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Termination of
membership and
Distinction bet. Member
and Shareholder
BY:
SWETLINA
Xavier Institute of Management, Jabalpur
.
 A person shall cease to be a member of a
company when his name is removed from the
register of member for a valid reason.
The name of a member may be removed from
the register of members under any of the
following situations :
1.When a member transfers all his shares to
another person and the transfer is registered
in the company, his name shall be removed.
2.When his shares have been validly forfeited,
surrendered or sold by the company to
enforce its lien for unpaid calls, the
membership of the membership of the
member ceases.
.
3. When the shares have been surrendered by the
member, he shall cease to continue as a member
of the company. At times, the existing members
are unable to make a payment of unpaid value of
shares . Therefore they decide to surrender the
shares held by them and get rid of their liability.
4.When his shares being redeemable preference
shares , have been validly redeemed by the
company.
5. When any member dies, his shares are
transmitted to his legal representatives who
become the company after their names are
entered in the register of member.
6. If a member becomes insolvent, and his
shares are transferred by the Official
Assignee or are registered in his name or are
disclaimed by him as property.
7. When the members rescinds the contract of
membership on the ground of fraud or
misrepresentation or a mistake in the
prospectus.
8. When member of a company which is in the
process of winding up, and the liquidator
disclaims the shares under Sec 535 of the
Companies Act.
Distinction bet. Members and
Shareholders
The term “member” and “shareholder” are
interchangeable used in the management
of company’s affairs and the shareholders
of a company limited by shares are
essentially the members of the company.
The two terms do have the same
connotations.
In National Textile Workers Union vs. P.R.
Ramakrishnan, the Supreme Court
through Mr. Justice P.N. Bhagwati
observed that the shareholders of a
company are not its proprietors but they
only contribute to the share capital of the
company and are entitled to dividend. The
shareholders has no right in the property
of the company as they neither have any
legal nor equitable interest vested in it.
The main distinction between a shareholders and
a member of a company may be noted as follows
:-
 A registered shareholder is a member but a
registered member may not be a
shareholder because the company may not have
the share capital.
They may be shareholders only if they have
subscribed for company’s share-capital.
 A legal representative of a deceased member is
not a member until he applies for registration.
He is, however, a shareholder even though his
name does not appear in the register
of members.
Every share-warrant holders of a
company is its shareholder but he is not
treated as a member of the company
except for the purpose of Sec 115(5) of
the Companies Act.
On the death of a shareholder, his legal
representative becomes the shareholders
forthwith whether his name is entered in
the register of shareholder or not. But it
is not so in a case of a member’s death.
 The Supreme Court in Howrah Trading Co.
Ltd. v. Commissioner of Income Tax has,
however , held that the expressions
“member” , “shareholder” has been used
interchangeably in the Companies Act and
denotes, so far as the company is
concerned, only a person who as a
shareholder, has his name entered in the
register of members.
Termination of membership and distinction bet

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Termination of membership and distinction bet

  • 1. Termination of membership and Distinction bet. Member and Shareholder BY: SWETLINA Xavier Institute of Management, Jabalpur
  • 2. .  A person shall cease to be a member of a company when his name is removed from the register of member for a valid reason. The name of a member may be removed from the register of members under any of the following situations : 1.When a member transfers all his shares to another person and the transfer is registered in the company, his name shall be removed. 2.When his shares have been validly forfeited, surrendered or sold by the company to enforce its lien for unpaid calls, the membership of the membership of the member ceases.
  • 3. . 3. When the shares have been surrendered by the member, he shall cease to continue as a member of the company. At times, the existing members are unable to make a payment of unpaid value of shares . Therefore they decide to surrender the shares held by them and get rid of their liability. 4.When his shares being redeemable preference shares , have been validly redeemed by the company. 5. When any member dies, his shares are transmitted to his legal representatives who become the company after their names are entered in the register of member.
  • 4. 6. If a member becomes insolvent, and his shares are transferred by the Official Assignee or are registered in his name or are disclaimed by him as property. 7. When the members rescinds the contract of membership on the ground of fraud or misrepresentation or a mistake in the prospectus. 8. When member of a company which is in the process of winding up, and the liquidator disclaims the shares under Sec 535 of the Companies Act.
  • 5. Distinction bet. Members and Shareholders
  • 6. The term “member” and “shareholder” are interchangeable used in the management of company’s affairs and the shareholders of a company limited by shares are essentially the members of the company. The two terms do have the same connotations.
  • 7. In National Textile Workers Union vs. P.R. Ramakrishnan, the Supreme Court through Mr. Justice P.N. Bhagwati observed that the shareholders of a company are not its proprietors but they only contribute to the share capital of the company and are entitled to dividend. The shareholders has no right in the property of the company as they neither have any legal nor equitable interest vested in it.
  • 8. The main distinction between a shareholders and a member of a company may be noted as follows :-  A registered shareholder is a member but a registered member may not be a shareholder because the company may not have the share capital. They may be shareholders only if they have subscribed for company’s share-capital.  A legal representative of a deceased member is not a member until he applies for registration. He is, however, a shareholder even though his name does not appear in the register of members.
  • 9. Every share-warrant holders of a company is its shareholder but he is not treated as a member of the company except for the purpose of Sec 115(5) of the Companies Act. On the death of a shareholder, his legal representative becomes the shareholders forthwith whether his name is entered in the register of shareholder or not. But it is not so in a case of a member’s death.
  • 10.  The Supreme Court in Howrah Trading Co. Ltd. v. Commissioner of Income Tax has, however , held that the expressions “member” , “shareholder” has been used interchangeably in the Companies Act and denotes, so far as the company is concerned, only a person who as a shareholder, has his name entered in the register of members.