Membership In a Company

I. INTRODUCTION

 For obtaining another separate legal entity a company must be composed of members.[1] The members of the company are the persons who constituted the company as a separate legal corporate entity.[2] When the shareholders are limited by shares in a company then the members become the share holders.[3] This is generally noted that every member is a share holder and every shareholder is a member.[4] In the case of Herdilia Unimers Ltd. v. Renu Jain,[5] it was held that “the moment the shares were allotted and share certificate signed and the name entered in the register of members, the allottee became the shareholder, irrespective of whether the allottee received the shares or not”.[6] The moment shares allotted and are signed by the members, the allotee becomes the shareholder.[7] Under the company which is limited by the guarantee, under this a person who are liable under the memorandum of association of the members of the company.[8] Whereas India limited company members are the people who are liable to the extent of the interest in the company to contribute their full debts and liability of a company.

 

II. DEFINITION OF MEMBERS

 According to Section 2(55) of the Companies Act, 2013:

“(1) the subscribers to the memorandum of a company who shall be deemed to have agreed to become members of the company, and on its registration, shall be entered as members in its register of members;

(2) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members shall, be a member of the company;

(3) Every person holding shares of a company and whose name is entered as a beneficial owner in the records of a depository shall be deemed to be a member of the concerned company”.[9] In the case of Balkrishan Gupta v. Swadeshi Polytex Ltd.[10] it was stated that there are two important elements which must be present so that a person can acquire a membership of company. These are

(i) Agreement to become a member.

(ii) Entry of the name of the person so agreeing, in the register of members of the company.

For becoming a Partner of a company a person must have capacity to enter India under the provisions of Indian Contract Act 1872. This has been stated under section 11 of Indian Contract Act.[11]

III. MODES OF ACQUIRING THE MEMBERSHIP

A person can acquire a membership in different type of modes. It has been stated under the Companies Act 2013-

“By subscribing to the Memorandum of Association (deemed agreement); or

(b) By agreeing in writing to become a member:

(i) By making an application to the company for allotment of shares; or

(ii) By executing an instrument of transfer of shares as transferee; or

(iii) By consenting to the transfer of share of a deceased member in his name; or

(iv) By acquiescence or estoppel.

(c) By holding shares of a company and whose name is entered as beneficial owner in the records of a depository (Under the Depositories Act, 1996), and on his name being entered in the register of members of company. Also every such person holding shares of the company and whose name is entered as beneficial owner in the records of the depository shall be deemed to be the member of the concerned company”.[12] In Re. M.F.R.D. Cruz,[13], 4,000 shares were applied by plaintiff in an organization however no allotment was made to him. Although 4,000 shares were exchanged to him without his demand and his name was entered in the register of members. The plaintiff knew it yet made no steps for correction of register of members. The company went into liquidation and he was held obligated as a contributory. The Court held “when a person knows that his name is included in the register of shareholders and he stands by and allows his name to remain, he is holding out to the public that he is a shareholder and thereby he loses his right to have his name removed”.[14]

RECTIFICATION OF A REGISTER OF MEMBERS

The register of members of a company contains names, occupations, addresses etc.  Any individual, whose name is entered in the register of members from a company, thought to be its part, despite the fact that he may not possess the shares which are appeared in his name in the enlist of individuals. Despite what might be expected, a person, whose name is not entered in the register of members, is not considered as individual from the company despite the fact that he may have done everything to qualifies him for be put on the register of members. Injustice in this manner results from such exclusion or commission.

 

[1] The Companies Act, 2013 The Companies Act, 2013 & The Companies Rules, 2014 , , http://cii.in/WebCMS/Upload/CompaniesActRepresentation.pdf (last visited Apr 11, 2017).

[2] Id.

[3] Prasad, Suresh, Complete list of Sections of Companies Act, 2013, http://www.aubsp.com/sections-of-companies-act-2013/ (last visited Apr 11, 2017).

[4] “Commencement Notification Of Companies Act 2013, Ministry of Corporate Affairs, India, http://www.mca.gov.in/Ministry/pdf/CommencementNotificationOfCA2013.pdf (last visited Apr 11, 2017).

[5]  Herdilia Unimers Ltd. v. Renu Jain[1995] 4 Comp. LJ. 45 (Raj.)

[6] Herdilia Unimers Ltd. vs Smt. Renu Jain, , https://indiankanoon.org/doc/1607110/ (last visited Apr 11, 2017).

[7] PSA Legal Counsellors, India: New Companies Act, 2013 – The Cat Is Finally Out (2016), http://www.mondaq.com/india/x/269316/Corporate Commercial Law/New Companies Act 2013 The Cat Is Finally Out (last visited Apr 11, 2017).

[8] BS Reporter, MCA notifies 183 sections of Companies Act 2013 (2014), http://www.business-standard.com/article/companies/mca-notifies-183-sections-of-companies-act-2013-114032601009_1.html (last visited Apr 11, 2017).

[9] Companies Act, 2013 Key highlights and analysis, , https://www.pwc.in/assets/pdfs/publications/2013/companies-act-2013-key-highlights-and-analysis.pdf (last visited Apr 12, 2017).

[10] Balkrishan Gupta v. Swadeshi Polytex Ltd. (1985) 58 Com Cases 563].

[11] Every person is competent to contract who is of the age of majority according to the law to which he is subject,1 and who is of sound mind and is not disqualified from contracting by any law to which he is subject. —Every person is competent to contract who is of the age of majority according to the law to which he is subject,1 and who is of sound mind and is not disqualified from contracting by any law to which he is subject.

[12] Companies Act, 2013 Key highlights and analysis, , https://www.pwc.in/assets/pdfs/publications/2013/companies-act-2013-key-highlights-and-analysis.pdf (last visited Apr 12, 2017).

[13] Re. M.F.R.D. Cruz, A.I.R. 1939 Madras 803.

[14] Id.

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