Financial structure and membership


The financial structure and membership may be placed under the companies act 1956, the company may registered properly.

Membership in a company?

In the type of a company limited by shares, the shareholders becomes members of the company. The name “members” and “shareholders” are normally used similarly, there is no membership, but across the medium of shareholding.

Normally speaking all shareholder is a member and all members becomes a shareholder. But there may be exclusions to this declaration.

In a company limited by guarantee, the persons who are responsible under the secure section in its MOA, are the company members.

In an unlimited company, the members are the persons who are responsible to the company, each parts to the size of their interests in the company, to provide the sums compulsory to deliver in full, the liabilities and debts of the company.

Definition of member

The conferrer of the company memorandum shall be considered to have decided to become company members, and on company registration shall be entered as members in its register of members.

All other person who owns in writing to become a company member and whose name is entered in its register of members shall be a company member.

All person maintaining an equity share capital of the company and whose name is specified as beneficial owner in the records of a bank shall be considered to be member of the involved company.

Financial structure and membership

Financial Membership

So, there are two major parts which must be ready before a person can get company membership such as

  • Agreement to become a member
  • Approach the name of the person is deciding, in the register of members of the company. Both these provisions are progressive.

The person envious of becoming a company member must have the legal power of entering into a condition in agreement with the allocation of the Indian Contract Act, 1972.

Every person is capable to agreement who is of the age of importance on to the law which he is concern.

Modes of getting membership

Under the section 41 of the companies act, a person may need the company membership.

  • By approving the MOA
  • By conforming in writing to become a member
  • By performing an instrument of transfer of shares
  • By approving to the share transfer of a deceased member in his name
  • By estoppel or acquiescence

Subscribers to the Memorandum

In the case of a member, no allotment or application is required to become a member. By advantage of his subscribing to the memorandum, he is considered to have agreed to turn a member and he becomes ipso facto member on company registration and is responsible for the shares he has supported.

In Gopal Potty v. Venkat Pharameticals and Chemicals Ltd in Coimbatore, a question appears as to whether their appeared promise to convert loan into shares can also create a ground for conversion of register of members. The company vice-chairman collected large sums of money from employees.

In conformity with the conditions of section 36 (2) of the companies act 1956, total money payable by any member to the company under the articles or memorandum must pay for his shares in cash. If the promoters have guaranteed him the shares for services provided in relation with the help of the company. Again he must use the shares quickly from the company and not through transfer from other members.

It shall be a company member. Two provisions have to be satisfied to form a person as a member. But only a person who is on the register of company members who is a shareholder or member of the company. No requests by one whose name is not a register company can be made against the company.

The need of agreement in writing is a statutory request based on a principle of public policy. Hence cannot be rejected by the parties.

 Agreement in writing

By an application and allotment

A person who register for shares becomes a member when shares are assigned to him, a notice of allocation is provided to him and his name is started on the register members. The common law of contract relates to this transaction.

By transfer of shares

The company shares are movable property as mentioned in section 82 of the companies act and are transferable in the way as offered in the articles of the company and as specified under section 108 of the act 1956. A person can become a member by getting shares from a holding member and by having the transfer of shares registered in the company books. For example by obtaining his name entered in company registration of members.

By transmission of shares

A person may become a company member by idle of law. If he achieves to the estate of a departed member. Membership by this procedure is a legal outcomes. On the death of a member, his executor or the person who is qualified under the law to assume to his estate, gains the right to have the shares registered and transmitted in his name in the company’s register of members. No instrument of transfer is required in this case. If the legal appointed of departed member needs to be registered as a member in location of the departed member.

The company shall do so or in another he may need the company to transfer the shares in the name of another person of his option.

By estoppel or acquiescence

A person is considered to be a company member if he permits his name without enough reason to be on the company register members or maintains himself out or authorize himself to be held out as a member.

Holding shares as beneficial owner in the records of facility

A new sub-section (3) has been placed in section 41 by depositories act to give which a person maintaining equity share capital of a company name is registered in the information of the depository shall be considered to be a member of the registered company.


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