Page 115 - DCOM106_COMPANY_LAW

Company Law

Notes 8.7 Liability of Members

A member is also subject to certain liabilities and obligations either by the Act or by the articles.
Some of the important ones are:

If shares are not allotted for a consideration other than cash, then a member must pay the
whole nominal value of his shares in cash.
If a member is holding partly paid-up shares, and the company goes into liquidation, then
he becomes liable as contributory to pay, if called upon to do so, towards the assets of the
company (s.429).
A person may be included in the ‘B’ list of contributories, as a past member and required
to pay to the extent of the amount remaining unpaid on the shares, which he held within
one year prior to the commencement of winding up, if (i) on the commencement of
winding up, debts exist which were incurred while he was a member; and (ii) the
contributories of the ‘A’ list (i.e., present members) are not able to satisfy the contribution
required from them in respect of their shares.

As mentioned earlier, the liability of members becomes unlimited and several, even in
the case of a limited liability company (s.45).
A member is bound to the company by all the covenants of the articles; e.g., a company
may have a paramount lien on a member’s shares for any amount due from him to the
company.
In the case of a company limited by guarantee, the member may be asked to contribute to
the extent of his guarantee at the time of winding up.

8.8 Register of Members (Sec. 150)

Section 150 read with s.168 requires every company to keep a register of members ordinarily at
its registered office. The register must contain the following particulars:
The name, address and occupation of each member;
The number of shares held by each member, distinguishing each share by its number and
amount paid-up;
The date of entry in the register;
The date on which a person ceased to be a member.
Where fully paid-up shares have been converted into stock, the fact that stock has been issued is
to be entered against the name of the member in the register of members.
It is the duty of the company to maintain the register of members. A company cannot take
advantage of its failure to maintain the prescribed register of members. Thus, in N. Satyaprasad
Rao and others vs. V.L.N Sastry & Others [(1988)64 Comp. Cas. 492], it was held that, where
register does not incorporate name of all shareholders as members, those shareholders who
have been issued share certificates can exercise their rights as members.

8.8.1 Index of Members

Section 151 requires every company with more than 50 members, to keep an index of names of
members, unless the register itself is in the form of an index. The index of members is required
to be kept at the same place as the register of members. The register of members is open to

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