Membership may also be joint i.e. when two or more persons hold a share in the company in their joint names. In such a case the name of the member appearing first is considered to be the main member for the purpose of notices, dividends, etc. However when two or more persons hold one or more shares in a company jointly they shall be treated as a single member.
How membership ceases?
Membership ceases in the following events:
1) by transfer of shares
2) by forfeiture of shares;
3) by surrender of shares;
4) by sale of shares by the company after it exercises its right of lien on the shares or in execution of a decree by Court or the proper authority.
5) By insolvency
6) By death; the name of deceased member continues till the shares are registered in the name of his legal representative
7) By rescission of the contract to take shares on the ground of misrepresentation in the prospectus
8) When the company redeems its redeemable preference shares;
9) On issue of share warrants by the company in place of share certificates;
10) On winding up of the company.
Who can be a member?
An individual or body corporate can be a member in a company. A person who is of sound mind and capable of contracting can be member. A membership in a company postulates a contract between a member and a company. It is therefore necessary that a person should be competent to contract. Let us examine the following cases:
Minor: As a minor is incapable of entering into valid contract he cannot be a member. However, there is nothing in law to prevent a minor for acquiring or holding shares in a joint stock company if he is properly represented and acts by lawful guardian. A guardian can therefore hold shares in a company for and on behalf of minor. A minor’s name may remain on company’s register of members, but during minority he incurs no liability.
The minor on attaining majority can rescind the contract and get his name removed from the register of members. The company however, cannot be compelled to admit the minor as a member . The acquisition of fully paid up shares by a minor is valid in law and that the name of the minor represented by the guardian could be entered on the register of members of the company.
A minor can be admitted to the membership of a company limited by shares by means of transfer or transmission of shares in his name. The shares in question must be fully paid up with no additional liability or obligation attached thereto. The guardian can execute the transfer deed on behalf of the minor.
Company and subsidiary company:
A company or any body corporate being a legal person can be a member of another company. However, a subsidiary company cannot be a member of a holding company. Any allotment or transfers of shares by a holding company to its subsidiary shall be void:
A subsidiary company can, however, be a member of the holding company in the following cases:
1) subsidiary company is concerned as a legal representative of a deceased member of the holding company or
2) when subsidiary company is concerned as a trustee;
3) When subsidiary company is a member of the holding company before the commencement of the act and it continues to be so.
4) Where subsidiary company was a member of the holding company before becoming the subsidiary of the holding company.
Trust: A trust cannot hold shares in a company. A trustee can however hold shares in his name for and on behalf of the trust.
Source: Business Law