CHAPTER 18

MEMBERSHIP IN COMPANY
ZAHRA MIR
52-06
WHO ARE MEMBERS ?

 The company composing of persons who

constitute it as a corporate body and composing a
company are called “MEMBERS OF A COMPANY”.
 The holder of shares in a company must have
entered his name in company’s register of
members.
 A purchaser or transferee of shares whose name
not entered cant be a member of company.
 The seller or transferor, in spite of sale remains a
member of the company.
Situations Creating Members

 A signatory to memorandum immediately becomes a

member on registration of the memorandum before
any shares are allotted to him.

 A member who transfers all his shares ,continues to

be the member, until his account is closed by the
transfer of shares.

 A company limited by guarantee or an unlimited

company having no share capital, have only member
and no shareholder.

 A shareholder whose name is, by mistake or

wrongfully left out of register of members, is a
member.
Situations Creating Shareholders

 A person having a share warrant is a shareholder

but not a member.

 A legal representative of a deceased shareholder

is the shareholder even if his name is not entered
in the register of members.
Competency to Become member

 Under the contract act a person who is competent

a contract can make a valid contract. a person
can become a member of a company by making a
contract for the purchase of shares. Such a
contract is like any other contract. Thus the
company is open to any person who is competent
to contract under the law. companies ordinance
does not lay down any rules in this regard.
 Competency
Here under the capacity to become members of certain persons is discussed :
MINOR:
A minor is NOT competent to make a contract. a minor can apply for shares of a company through his guardian.
COMPANY:
A company is an artificial legal person and is competent to make valid contract. it can also become member if
authorized by its memorandum and articles.
PARTNERSHIP FIRM:
A partnership firm is not a legal person so it can’t purchase shares in its own name.
Insolvent:
An insolvent is NOT competent to become member as he cannot pay his debts.
Foreigner:
A foreigner is competent to become a member of a company incorporated in Pakistan provided he obtains
permission from the Gov.
Trustee:
According to sec.148 NO notice of any trust is to be entered on the register of members.
CONT’
JOINT SHARE HOLDER:
Incase of joint shareholders the following legal provisions are applicable:
 All joint shareholders are counted as one member for all purposes.
 Company is not bound o deliver more than one share certificate to all
joint holders.
 Company is entitle to pay dividend to a joint holder whose name
appears first in the register of members.

 Transfer of shares by joint holders is effective only when it is made by

all of them jointly.
 Signature of any one of them is sufficient for signing a requisition or
notice relating to extraordinary general meeting.
Trade union:
A trade union registered under the law can be a member of a company.
Modes of Acquiring Membership
 Subscribing memorandum
 Written consent
 Application
 Transfer
 Transmission
 Qualification shares
By Subscribing to Memorandum of
Association:

Under the law of the persons who subscribe to the

memorandum of association are deemed to have
agreed to become the members of a competent.
The name of the subscribers will be entered in the
register of members immediately on registration
of memorandum.
1. By Agreeing In Writing To become
Member
A person (other than subscriber) can become a member of the company. if
he satisfies the following conditions:

 An agreement to become a member exits in writing .

 Applicant’s name is entered in the register of members.

In following circumstances a person agrees in writing to become members:

 By application (and allotment)

 By submission of transfer documents.
 By applying for transmission of shares.
2. By Application and Allotment:
A person by making an application for taking shares
becomes a member when the shares are allotted to him
and his name is entered in the registers of members.

3. By Transfer of Shares:
On registration of transfer of shares the transferee
becomes a member of the company.

4. By Transmission of Shares:
On the death or insolvency of a shareholder , his legal
representatives or official receiver become entitled to
the shares of the deceased or insolvent shareholder.

6. By Agreeing to Take Qualification Shares:

A director in a company is appointed when he signs an
undertaking to take and pay for his qualification shares.
Way of Becoming Member-Section2(21)

The members of a company limited by shares are its shareholders. under SEC 2(21)
the members consists of :
1. In relation to a company having share capital:
 A subscriber to the memorandum.
 A person who is allotted or who becomes the holder of any share script or other
security which gives him a voting right and whose name is entered in the
register of members.
2. In relation to a company not having a share capital. a person who has agreed to
become a member and whose name is entered in the register of members.
3. The transferee of shares when his name is entered in the register of members,
SEC 76(1).
4. The nominee or successor in interest of a deceased member when his name is
entered in the register of members. SEC 79.
Minimum & Maximum Number of Members:

PRIVATE COMPANY PUBLIC COMPANY

(NON-LISTED)
 SINGLE MEMBER COMPANY
The min. number of members
required to form a SMC in The min. number of
one member, section members required to
15(1).it falls in the form a public company is
category of private 3.no limit for
company. maximizing.
 PRIVATE COMPANY
Min. one member is required.
maximum must not exceed
50. range b/w 1-50.