Members and Shareholders PDF

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Summary

In the Companies Act, the terms 'member' and 'shareholder' have been used interchangeably to mean the same thing. The term 'shareholder' refers to a person who owns stock in a corporation that has a share capital. However, a person who owns a specific number of shares in a corporation is referred to...

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MEMBERS AND SHAREHOLDERS

In the Companies Act, the terms 'member' and 'shareholder' have been used interchangeably to mean the same thing. The term 'shareholder' refers to a person who owns stock in a corporation that has a share capital. However, a person who owns a specific number of shares in a corporation is referred to as a shareholder, and a shareholder only becomes a member when his or her name is recorded on the company's register of members. A person, on the other hand, can become a member of a corporation even if they do not own any shares in it. Unlike corporations limited by guarantee or limitless corporations with no share capital, businesses limited by guarantee or unlimited corporations can have members, but not shareholders. In order to distinguish between members and stockholders, the following characteristics must be considered:

DISTINCTION BETWEEN MEMBERS AND SHAREHOLDERS:

One of the primary differences between shareholders and members is that share warrant holders have their names stricken off the register of members immediately after the share warrants are issued to them.

Every registered shareholder is also a member, but not every registered member is also a shareholder, because the business in which he is a member may not have any share capital at the time of his registration.

As long as the name of the transferor of shares or the deceased shareholder is not stricken off the list of members, he or she is considered a member. He cannot, however, be referred to as a shareholder.

A shareholder to whom shares have been transferred is not considered a member until his or her name is included in the company's register of members, as explained above.

A person who misrepresents himself as a member is barred from

thereafter

renouncing

his

membership

in

the

organisation. He is believed to have become a member as a result of implication.

A person may be admitted as a member by an order or decision of a court of competent jurisdiction.

❖ Who is eligible to become a member?

A person who is competent to contract (other than the company itself) can become a member of a corporation, according to the provisions of the company's Memorandum and Articles. However, the following issues should be taken into consideration in connection to certain organisations and individuals:

First.

Minor

According to the Indian Deal Act, any contract with a minor is invalid in its entirety. As a result, in India, a minor who lacks the legal capacity to contract cannot become a member of a corporation. A minor, on the other hand, can apply for shares and receive an allocation of shares subject to the right to repudiate obligation on such shares before or within a reasonable time after becoming a significant.

Second.

Company

Because a corporation is a legal entity, it has the ability to become a member of another corporation by investing in the shares of that corporation, provided that the corporation's memorandum permits it to do so.

Third. A Partnership Firm.

Given the lack of legal personality of a partnership business, it is unable to acquire stock in a corporation in its own name.

Fourth.

A person who purchases stock under false

identities.

If a person obtains shares under the pretence of a fictitious person, that individual is held responsible as a member in respect of those shares, and his or her name will be put in the company's member's register. Furthermore, under Section 68-A, a person who impersonates another person can be penalised.

Fifth. Bankruptcy or insolvency

An insolvent who is unable to contract is unable to become a member of a corporation or partnership. When an individual is an owner of stock in a corporation and is later declared insolvent, he will continue to be treated as a member for as long as his name appears on the register of members, and will be entitled to vote, but the beneficial interest in the shares will be vested in the official assignee or receiver, and any dividend on the shares will be received by the official assignee.

Sixth. Non-citizens and foreign nationals

Foreigners can become shareholders in Indian corporations, but they must first acquire approval from the Reserve Bank of India under the Foreign Exchange Management Act, 1973, in order to do so. If the foreigner becomes an adversary of the United States, his membership privileges will be terminated....