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Recap

Learn about the roles and rights of shareholders and members in a company. Understand the differences between them, their voting rights, and how one becomes a member. Discover the rights and duties involved in being a shareholder or member.

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Recap

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  1. Recap • Chief Executive • Appointment of Chief executive • Term of office of chief executive • Ineligibility • Removal of chief executive • Managing agent • Company's secretary • Qualification and duties of company's secretary

  2. SHAREHOLDERS & MEMBERS

  3. Member and Shareholder • What is a member? • A member is one of the company’s owners whose name has been entered on the register of members. Members delegate certain powers to the company’s directors to run the company on their behalf. • A shareholder is a person who buys and holds shares in a company having a share capital. They become a member once their name is entered on the register of members.

  4. Shareholders • Any person, company or other institution that owns at least one share of a company’s stock. Shareholders are a company's owners. They have the potential to profit if the company does well, but that comes with the potential to lose if the company does poorly. 

  5. Shareholders • Unlike the owners of sole proprietorships or partnerships, corporate shareholders are not personally liable for the company’s debts and other obligations. • Also, corporate shareholders do not play a major role in running the company. The board of directors and executive management perform that function. Common stockholders are, however, able to vote on corporate matters, such as who sits on the board of directors etc. They also benefit when the company performs well and its share price increases, and they have the right to trade their shares on a stock exchange,which makes stock a highly liquid investment.

  6. Rights of shareholders…. • Shareholders can inspect the company’s books and records, sue the corporation for misdeeds of the directors and officers, and if the company liquidates, they have a right to a share of the proceeds. However, creditors, bondholders and preferred stockholders have precedence over common stockholders in a liquidation. Shareholders also have a right to receive a portion of any dividends the company declares.

  7. MEMBERS: Do all members have equal rights? In some companies with a share capital, each share equals one vote. In other companies, each member has one vote. However, a company’s articles of association can make different voting arrangements. For instance, different classes of shares may give shareholders different rights in the company.

  8. Do all members have equal rights? • In addition, a member’s share transfer rights in private companies may be restricted. For instance, common restrictions are that a member who wishes to transfer shares must offer them to the existing members of the company first and must permit the company’s directors to refuse to register a transfer of shares to a person of whom they do not approve.

  9. HOW TO BECOME A MEMBER?

  10. 1.BY SUBSCRIPTION Person subscribes his name to the memorandum of association by signing such memorandum is deemed to be the member of the company.

  11. 2. BY APPLICATION A person who makes an applicationtotake the shares of the company and agrees to become a member but he does not become a member until his name is enter in the register of members.

  12. 3 .BY TRANSFER A person by taking a share from a member , becomes the member of the company, on being put on the register of members.

  13. 4.BY SUCESSION The legal representative of thedeceased member or an official assignee of an insolvent ,become the member of company in place of such deceased or insolvent .

  14. 5. BY ESTOPPEL A person who allows his name to be on the register of members or otherwise holds out as a member. A person who is estopped from denying that he is registered with his consent , becomes the member of the company.

  15. What is the difference between shareholders and directors? • Shareholders and directors have two completely different roles in a company. The shareholders (also called members) own the company and the directors manage it. Unless the articles say so (and most do not) a director does not need to be a shareholder and a shareholder has no right to be a director.

  16. What is the difference between shareholders and directors? • The separation in law between directors and shareholders can cause confusion in private companies. If two or three people set up a company together they often see themselves as 'partners' in the business. That relationship is often represented in a company by them all being both directors and shareholders.

  17. What is the difference between shareholders and directors? • The problem with this is that company law requires some decisions to be made by the directors in board meetings and others to be made by the shareholders in general meetings. To complicate matters further, some decisions have to be made by the directors, but only with the shareholders' consent.

  18. NUMBERS OF MEMBERS

  19. 1.A PUBLIC COMPANY (UN -LISTED) This company shall have a minimum of three members and there is no restriction as to maximum number of members.

  20. 2.A PUBLIC COMPANY ( LISTED ) : This company shall have a minimum of seven members and there is no restriction as to maximum number of members.

  21. 3.A PRIVATE COMPANY : A private company shall have a minimum of two members and a maximum of fifty members .

  22. 4.SINGLE MEMBER COMPANY : A single member company shall have a single member only.

  23. 5.A COMPANY LIMITED BY GURANTEE AND AN UNLIMITED C OMPANY : This company shall have minimum and maximum number of members as are specified by its Articles .

  24. Duties of members • What are the duties of members? • An important duty of a member is to pay the money they are liable to pay by virtue of their membership. • If a company is being wound up, each member has to contribute to the company’s debts based on their liability limits. In a company limited by shares, members are only committed to paying the price of the shares allotted to them. In the case of a company limited by guarantee, members are liable to contribute a set amount. However, the members of a company with unlimited liability are liable to pay all of its debts if it is wound up. • It is also essential that members take part in supervising the performance of the company and its directors to protect their financial and other interests.

  25. RIGHTS : • Members may remove a director by passing a resolution , at a general meeting , of which a notice of intention to propose the name of person to take the position of an existing director being removed, is given ; 2. Members can take proceedings, in the name of the company against the directors

  26. 3. Members may have the affairs of the company investigated by an inspector appointed by the commission . 4. Members are entitled to receive notices of all general meetings of the company and to attend those meetings and speech and vote therein; 5. Members are entitled to receive dividend declared by the company.

  27. Members can call the EGM A member or several members of a company with at least 10% of the paid-up share capital and voting rights in the company can also require the company’s directors to call an EGM. If a company doesn’t have a share capital, members with at least 10% of the voting rights can require the directors to call the EGM. If the directors do not do so, the members can call the meeting themselves.

  28. LIABILITIES :

  29. COMPANY LIMITED BY SHARES : Members are liable only to the extent of the nominal value of shares taken by them .

  30. 2. COMPANY LIMITED BY GURANTEE : Members are liable to the extent of the amounts which , under the memorandum , they undertake to contribute to the assets of the company in the event of its being wound up .

  31. 3. UNLIMITED COMPANY : • The liability of the members is unlimited. • So, the private estates of the members are also liable to pay the debts of the company.

  32. A PERSON MAY CEASE TO BECOME A MEMBER : By transfer of his shares ; or By forfeiture of his shares ; or By surrender of his shares ; or By sale of his shares by the company under its lien ; or By death ; or By winding up of the company .

  33. REGISTER OF MEMBERS The names , father ‘s name , description , nationality , occupation and addresses of the members ; The amount and the number of theirs shares; The date of acquiring the shares; The amount paid on the shares ; The date of entering a member in the register ; and The date and reason for ceasing to be a member .

  34. NOTE : In case of married woman or widow , the name of her husband or deceased husband is required to be stated .

  35. Upcoming • Meetings and Proceedings • Statutory meeting ( sec 157 ) • Annual General meeting ( sec 158 ) • Extra ordinary general meeting ( 159 )

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