A company’s “member” is the person recorded in the register of members or as a depository’s beneficial owner; in short, a member is the legal owner on record, which may differ from the beneficial shareholder until registration aligns.
Who is a member
- Statutory meaning: A member includes (i) subscribers to the Memorandum entered on incorporation, (ii) anyone who agrees in writing to become a member and is entered in the register, and (iii) anyone recorded as beneficial owner in a depository’s records.
- Member vs shareholder: A shareholder becomes a member only when the name appears in the register; in demat systems, the depository beneficial owner entry also confers membership.
Modes of becoming member
- Subscription: Signatories to the Memorandum automatically become members on registration of the company.
- Allotment: On agreeing in writing, allotment, and entry of name in the register, membership commences; contract-law rules on offer and acceptance apply to conditional applications.
- Transfer: Transferee becomes member upon registration of transfer; until then, the transferor remains the member of record.
- Transmission: By operation of law (e.g., death or insolvency), legal representatives/nominees obtain title and can be registered without an instrument of transfer.
- Depository beneficial ownership: A person whose name is entered as beneficial owner in depository records is treated as a member.
Cessation of membership
- Transfer/Transmission registered: Member ceases when the transferee’s or successor’s name is entered in the register.
- Forfeiture/Surrender/Buyback/Reduction: On cancellation and removal from the register, membership ends; contingent post-winding-up liabilities may persist for a limited period under law.
- Death/Insolvency: Membership shifts to legal representatives/assignees on registration; until then, the deceased/insolvent’s estate remains the member of record.
Register of members
- Constitutive record: Entry in the register is essential to establish membership (except via depository beneficial ownership); the register controls rights like voting and dividends.
- Maintenance: The company must maintain a timely, accurate register, capturing member names, addresses, shareholdings, folio/demat details, and changes; inspection rights apply under statute.
- Evidence and updates: Share allotments, transfers, transmissions, and corporate actions require prompt register updates to align legal ownership with economic interest.
Rights of members
- Governance rights: Attend, speak, and vote at general meetings; requisition meetings; propose and vote on resolutions; and appoint/remove directors subject to law and articles.
- Economic rights: Receive dividends when declared, participate in rights/bonus issues, and share in surplus on winding up after creditors and preference payments.
- Information rights: Receive financial statements, auditor reports, and notices; inspect statutory registers and certain records as provided by law.
- Transferability and exit: Transfer shares subject to the articles and law; in demat, transfers occur through depository mechanisms with ensuing register alignment.
Duties and responsibilities
- Compliance and good faith: Abide by the memorandum and articles, meet calls on shares, and refrain from abusive or oppressive conduct toward the company or other members.
- Disclosure and updates: Provide accurate KYC/ownership details, notify changes for register accuracy, and comply with beneficial ownership and depository requirements.
- Participation: Exercise voting and meeting rights responsibly, scrutinize disclosures, and support lawful governance decisions in the company’s long-term interest.
Practical distinctions for banking
- Legal owner vs beneficial: Creditors and counterparties should rely on the register/depository records for enforceable ownership; beneficial interest without registration may not confer member rights
- Timing of rights: Voting, dividend, and entitlement cut-offs depend on the register position on record dates; delays in transfers can shift who receives rights.
Comparison table of “Member” and a “Shareholder.”
Here’s a concise, blog-ready comparison table clarifying the practical and legal differences between a company “Member” and a “Shareholder.” The core distinction: a member is the person/entity whose name is entered in the register of members (or is the depository’s beneficial owner), while a shareholder is one who owns shares; alignment occurs only when ownership is duly registered.
| Basis | Member | Shareholder |
| Legal meaning | Person/entity whose name is entered in the company’s register of members or recorded as beneficial owner in depository records; includes memorandum subscribers on incorporation. | Person/entity that owns shares in the company; economic owner of equity, which may or may not yet be reflected in the register. |
| Statutory footing | Defined in company law (e.g., “member” defined; register-driven status). | Not always explicitly defined in statute; understood as holder of shares/equity interest. |
| How status is acquired | Subscription to memorandum, allotment followed by entry in register, registration of transfer/transmission, or depository beneficial ownership entry. | Acquisition of shares by subscription, purchase/transfer, transmission, or corporate actions (rights/bonus); becomes member only upon registration/beneficial record alignment. |
| Register dependency | Constitutive: rights flow from being entered in the register (or as beneficial owner in depository). | Ownership without registration may not confer meeting/voting/dividend entitlements until entry aligns. |
| Applicability across company types | Applies to all companies (including companies limited by guarantee without share capital). | Applies where there is share capital; not applicable to companies limited by guarantee without shares. |
| Rights in governance | Attend, vote, requisition meetings, receive notices/documents, subject to articles and law; rights hinge on register position/beneficial record. | Voting/dividend rights arise after recognition in register/beneficial record; mere beneficial ownership without registration may not suffice. |
| Economic rights | Dividends and distributions when declared, subject to share class and being on record; share in surplus on winding up as per law/articles. | Economic interest arises from share ownership; cash rights activate on record/benefit date alignment with register/beneficial records. |
| Transfer and transmission | Transferee becomes member only upon company registering the transfer (or reflecting beneficial ownership in depository); transmission by law (death/insolvency) needs registration of successor. | Share purchase/sale alone does not confer member rights until the company/depository records are updated; interim period risk on cut-off dates. |
| Edge cases | Memorandum subscribers are members from incorporation; nominee arrangements can make nominee the member while investor is only beneficial owner. | A beneficial owner can be a shareholder but not a member until entered; a former holder may remain a member of record until transfer is registered. |
| Enforcement relevance | Courts, lenders, and counterparties rely on the register/depository record to establish who holds legal member rights at any point. | Evidence of ownership must be matched with register/depository entries for enforceable governance and distribution rights. |
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