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Membership & Members’ Rights

Membership & Members’ Rights. MGM4321 Dr Zahira bt Mohd Ishan. Membership & Shareholding. Raja Khairulzaman Shah v Zaman Indah Sdn Bhd [1979] 2 MLJ 181 at 183 per Abdoolcader J.: “Mere allotment of shares does not create the status of membership”

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Membership & Members’ Rights

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  1. Membership & Members’ Rights MGM4321 Dr ZahirabtMohdIshan

  2. Membership & Shareholding • Raja Khairulzaman Shah v Zaman Indah SdnBhd [1979] 2 MLJ 181 at 183 per Abdoolcader J.: “Mere allotment of shares does not create the status of membership” ~ Membership is not based on owning of shares. ~Co ltd by guarantee / unltd co: no share capital.

  3. Membership & Shareholding Distinction between a member and a mere shareholder: Ming Yueh Holdings SdnBhd v Kong Ming Bank Bhd & Anor [1990] 1 MLJ 374 at 378 per Haidar J.: the term ‘shareholder’ is often loosely used as a synonym for ‘member’. “However, a member need not be a shareholder, the obvious case being where the company does not have a share capital. Nor is a person who owns shares in a company necessarily a member, for instance, it is possible to purchase shares on the stock exchange without being registered as a holder of those shares in the company’s register of members. Thus a person may be a shareholder (in the sense of owning shares in the company) without being a member.”

  4. S.16(6): 2 ways to become member of co (1 of 2) 1. Subscribers to the MoA are automatically members of the co [members ipso facto on the incorp.] ~ Co ltd by shares (s.18(2) : subscriber must obtain shares directly from the co, not by share transfer from other member [Re Heyford Ironworks Co; Forbes & Judd’s Case (1870)] : Null & void resolution if co by board cancel allotment of shares to subscribers, unless shows that all co’s shares have been allotted to others (Ho Kim Hoi v The Anglo Ame. Corp Ltd [1938])

  5. Ho Kim Hoi v the Anglo Ame. Corp Ltd [1938] Fact: On 28 /6/1935, Appellant (A) subscribed his name to the MoA & AoA, and thereby agreed to take one share of $1,000.. The Company was incorporated on 1 /7/ 1935. A was appointed via an agreement (9/7) as sales director for 3 years at a salary of $440 pm. The Agreement was liable to be determined by 3 months' notice on either side. 19 /8: The Directors passed a resolution purporting to cancel the allotment of the appellant's Memorandum share. 30 /9: The Company gave the appellant three months notice terminating his agreement. 4/10: The parties entered into fresh agreement dispensing with the notice, and putting an end to the agreement as from 30 September 1935, and releasing each other from all claims. 24/10: The directors, having been advised that the cancellation of the allotment of the appellant's Memorandum share was illegal, treated such cancellation as a nullity, and resolved to demand payment of the $1,000 from the appellant. A refused to pay. Held: the Company had no power to cancel a share subscribed for in the Memorandum of Association. As A had not paid the $1000, he must pay it.

  6. Subscribers to the MoA: • Different position from other members: ~ becomes member upon incorp. [ipso facto] ~ name may not appear in the register of members. ~ shares deemed to have been issued at the date of incorp. ~ may not repudiate his membership even if been induced to join co by promoter’s misrepresentation [deemed to have agreed to become member: s.16(6)].

  7. Why can’t subscriber repudiate membership? :Re Metal Constituents Ltd ; Lord Lurgan’s Case [1902] provides 2 main reasons: 1-There is no agent prior to incorp; co is not liable for promoter’s act, & 2-Signing of MoA & incorp of co serve as a contract b’ween subscriber & co, and that contract is basis of the creation of the corp as one of the contracting parties, & every other person who becomes a member becomes such on the footing that that contract exists.

  8. S.16(6): 2 ways to become member of co (2 of 2) • Any person who agrees to become a member & whose name is on the register of members. ~ entries in the register of member is only prima facie evidence: s.158(4) & court can rectify the register to reflect true membership status:s.162 ~ that person must agree (s.16(6)) desirably in writing. Re Compania de Electricidad de la Provincia de Buenos Aires Ltd [1979]: must expressly / impliedly agreed to become a member. ~ if a person offer to take shares, the co must accept within specific term / reasonable time.

  9. ‘Joint holders of shares’: • 2/> members jointly hold the shares; has obligations of a member but with limited rights between themselves & qualified rights by the articles between each of them & the company. ~eg: Art 55 of Table A: at any GM, only the vote of first appeared name of the joint holder accepted. TH Saunders & Co Ltd [1908]: joint holders must decide the order of names in the register of members. ~ s. 15(1)(b): counted as one.

  10. Number of members: • S.14(1) : 2 / > • S.15(1)(b): 2>50 • S.36: veil of incorporation will be lifted if a co carries on its business > than 6 months with fewer than 2 members. After the 6th month + knew of that fact, he’ll be liable for payment of debt of co “contracted during the time that it so carries on business after those six months”. Both co & member shall be guilty .

  11. Shareholder But Not Member • Not entitled to exercise any of the rights of membership. SeowMui Kim v PerwiraHabib Bank [1987]: P was not entitled to vote / appoint nominees after shares had ceased to be registered in her name. • Not subject to member’s liabilities.

  12. Member’s Duty to Company • No fiduciary duty owed to co: Kuwait Asia Bank EC v Nat. Mutual Life Nominees

  13. Member’s Rights • Rights conferred by the Act, articles or general law. These personal rights are: 1- to have the MoA & AoA observed; 2- to restrain ultra vires acts; 3- to have access to company’s records & to have certain information provided to them; 4- where GMs are held, to attend & vote at GMs; 5- to be treated fairly. • Bound by certain policy of the majority which may not coincide with his own

  14. Shareholders’ Rights • Voting rights • Distribution rights • Receive information • Class rights where shares are divided into more than one class.

  15. Cessation of Membership : ~Transferring his shares to another person & the transferee is registered as the new shareholder ~ Transferring his shares back to the company under a “buy-back”: s.67A ~ Their shares are cancelled by the co under a reduction of capital: s. 64 ~ Their partly paid shares are forfeited when the person fails to pay a call; or ~ The co is deregistered, & ceases to exist.

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