Explain the different ways in which a person can become a member of a company

Mode of AC(luring Membership. A person may become a

member of a company in the following ways:

1. By Subscribing to the Memorandum of Association. Section 41 (1) provides that a person, who subscribes (i.e. signs) to the Memorandum, shall be

deemed to have agreed to become a member of the company. His rights and liabilities as a member shall commence from the date of inspiration of the

company irrespective of the fact whether he has actually taken the qualification shares or not.

In Smt. Nupur Mitra Vs. Basubani (P) Ltd. (1999)35CLA97 (Cal HC DB), it was held that the subscribers to the Memorandum automatically became the

members of the company. Their subscription to MIA takes the place of application for shares and registration of Memorandum operates as the acceptance

of application by the company.

2. By AI}placation and Allotment. Apart from subscribers to the Memorandum, every other person wishing to become a member must fulfil two conditions:

(i) There must be a written agreement to take shares, e.g. an application for shares and allotment and communication thereof; and (ii) in addition to such

an agreement the name. of the person ll1Ust appear on the register

of members. .

Thus a shareholder is not a member unless his name is entered in the

Register of Members.

3. By Transfer of Shares. Shares in a company are movable property

as provided in Section 82 of the Companies Act and are therefore.

transferable in the manner as provided ir. the articles of the company and in accordance with the provisions of Section 108 of the Act, A person may

become a member of the Company by purchasing shares, in the open market and then geUing the transfer registered in his name.

4. By Transmission of Shares. Transfer of shares by operation of law is known as the transmission of shares. On the death, insolvency or insanity of a

member, his legal representative, official receiver or administrator respectively may get their name substituted. There is no need to execute an instrument

of transfer in these cases.

5. By Agreeing to Purchase Qualification Shares. Directors, who have signed and delivered to the Registrar an undertaking to take up their qualification

shares, are in the same position as subscribers to the Memorandum and are also deemed to have become members on the registration of tIi’ company

[Section 266(2)].

6. Membership by Holding Out. When a person allows his name to be on the register of members of the company, or holds himself out as a member, or

allows others to believe that he is a member (by attending

meeting, by accepting dividends, etc.), then such a person is deemed to be .

a member of the company and he is known as a member by holding. out. The rule of estoppel shall apply and such a person is estopped from denying

capital Structure of the Company

(i) Authorized, issued, subscribed and paid-up capital.

(ii) Size of the present issue. giving separately reservation for preferential allotment to promoters and others.

m. Terms of the Present Issue

(i) Terms of payment.

(ii) How to apply availability of forms, prospectus and mode of payment.

(iii) Any special tax benefits for company and its shareholders.

IV. Particulars of the Issue

(i) Objects.

(ii) Project cost.

(iii) Means of Financing (including contribution of promoters).

Articles of Association lays down the regulations for the day-to-day management of the Company's affairs

The Articles of Association may explain or supplement the Memorandum of Association, but cannot extend its scope. However, if there is no ambiguity in the Memorandum of Association, its terms cannot even be controlled or modified by the Articles of Association.
3. Any act done in volition or beyond the Memorandum shall be ultra vies and void and not rectifiable even by shareholders. But acts done beyond Articles are considered as irregular and can be rectified by shareholders.
In brief, we may say that the Memorandum has superiority over Articles. Memorandum contains the basic conditions for the company constituted or incorporated. On the other hand, the Articles of Association of a company contains mles and regulations in respect of the internal administration of the company. Both are important and have different areas of operations. The Memorandum establishes and regulates the relationship of the company with outsiders whereas the Articles establishes a binding contract between the company and members and amongst members infer se.

Minimum provided that this fact is known to each one of them

On 1st January, 1994 the shares of F and G sold in u court depletion and were purchased by A to the knowledge of e Ethel' shareholder's, The company continued to canyon the business thenaftel' till 31st October, 1994, What would be the' legal consequence of such continuance? Solution, For thc legality of public company there must be a minimum of 7 members. If it falls "below 7, then it must be converted into a Private Company within 6
months, otherwise the members will be personally liable for all debts contracted after ,further acts (Section 45). a war all the member's of a private company, while in general's meting, arc killed by a bomb. Does the company cease to exit Solution. No, the company does not cease to exist because a company has perpetual existence. Its lite does not depend upon the death of any or all member(s). Law creates it and law alone can dissolve it. Pl'llblem 5. X holds all the shal'es (except line) in a timber concern and is also its suhstantial creditor. He gets company's timber insured in his own na'me. Unfortunatcly the timber is destroyed by fire and X claims the l'eimbul'Sement of loss the insu.-ancc company, Is the insul'ance company liuble to X ? Solution. No, the insurance company is not liable to reimburse the loss :'nd pay to X. A
company is a legal person and can own, enjoy and dispose of property in its own name like a natural person. Though it purchases property out of the
funds contributed by its shareholders, yet they cannot claim to be the joint owners of company's property because the company has an entity distinct from the members who constitute it. A shareholder, therefore, has no right to any item of property owned by the company. Consequenlty, he does not have any insurable interest in the company's property. In case of insurance, the insured can claim insurance money only if he had insurable interest in the property lost by- an event insured against. As a shareholder does not have insurable interest in the property of the ()OJrpany, he cannot claim insurance money in the event of loss even if he is a substantial shareholder as well as creditor of the company.. Therefore, in the given problem, X cannot claim the reimbursement of loss to company's property by fire, an event insured against by him. In A1acat/ra Vs. North em Assurance Co. Ltd, a case with facts similar to those given in the problem, a similar decision was announced by thc Court. Problem 6. A public limitcd company has 7 shareholders A,R,C,D,E,F and G. All the shal'es are fully paid up,