COMPANY LAW

Modes of acquiring membership and

Who may be member

SUBMITTED BY:- ARASHDEEP

KAUR
ROLL NO. 192021009
 Membership in Companies

Membership in a company is a fundamental concept in

corporate law, defining who has a stake in the
organization and the rights and responsibilities that
come with that status. This section delves into the key
aspects of company membership, exploring the various
ways individuals can become members and the legal
framework governing this process.
who actually is a Member?

As per Section 2(55) of Companies Act of 2013, member in relation to a company means: -
The subscribers to the memorandum of a company who shall be deemed to have agreed to become members of
the company, and on its registration, shall be entered as members in its register of members,

-Every other 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,

-Every person holding shares of a company and whose name is entered as a beneficial owner in the records of a
depository shall be deemed to be a member of the concerned company.
Subscribing to the Memorandum
Automatic Membership 1
The subscribers to a
company's memorandum of
association are deemed to 2 Liability for Shares
have agreed to become Subscribers to the
members upon the memorandum are liable for
company's registration. This the shares they have
means they automatically subscribed to, and this
become members without liability remains until the
any further action required. company is liquidated. They
Direct Acquisition 3 must pay for their shares in
Subscribers must acquire cash, even if they were
their shares directly from the promised the shares as
company, as they cannot compensation for
obtain them through a promotional services.
transfer from other
members. The liability
associated with the
subscribed shares is non-
transferable.
Becoming a Member by Agreement

Application and Transfer of Shares Transmission of

Allotment Shares
Shares in a company are
Individuals can become considered movable In the event of a
members by applying for property and can be member's death, their
shares and having them transferred to new legal representative or
allotted to them. This owners. By acquiring the person entitled to
transaction follows the shares from an existing succeed to their estate
general principles of member and having the can have the shares
contract law, with the transfer registered in the transmitted and
application serving as an company's books, a registered in their name,
offer and the allotment person can become a becoming a member
as the acceptance. member. without the need for a
transfer instrument.
Membership by Estoppel
Holding Oneself Out as a
1 Member
2 Estoppel Principle
A person can be deemed a
member of a company if they
allow their name to be entered on
the register of members or
otherwise hold themselves out as
a member, without sufficient
cause.
In such cases, the person is
estopped, or prevented, from
denying their membership, as
they have created the impression
of being a member and allowed
others to rely on that
representation.

3 Protecting the Company's Interests

The doctrine of estoppel helps protect the company's interests by ensuring that
individuals who have held themselves out as members cannot later avoid the
responsibilities and liabilities that come with that status.
Beneficial Ownership and Membership

Beneficial Ownership
Depository Records
This provision recognizes the concept of
Under the Companies Act, 2013, a
beneficial ownership, where an individual
person holding shares of a company
may hold shares without their name being
and whose name is entered as a
directly registered in the company's
beneficial owner in the records of a
records, but they are still considered a
depository is deemed to be a member
member.
of the company.

Protecting Shareholder Rights Enhancing Transparency

This approach promotes transparency in
The inclusion of beneficial owners as the company's shareholder base and helps
members ensures that all individuals prevent the misuse of corporate structures
with a stake in the company are for illicit purposes.
afforded the rights and
responsibilities that come with
membership, regardless of the
technical ownership structure.
The Legal Capacity to Become a
Member
Contractual Capacity
To become a member of a company, an individual must have the legal
capacity to enter into a contract, as defined by the Indian Contract Act,
1872.

Determining Capacity
Factors such as age, mental soundness, and legal status are considered
when assessing an individual's capacity to enter into a contract and, by
extension, become a member of a company.

Protecting Vulnerable Parties

The legal capacity requirement helps ensure that only individuals who
can fully understand and fulfill the obligations of membership are
allowed to join a company, protecting both the company and the
prospective member.
Membership Termination

Resignation Transfer of Death or Expulsion

A member can Shares Insolvency In certain cases, a
voluntarily resign A member's Membership can member may be
from a company, membership can also be terminated expelled from the
subject to the be terminated by the death or company, though
provisions in the through the insolvency of the the legality of this
company's transfer of their member, with their action is a matter
articles of shares to another legal of debate and
association. individual, who representative or requires careful
then becomes the trustee in consideration.
new member. bankruptcy taking
over the
membership
rights.
Membership Rights and Responsibilities

Rights Responsibilities

- Voting on company decisions - - Paying for the shares subscribed -

Receiving dividends and other Complying with the company's articles
distributions - Accessing company of association - Avoiding actions that
records and information - Participating may harm the company's interests -
in the election of directors Disclosing any conflicts of interest
Membership Dynamics and Governance

Shareholder Primacy Stakeholder Interests Balancing Interests

The challenge for

The principle of However, modern companies is to strike a
shareholder primacy corporate governance balance between the
holds that the frameworks also rights and
company's primary recognize the responsibilities of
objective is to maximize importance of members and the
value for its members, considering the interests broader societal impact
who are the owners of of other stakeholders, of their operations,
the business. such as employees, ensuring sustainable and
suppliers, and the responsible growth.
community, in the
company's decision-
making.
The Evolving Landscape of
Membership
1 Technological Advancements
The rise of digital platforms and the increasing use of technology
in corporate governance have introduced new ways for individuals
to participate in and engage with companies as members.

2 Changing Ownership Structures

The traditional model of share ownership is evolving, with the
emergence of new financial instruments and the growing
importance of beneficial ownership, which requires a re-
evaluation of membership rights and responsibilities.

3 Stakeholder Activism
Shareholders and other stakeholders are becoming more vocal
and assertive in their demands for greater transparency,
accountability, and social responsibility from companies, shaping
the future of corporate membership and governance.