Page 113 - DCOM106_COMPANY_LAW

Company Law

Notes 8.4.6 Society registered under the Societies Registration Act, 1860

A society registered under the Societies Registration Act, 1860 is treated as a ‘person’ having a
separate legal entity distinct from the members constituting it. Therefore, such a society can
become member of a company under s.41 (2) of the Companies Act, 1956.

8.4.7 Trade Union

A trade union registered under the Trade Union Act 1926, is a body corporate and thus, can sue
and be sued, and can enter into contracts in its own name. Thus, a registered union can become
a member under s.41 of the Companies Act, 1956.

Task Mr. P who is a member of A Ltd., has been declared insolvent. However, his name
appears in the register of members of A Ltd. Can he attend the AGM of A Ltd., and receive
the 20 percent dividend declared by it? [Hint: He can attend the meeting and also receive
the dividend declared by the company. However, he has to hand over the dividend to the
official receiver or assignee.]

8.5 Cessation of Membership

A person may cease to be a member of a company when:
He transfers his shares to another person and the shares are registered in the name of the
transferee;
His shares are forfeited by the company for non-payment of calls;
He surrenders his shares to the company and the latter accepts the surrender;

His shares are sold by the company to enforce its lien and the buyer of these shares is
registered as a member;
He dies and his legal heir gets his own name registered in the register of members or sells
shares to a party who gets his name registered with the company;
He is adjudged insolvent and the official receiver/official assignee either transfers the
shares to a third party who gets registered as a member or disclaims shares;

He was holder of redeemable preference shares which have now been redeemed by the
company;
He rescinds the contract of membership on the ground of fraud or misrepresentation;

His shares are purchased either by another member of the company or by the company
itself by an order of a court under s.402;
He has got share warrants issued in exchange for share certificates of fully paid-up shares;
and
On the commencement of winding up (but he will be liable as a contributory and is also
entitled to a share in the surplus assets, if any).
As mentioned earlier, a company may be member of another company. In such a situation if the
shareholding company is being wound up, then the membership will come to an end if the
liquidator disclaims the shares.

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