Member Modes: Top 7 Ways to Become a Company Member – An In-Depth Guide

Introduction

The Companies Act of 2013 defines “Member” in Section 2 (55) of the Act. It covers everyone who consents to become a company member, holds company shares, and subscribes to the company memorandum. 

In these three scenarios, an individual will only be considered a member if his name is listed in the company’s membership record. Only a person who satisfies the requirements of the Indian Contract Act of 1872 and is able to engage in contracts may join a company. 

A “Private Company” must have two member, a “One Person Company” must have one, and a “Public Company” must have seven members.

Ways to become a member

• By Signing the Association’s Memorandum

To become a member, a subscriber must refrain from submitting an application or making an allocation. He is considered to have consented to become a member by virtue of his memorandum subscription.

He also becomes an ipso facto member upon the company’s establishment and is responsible for the shares he has subscribed for. All funds payable by any member to the company under the memorandum or articles shall be considered debt owed by him to the company in compliance with the terms of Section 10(2) of the Act. 

Furthermore, even if the promoters have pledged to give a subscriber shares in exchange for services rendered in connection with the company’s promotion, the subscriber must pay for his shares in cash. Once more, he must accept the shares straight from the business and not via a transfer from another member.

A person who signs a memorandum agreeing to take any number of shares is fully obligated to do so, and any delay in fulfilling the duty will not release him from culpability. His obligation to pay the company’s creditors stays in effect until the company enters liquidation, at which point he must bring the necessary funds.

• By Written Agreement

• By Application and Allotment: Upon the issuance of shares, a notice of allotment, and the entry of his name in the membership register, an individual who applies for shares becomes a member. 

For this transaction, the general law of contracts is applicable. When the shares are distributed, there is an offer to accept them and an acceptance of this offer. An absolute or conditional application may be made for shares. 

An allocation and notification to the applicant will be adequate acceptance if it is absolute. In contrast, the allocation must be done in accordance with the conditions specified in the application if the offer is conditional.

• By transfer of Shares

As stipulated in Section 44 of the Act, a company’s shares are movable property and may be transferred in accordance with the terms outlined in the company’s articles of incorporation and Section 56 of the Companies Act of 2013. 

A person can join the company by purchasing shares from an existing member and having the transfer of shares recorded in the company’s records, which entails adding his name to the membership register.

• By Transmission of Shares

A person may join a corporation by default, meaning he will inherit a deceased member’s estate. Upon a member’s passing, the shares may be transferred and registered in his name in the company’s member registry by his executor or the legal successor to the member’s estate. In this instance, no transfer instrument is required.

The firm will register the legal representative of the deceased member as a member in place of the deceased member, or else the legal representative may ask the company to transfer the shares to a different person of his choosing.

• By Estoppels

A person is considered a member of a corporation if he permits his name to appear on the membership list without good reason or if he otherwise represents himself or allows himself to be represented as a member. He is prohibited from refusing his membership in such a situation.

• By Registering in Depository Records as the Beneficial Owner of Shares

All holders of the business’s shares whose names are included in the depository’s records as beneficial owners will be considered members of the relevant company. 

If you require assistance with any other legal matter, contact Lawgical Adda. You may seek the revival of a Struck company, relief for directors who have been disqualified, or other legal issues.

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