FINANCIAL STRUCTURE AND MEMBERSHIP – VI – MEMBERSHIP IN A COMPANY

FINANCIAL STRUCTURE AND MEMBERSHIP – V – MEMBERSHIP IN A COMPANY

In case of a Company limited by shares, the Shareholders are the members.

Definition of Member - Section 41

• The subscribers of the Memorandum of a company shall be deemed to have agreed to become members of the company, and on registration, shall be entered as members in its register of member.
• By agreeing in writing to become a member by making an application to the company for allotment of shares, or by executing an instrument of transfer, by acquiescence.
• By holding equity share capital of a company whose name is entered as beneficial owner in the records of a depository.

Minimum Number of Members – Section 12

Public Company – 7 or more

Private Company – 2 or more

Maintenance of Minimum Number – Section 45

The Liability of members become unlimited, if the number of its members falls below the statutory minimum and the company has carries on business beyond the period of six months after the number has so fallen and members are cognizant of the fact that it is carrying on the business with less than seven or two members, as case may be.

Restriction on Membership

By virtue of Section 3(1)(iii)(b), the maximum number of members of a private company is limited to fifty excluding the present and past employees of the Company who continues to be members of the Company.

No restriction with regard to the maximum number of members of a public company.

Cessation of Membership

• Transfer
• Forfeiture
• Sales
• Death of holder
• Adjudged insolvent
• Rescinds the contract on ground of misrepresentation
• Member is a company which is being wound – up in India
• Company is wound up
• Share warrants have been issued in exchange of fully paid shares.

Penalty for personation of Shareholders – Section 116

Imprisonment for a term which may extend to three years and shall also be liable to fine.

Register of Member – Section 150

Index of Members- Section 151

Every company having more than fifty members shall unless the register of members is in such a form as in itself to constitute an index, keep an index of members of the name of members within 14 days after the date on which any alteration is made in register, make necessary alteration of index.

Place of keeping and inspection of the Registrar – Section 163

At registered office of Company or such other place as approved by a special resolution.

Foreign Register – Section 157

Declaration by Persons not holding Beneficial Interest in any Share – Section 187C

Rights of Members

1.   Right to Receive

•  Abridged Balance Sheet and Profit and Loss Account – Section 219
• Report of the Cost Auditor
• Contract for appointment of MD/Manager – Section 302
• Notice of General Meeting – Section 171 172, 173

2.   Right to Inspect

• Debenture Trust deed (Section 118)
• Register of Charge(Section 141)
• Register of Members, and Debenture holder and Index Register, Annual Returns (Section 163)
• Shareholders’ Minute Book (Section 196)
• Register of Contracts (Section 301)

• Register of Directors’ (Section 304)
• Register of Directors’ Shareholders (Section 307)
• Copy of agreement of appointment of the MD/Manager (Section 302)

3.    Right to attend meetings of the shareholders and exercise voting rights at these meetings either personally or through proxy (Section 165, 166, 169, 176, 177).

Liability of Members –

A member is liable to pay the full nominal values of the shares he holds in a company as and when called up by the company.

The liability becomes unlimited if the number falls below the prescribed minimum limit - Section 45