Page 119 - DCOM106_COMPANY_LAW

Company Law

Notes In the case of a company limited by shares, the persons whose names are put on the
register of members, are the members of the company.
A subscriber to the memorandum becomes a member, the moment the company is
registered and it is not necessary that their names must have been entered in the register
of members.

The minor can also repudiate the allotment during his minority and he shall be returned
the amount he paid towards the allotment of shares.
A company, being an artificial person and a separate legal entity may become a member
of another company, if it is so authorised by its memorandum to purchase shares.

8.11 Keywords

Company: A company, being an artificial person and a separate legal entity may become a
member of another company, if it is so authorised by its memorandum to purchase shares.
Member: Person who agrees in writing to become a member of a company and whose name is
entered in its register of members, shall be a member of the company.
Partnership Firm: A partnership firm being an unincorporated association and therefore, not
having a separate legal entity distinct from the partners, cannot be registered as a member in the
register of members of a company.
Shareholders: Members may also be called shareholders of the company as they have been
allotted shares and are holding them in their own right.

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.

8.12 Review Questions

1. Define the term ‘members’.

2. Explain the ways of acquiring membership in a company.
3. Under what circumstances does a person cease to be a member of a company?
4. State the provisions of the Companies Act, 1956 relating to maintenance of the register of
members and Index of Members of a company.
5. To what extent is it possible for a minor to become a member of a company, under the
provisions of the Companies Act, 1956? Explain.

6. What is the reporting obligation of the shareholder in case he is not the beneficial owner
of the shares (BENAMI shareholding)?
7. What are the particulars entered in the register of members? How many years should the
register of members be preserved?
8. Comment on the following statements:
(i) In a company, all shareholders are members but all members need not be shareholders.

(ii) Every shareholder of a company is known as a member, while every member may
not be known as a shareholder.
(iii) A minor cannot become member of a company.

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