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Question
Answer the following question:
Explain the circumstances when Member is not a shareholder and vice-versa.
Solution
(A) Member without being a shareholder: Although the terms ‘member’ and ‘shareholder’ are used interchangeably and mean the same person, in the following circumstances member is not a shareholder:
(1) Signatories to the Memorandum of Association: Sometimes, a person who subscribes to the Memorandum of Association may not have been allotted any shares. In that case, until he is allotted any share, he is not called a shareholder of the company.
(2) Company Limited by Guarantee Amount: In the case of a company limited by guarantee having no share capital or an unlimited company having no share capital, there will be only members but no shareholders.
(3) Membership by Acquiescence/Estoppel: If a person’s name is improperly entered in the Register of Members and the exercises rights of membership such as attending company meetings, accepting dividends, etc. and does not take any step to remove his name from the Register of Members. In this case, he is a member but not a shareholder. So, he is estoppel from denying this fact so as to disown his liability as a member.
(4) Transfer of shares: The shareholder who has transferred his shares to another person ceases to be a shareholder but continues to be a member till the transfer is registered and the name of the transferee is recorded in the Register of Members.
(5) Transmission of shares: In the event of death or lunacy of a member, his legal heir or representative automatically becomes the shareholder. He is entitled to have his name entered in the Register of Members. He can do so by making an application to the company supported by legal evidence of his title. The deceased person ceases to be a shareholder but continues to be a member of the company until the transmission of shares is completed (effected).
(6) On Insolvency of a Member: Though shares of the insolvent member are taken possession by (held) by the Official Receiver or Assignee appointed by the court. An insolvent member continues to be a member but not a shareholder of the company.
(B) Shareholder without being a Member: As explained above the transferee. i.e. buyer of the shares, legal heir representative in the case of death of a member. The official receiver or assignee in the case of insolvency of members are the shareholders but not the member of the company.
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RELATED QUESTIONS
Select the correct answer from the options given below and rewrite the statement:
________ is a person whose name is entered in the Register of Members.
Select the correct answer from the options given below and rewrite the statement:
A _______ cannot be a member of a company.
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A member has the right to participate in General Meetings means, he has a right to ________
Match the pairs:
| Group ‘A’ | Group ‘B’ |
| a) Insane person | 1) Transfer of shares by operation of law |
| b) Foreigner | 2) Cannot be a member |
| c) Transmission of shares | 3) Cessation of membership |
| d) Surrender of shares | 4) To get copies of Auditor’s, Directors’ Report, etc. |
| e) Right of Members | 5) Can be a Member |
| 6) To attend a board meeting | |
| 7) Duties of member | |
| 8) Surrendering all assets to the company | |
| 9) Demand or claim money from the company | |
| 10) Transfer of shares by order of Secretary |
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End of membership of a person.
Write a word or a term or a phrase which can substitute the following statement:
A person whose name is entered in Register of Members.
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Book in which names of all members are entered.
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The subscribers of this document are considered as Members of the company.
State whether the following statement is True or False:
Both, individuals and body corporate can be members of the company.
State whether the following statement is True or False:
Members of the company can attend general and Board meetings of the company.
Complete the sentence:
A person whose name is entered in the Register of Members of a company is called __________
Complete the sentence:
Members have a right to appoint and remove the __________
Answer in one sentence:
What is the common way of becoming a member of a company?
Correct the underlined word and rewrite the following sentence:
Partnership Firm can be a member of a company.
Justify the following statement.
Insolvent person ceases to be the Member of the company.
Justify the following statement.
Members of company are entitled to several rights.
Justify the following statement.
Members of the company have some fundamental corporate decision-making rights.
Justify the following statement.
Transfer of shares results in termination of membership.
