Know Your Rights: Rights of Members in A Companies Act 2013

1. Introduction

Rights of members are crucial in the business sector, where forming a company is the standard procedure for conducting business. A company comprises several individuals who become members and are vital to its functioning. Every employee of a business must understand their membership rights and duties.

In this article Lawgical Adda give comprehensive overview of the rights of members in a company and privileges held by members of an organization in order to aid in comprehension and decision-making.

2. Who is A Member?

According to the Companies Act of 2013, the organization’s genuine members are those who signed the memorandum consenting to have their name added to the list of members of the firm. Those who are admitted into a corporation are awarded a membership card as a token of their accomplishment. There are formalities that need to be finished when you are accepted as a member of the company.

3. Membership in the Company

The conditions for becoming a member of a corporation are outlined in Section 41 of the Companies Act of 1956. This provision states that upon the registration of a firm, the names of all those who sign a memorandum of association are added to the member register, and they are instantly deemed to have consented to become members. 

In addition, anybody else whose name appears in the organization’s membership list and who gives written permission to join is recognized as a member. Furthermore, if an individual owns equity share capital and their name appears in the depository’s records as a beneficial owner, they are considered members of the business. They all are entitled to the rights of members of a company.

4. Types of Members in a Company

• Shareholders
• Partners 
• Subscribers
• Directors
• Designated partners 

5. Methods for Becoming a Member of a Company

• Subscribing to the Memorandum: This is a formal agreement that defines a member’s role and liabilities. By subscribing, individuals commit to becoming company members, enrolling their names in the Register of Members. If desired, they can become shareholders by owning company shares.
• Written Agreement: This is a written agreement that signifies acceptance. This process is mirrored in shareholder acquisition, involving application and allotment, transfer of shares, estoppels, and shareholding. Individuals apply for the company’s shares, and the notice of allotment signifies their acceptance. Alternatively, they can acquire shares from existing members, including their names in the Register.
• Shareholding: Membership is attained by having one’s name entered as the beneficial owner of shares in the company, which does not require formal submission.

6. Rights of a Member in a Company

• Distribution of the shares and the transfer of the dividend
• Rights of preemption for shareholders
• The right to take part in a company’s winding up
• Rights Associated with Meetings of Members
• Members’ informational right
• Members’ authority in case of company members
• Application for restoration of a company in case of it’s default
• Members’ right to request a company investigation
• Ability to file a petition for a company’s winding up
• Right to file a petition for redress in oppressive situations 

7. Removal of Membership

The formal removal of their name from the “Register of Members” signifies the termination of their membership. Once a member is terminated he can no longer enjoy the rights of a member in a company. The procedures for canceling one’s membership in the firm are as follows:

• Transfer of Shares
• Transmission of Shares
• Forfeiture of Shares
• Surrender of Shares
• Insolvency of Member
• Winding up of Company
• Repudiation of Contract
• Enforcement of Lien
• Redemption of Shares
• Tribunal’s Order

8. Conclusion

Comprehending the rights of members in a company and the responsibilities of a company’s members is crucial for efficient governance, openness, and responsibility. Members should be conscious of their responsibilities, such as fiduciary obligations and possible personal culpability, as well as their rights to take part in decision-making processes, access information, and collect dividends. 

Members may safeguard their interests and reduce legal risks while contributing to the expansion and success of the firm by keeping themselves informed and abiding by their responsibilities.