legal

2.  Definition of member.
 Shareholder vs member.
 Eligibility and methods of membership.
 Termination of membership.
 Rights of members.
 Liabilities of members.
 Register of members.
 Benami holdings.
 Maintenance of register.
 Closure of register.

3.  Section 41 of companies act,
defines member as, “a person
has signed the memorandum of
association and every person
who agrees in writing to become
a member of company and
whose name is entered in the
register of members, shall
become member of company”.

4.  The membership of company can bee secured in
following ways:
1. By acting as signatory to memorandom
2. By agreement and entry in the register of members.
Thus a person who holds the shares of company but
if his name does not appears In the register of
member, he can not be legally called a member of the
company.

5. Shareholder Member
1. A shareholder is merely a holder of
shares.
1. A member not only holds the shares but
also his name is entered in the register of
member.
2. Any restriction on transfer of shares
unable to enter shareholder in
members register.
2. There is no such situation, because only
after successful transfer the name is
entered in register.
3. When member transfer his shares,
he is not a shareholder of the company
any more.
3. When member transfer his shares until
his name is not removed fromregister, he
is still a member of company.

6.  Majority
 Sound-minded
 Not Disqualified by any Law
 A firm is not legal person, it can not registered as a
member of the company but partners may registered
as joint members

7.  By entry in the register of members
 By subscribing MOA of company [ Sec. 41(1)]
 By making application to the company for shares
 By acting as nominee in the letter of renunciation of
allotment.
 By transmission of shares on death, lunacy or insolvency of a
member.
 Byagreeing to pay for qualification shares for acting as
director.
 By principle of estoppels.

8.  When he transfer his shares through the registration of
transfer.
 When he surrenders his shares before their forfeiture.
 When the shares are forfeited on account of non
payment of money.
 When he becomes a lunatic, insolvent.
 Transfers the ownership of shares through gift.
 Renounces the allotment.
 When company is wound up.

9.  A member is entitled to receive notice, circulars, statutory
reports, annual report of directors, auditor reports etc.
 Entitled to attend and vote in a statutory meeting, general and
extra-ordinary general meeting. (Sec. 171)
 Right to appoint proxy.
 A member has right to receive share certificates (Sec. 113).
 Right to inspect the statutory books of company free of
charge and take extracts, if necessary.
 Right to apply to Company Law Board for rectification of
the register of member.
 Under special circumstances he has right to call extra-
ordinary general meeting. (Sec. 167)
 Right to receive bonus shares on capitalization of profit.
 Right to demand poll at a meeting.

10.  Right to alter Memorandum of
Association of the company.
 Right to present petition to the Company
Law Board for relief in case of miss-
management .
 Right to share in the assets of the
company on its winding up.
 Right to apply to Central government for
ordering an investigation into affairs of
the company.

11. As per the Companies Act, 1956 (Section 150) every company
must maintain a register of members which should contain the
following particulars;
1. Name, addresses and occupations of members.
2. The statement of shares held with particulars relating to:
A. Number of shares held.
B. Their distinctive numbers.
C. Amount paid or agreed to be considered as paid on the
shares.

12. 3. Date of entry in register of members.
4. Date on which ceased to be a member.
The amount due and amount paid are two columns are
incorporated if the shares are not fully paid.
If a company does not comply with these requirements, the
company and every officer of the company responsible for
this are liable for fine.

13.  A Benami holder is one whose name is entered in the register
of member as the holder of shares but does not have any
beneficial interest in such shares.
 This practice has been exploited by the investors for evasion
of tax. Hence, the companies (Amendment) Act, 1974, has
introduced new sections viz. 187C & 187D in order to restrict
the misuse of this practice.

14. Immediately after
allotment of shares
completion.
Change in membership
to be reported within 14
days from Date of alteration
in register of member.
Company with share
capital in foreign country,
may maintain register in
that country.
Part of the Principal
Register

15. CLOSURE OF REGISTER
• May close register giving 7 days prior notice with advertisement
in local newspaper.
• Company Law – Close register for not more than 30 days.
Not more than 45 days in a year.
• Defaulters punishable with Rs.500 each day till default continues.
• No transfer or change of membership.

16. Closure of register exercised in below cases
New shares to be issued to existing
members
Share capital to
be recognized
Interim
dividend to be
declared
Call to be made
Before general
meeting of
share holders

17. RECTIFICATION OF REGISTER OF
MEMBERS
 Section 118 – The High
Court may rectify the register
of members if :
 Name of person entered or
omitted without any cause.
 Default or unnecessary delay
in entering on the register the
fact of any person ceasing to
be a member.
 Section 111 - Application
for rectification may be
done by:
a) Aggrieved Person
b) Any Member
c) The Company

18.  Section 118 – The High
Court may rectify the
register of members if :
 Name of person entered or
omitted without any cause.
 Default or unnecessary
delay in entering on the
register the fact of any
person ceasing to be a
member.
Section 111 - Application for
rectification may be done
by:
a) Aggrieved Person
b) Any Member
c) The Company

19. SPECIMEN NOTICE OF RECTIFICATION
OF REGISTER OF MEMBERS
No. of Company......................... Form No............................
Notice of Rectification of Register of Members.
Pursuant to Section 111 of the Companies (Amendment) Act 1988.
Name of the Company...........................Ltd., presented by..............................
.....................Company Ltd. Hereby gives you notice, pursuant to Section 111 of the
Companies Amendment Act, 1988 that by an order of the Company Law Board dated the 18th
day of May 1990, the following rectification has been made in the Register of Members of the
Company.
(Give here the details of the rectification order by the Court.) Dated the .................day of
1990
Signature Destination*
*(State whether Director, Managing Director, Manager or Secretary)

20. VARIATION OF SHAREHOLDERS
RIGHTS
• Alteration only permitted by Memorandum of Association
& Articles of Association.
• Section 106 and 107 lay down procedures to alter rights as followed
1. The content for the variation should be owned by a special
resolution passed by the shareholders concerned or consent
in writing ¾ of shareholders.
2. If the shareholders have any preferential rights, it can be
altered by the issue of new shares of that class only. Section
107, empowers the dissenting shareholders to apply to the
court for the cancellation of variation.