Members are individuals whose names are registered in a company's register of members, while shareholders are individuals who own shares of a company. Key differences include members must be defined and registered, whereas shareholders simply own shares; holders of share warrants are shareholders but not members; and memberships have minimum and maximum requirements that shareholdings do not. Both members and shareholders have important rights as owners of a company.

1. Difference Between Members and Shareholders

2. Who may be a member?
1. Minor
2. Company
3. Subsidiary company
4. Partnership Firm
5. Foreigners
6. Fictitious Person

3. Who is member?
According t section 41
I.The subscriber of MoA of a co. shall be deemed to
have agreed to become member of the co., & on its
registration , shall be entered in its register of member.
II.Every person who agree [in writing] to become
member of a company and whose name is entered in
the register of member shall be a member of the co.

4. Ways of Membership
Aperson may become a member of the company in any
following ways:
1. By subscribing to the memorandum of association.
2. By application and allotment.
3. Agreeing to become director:
4. By transfer of shares.
5. By transmission of shares.
6. By holding out as a member or by estoppels

5. Termination of Membership
A person will cease to be a member of the company when his
name is removed from the register of members. It may take
place in any of the following ways:
1.When a person transfers his shares. In such a case the
transferor ceases to be a member as soon as the transferee is
registered but not before.
2.When his shares are validly forfeited by the company.
3.When a person makes a valid surrender of his shares of the
company.
4.When a company sells the shares in exercise of its right
of lien over them.
5.When he dies.

6. Cont.
6.When he is declared insolvent.
7.When he repudiates the contract on the ground
of false or misleading statement in the
prospectus of the company.
8.When he is holding redeemable preference
shares and such shares are redeemed.
9.When share-warrants are issued in exchange of fully
paid-up shares and the articles do not recognize
holders of share-warrants as members.
10.When the company is wound-up. But he remains
liable as a contributory.

7. Liability of Member

8. Register of members
(a) The name, address, and occupation of each
member.
(b) In the case of a company having a share
with
capital, the shares held by each member
• numbers and amount paid or considered to be paid
• on them.
(c)The date on which each member’s name was entered
in the register.
(d)The date on which any person ceased to bea member; and
(e)If the shares have been converted into stock, and notice
of conversion given to the registrar, it will

9. Rights of members
1. Claiming Share certificate
2. Duplicate certificate
3. Transfer of shares
4. Legal heir
5. V
oting regarding dividend
6. Attending meetings
7. Appointing auditors
8. Appointing proxy
9. Copies of P&LA/c
10. Appointing & removing directors

10. • Director manage the company. They act as
representative of share holders of the company.
Normally there is no difference between member and
shareholders except certain situations.
• When we talk about a company, the terms
shareholders and members are commonly used as
synonyms, as one can become a member of the
company, except by way of holding shares. In this
way, a member is a shareholder and a shareholder is
a member.
• The statement is true but not completely, as it is
subject to certain exceptions, i.e. a person can
become the holder of shares through transfer, but is
not a member, until the transfer is entered in the
register of members.

11. • In the same way, the transferor of shares lacks shareholding but
continues as a member, until entries are made in the company’s books
regarding the transfer. Likewise, there are a few more points of difference
between member and shareholder which are elaborated below:
• Shareholder means a person who hold the shares by having his name on
the register of members. but where shares are transferred by a member,
the transferee, though not yet registered in the books of the company
would be a 'member' and the 'holder' and a 'member' shall be a 'holder' of
shares, but a 'holder' may not be a 'member'. However, in 1974, a
Division Bench of the Calcutta High Court in CWT, West Bengal III v Smt.
Sumitra Devi Jalan 96 ITR 35, held that Art.19 of the Table A, says that
the transferor shall be deemed to remains a holder of the shares until the
name of the transferee is entered in the register of members in respect
thereof. So, a person to be a member has to hold shares and the name
of such person has to be entered on the register of members, kept by the
company pursuant to section 150 of the Companies Act, 1956 and such
company obviously must be a company limited by shares, or by
guarantee but having a share capital or an unlimited company where
capital is held by indefinite shares.

