
repudiated;
f) he becomes insolvent and the Official Assignee or
Receiver disclaims the shares or transfers them; &
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g) the shares are held by a company in the course of
liquidation, and the liquidator disclaims the shares or
transfers them.
h) the company seals his shares in exercise of its rights
under the articles of association of the company.
i) the Court or any other competent authority attaching
and selling the share in satisfaction of a decree or
claim.
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Rights of a member
Liabilities and duties of a
member
Member v Contributory
In the event of winding-up of a company, since a member
may be called upon to contribute towards the assets of the
company, he is accordingly called a contributory.
However, under section 428, the expression ‘contributory’
includes the holder of fully paid up shares. Even a past
member may be held liable as a ‘list B’ contributory in case
the winding-up commences within one year of his ceasing
to be a member of the company.
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Can a member be expelled?
Variation of shareholders’ rights

(Section 106)
The holders of atleast 3/4ths of the issued shares of the
class whose rights are to be varied must give their
consent in writing or a special resolution must be passed
at a separate meeting of holders of the issued shares of
that class.
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Submitted By:-: Ankita Paliwal Bhavika Jain Silky Gaur Tanuja Bishnoi

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1. Subscribers of the Memorandum of a

2) Agreement in writing to take shares of the

3) Besides, a person may also become a

. They may also be called shareholders of

1. A person who is holding a share warrant is a shareholder

2. In the case of a company limited by guarantee having no

4. There may be situation where a person is the holder of

1. By subscribing to the memorandum of

2. By agreement and registration

e) conversion of convertible debentures or

3. By agreeing to purchase qualification

Can a LLP become a member?

However, an HUF can hold shares in the name of

Variation of shareholders’ rights

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