The Companies Act: How to Become a Member of a Company?
A company comprising its shareholders, employees and other members together own the company. The initial members and shareholders of a company are known as subscribers. As per the Companies Act, 1956, a public company must have at least seven members and a private company must have at least two members.
The Companies Act: Options for Becoming a Member
Here are a few ways of becoming a member of a company:
Membership by Subscription: Under Sec. 41 of the Companies Act, 1956, the subscribers to the Memorandum of a company are believed to have given their approval to become members of the company. Their names are entered in the register of members as members of the company, once the company gets registered under the Companies Act, 1956.
Membership by Beneficial Ownership: As per Sec. 41(3) of the Companies Act, 1956, every person whose name is mentioned as beneficial owner in the records of the depository and owns equity shares of the company is considered member of the company.
Membership by Qualification Shares: Under the provisions of Sec.266 of the Act, a person must sign for undertaking to hold and reimburse for qualification shares of a public company before becoming the director of the company. He thus automatically becomes the member of the company.
Membership by Application and Registration: As per Sec.41 (2) of the Act, a person who gives a written approval to become a member and whose name is mentioned in the register of members is considered a member of the company. The name of a person may be registered through many ways, such as by transfer, succession, application and allotment.
Final Legal Take Away Tip: A subscriber to the Memorandum of a company cannot cancel the contract to hold shares of the company on the ground of false representation of facts by the promoter of the company.