12. Comparison Chart
•
BASIS FOR COMPARISON MEMBER SHAREHOLDER
Meaning A person whose name is
entered in the register of
members of a company, is
the registered member of
the company.
The person who owns the
shares of a company is
known as shareholder.
Defined in Section 2 (27) Not defined
Share Warrant The holder of a share
warrant is not a member.
The holder of a share
warrant is a shareholder.
Company Every company must have
a minimum number of
members.
The company limited by
shares can have
shareholders.
Memorandum The person who signs the
memorandum of
association with the
company becomes a
member.
After signing the
memorandum, a person
can be a shareholder only
when the shares are
allotted to him.

13. Definition of Member
• A person whose name is entered in the register of
members of a company becomes a member of that
company. The register includes every single of
guarantee given by them. But, in the case of an
unlimited company the members have to contribute
from his personal assets to pay the debts.
• The members cannot take part in the management of
the company, i.e. the manage detail about the member
like name, address, occupation, date of becoming a
member, etc. It also includes every person who holds
company’s shares and whose name is entered as the
beneficial owners in depository records.
•

14. Definition of Member contd……
• The liabilities of members are limited to the amount of shares
held by them in the case of a company having share capital
while in the case of a company limited by guarantee the liability
of members is limited to the amount of guarantee given by
them. But, in the case of an unlimited company the members
have to contribute from his personal assets to pay the debts.
• The members cannot take part in the management of the
company, i.e. the management of the company is looked after
by the Board of Directors. Although the right to appoint and
remove the directors is in the hands of members.
•

15. How to become the member of a company
• If a person subscribes the memorandum of association of a
company, he becomes a member by signing it.
• If a person becomes the beneficial owner of shares whose
name is registered in the record of the depository, then also
he becomes a member.
• If a person gets shares by way of transfer and the transfer is
recorded by the company, along with the entry of the name
of the transferee in the register of members.
• If a person gets shares by way of transmission and the
transmission is recorded by the company along with the
entry of the name in the register of members.
• If a person agrees to take the qualification shares of the
company and pay for it then also he becomes a member of
the company.

16. Definition of Shareholder
• An individual who owns the share of a public or a
private company is known as a ‘Shareholder.’ A
subscriber of shares is not regarded as the
shareholder until the shares are actually allotted to
him.
• The shareholders are the owners of the company,
i.e. to the extent of the share capital held by them.
The legal representative of the deceased member, is
a shareholder, not the member, until and unless his
name is recorded in the register of members of the
company. Hence, it can be said that every
shareholder is a member but every member, is not a
shareholder.

17. The following are the rights of a shareholder:
• Right to transfer or sell their shares.
• Right to get the dividend.
• Right to attend the general meeting and vote.
• Right to take copies of Memorandum and
Articles of Association.
• Right to receive the copy of the statutory
report.

18. Key Differences Between Members and Shareholders
The following are the differences between members and shareholders:
1. A member is a person who subscribed the memorandum of the
company. A shareholder is a person who owns the shares of the
company.
2. The term member is defined under section 2 (27) of the Indian
Companies Act, 2013. Conversely, the term shareholder is not defined
in the Indian Companies Act, 2013.
3. The bearer of a share warrant is not a member, but the bearer of a
share warrant can be a shareholder.
4. All shareholders whose name are entered in the register of members
are the members. On the other hand, all members may not be the
shareholders.
5. In the case of a public company, there must be a minimum of 7
members. There is no such cap on the maximum number of
members. Similarly, a private company can have a minimum of 2 and
maximum of 50 members. As opposed to shareholders, there is no
minimum or maximum limit, in the case of a public company.

19. Conclusion
• Members and Shareholders both are important
persons of any company, whether it is public or a
private limited company. We explained many
differences between them, which makes it clear that
how these two terms differentiate each other.
• However, a member can be a shareholder and in the
same way, a shareholder can also be a member
subject to certain conditions has to be fulfilled for
the same.