An organization is composed of individuals working together, sharing similar perspectives. While the leader plays a vital role in decision-making, the workforce is encouraged to voice their opinions, and these contributions are deemed valuable. Recognition in the form of promotions is bestowed upon more seasoned employees. Ultimately, a company’s triumph is intricately tied to the contributions of its workforce. It is, therefore, apt to assert that workers constitute the vital core of an organization, ensuring its smooth operation.
Definition of a Company Member
A company member is an individual who formally joins a company by having their name included in the official list of registered members known as the ‘Register of Members.’ This step signifies their acceptance of the company’s norms and often involves holding shares in the company under their name.
In a limited company, individuals who own shares are referred to as members. Conversely, in an unlimited company, members are those individuals whose liability extends to claims on the company’s debts.
Distinguishing Members from Shareholders
| MATTER | Member | Shareholder |
| Meaning | A person whose name is entered in the register of members of a company. | A person who owns the shares of the company. |
| Definintion | Companies Act, 2013 defines ‘Member’ under section 2(55) | Shareholder is not listed under the Companies Act, 2013 |
| Share Warranges | The holder of the share warrant is not a member. | The holder of the share warrant is a Shareholder. |
| Company | Every company must have a minimum number of members. | The Company limited by shares can have shareholders |
| Memorandum | A person who signs the memorandum of association with the company becomes a member. | After signing the memorandum, a person can become a shareholder only if shares are allotted to him. |
Liabilities of Company Membership
Modes of Acquiring Membership
Subscribing to MOA
- If a person agrees to sign the memorandum and pledge his presence on the board of members, he becomes the member of the company.
- Names of the people who have agreed to join the membership of the company should be entered in Register of Members.
- Along with the agreement, if they’ve agreed to share the company’s shares they become the Shareholders of the Company.
Agreement in Writing
- A person would become the member of the company if he ‘agrees in writing’ and gets his name entered in the register of members of the company.
- A shareholder would also become a member of the company if he ‘agrees in writing’, and by the following methods:
- By transfer of shares
- By transmission of shares
- By Estoppels (Membership Without sufficient Cause).
Holding Shares
A person becomes a member of the company if his name is entered as a beneficial owner of the records of the depository and also holds equity share capital of the company. In such cases, the person needn’t apply ‘in writing’ to become a member of the company.
Removal of Membership
The term ‘Cessation’ means ‘Termination’. Just as there’s a process to add a member of the company, there’s a process to terminate that member. Terminating a member of the company can result in removal from the ‘Register of Members’. The following are the modes of removing a member of the company:
Transfer of Membership
- Here, the shares of a member are transferred to another person by the company in the name of the transferee.
- The name of the transferor is removed from the Register of Members.
- After transferring all the shares from the person to another person, the person is legally removed from the company.
Transmission of Membership
- On the death of a shareholder/member of the company, his/her legal heir or representative becomes a member.
Surrender of Membership
- A person is removed from the membership once he/she surrenders his shares, which requires ‘Acceptance on part of Board’.
Forefeiture of Membership
- On account of Loss or selling of a share, the member is terminated from the company.
Share Buy Back
- The person is terminated from the company if the company buys back its shares.
FAQs
Who is considered a member of a company?
A member of a company is any person who holds shares or stock in the company and whose name is entered in the register of members.
What are the rights of members in a company?
Members have various rights, including the right to receive dividends, the right to attend and vote at general meetings, the right to inspect company records, the right to sue the company for wrongful acts, and the right to transfer their shares.
Can a company have different classes of members?
- Yes, a company can have different classes of members, such as ordinary shares, preference shares, or other categories with distinct rights attached to them.
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