Define a ‘member’. Distinguish him from a shareholder

Every company is composed of members, though it is a distinct

legal person existing independent of its members. Generally speaking the members of a company are the persons who, for the time being, constitute the

company as a corporate entity. The term ‘member’ has been defined by Section 41 ofthe Companies

Act and thereby ‘member’ means

(i) The subscribers of the Memorandum of a company shall be deemed to have agreed to become members of the company, and on its registration shall

be entered as members in its register of members.

(ii) Every other person who agrees in writing to become a member of a company and whose name is entered in its register of members. shall be a

member of the company.

(iii) Every person who holds equity share capital of the company and whose name is entered as a beneficial owner in the records of the depository, shall

be deemed to be (‘ member ofthe company. [Inserted by the Depositories Act, 1996].

Member and Shareholder. A shareholder is a person who holds the share of the company. The teml ‘member’ and ‘shareholder’ are used interchangeably

as they arc synonymous, but a member is not necessarily a shareholder. In case of a company limited by shares the members are also the shareholders

of the company; but a company limited by guarantee and an unlimited companies may exist without share capital and therefore, may have no

shareholders. Conversely, the bearer of a share. warrant is a shareholder but is not a member, because his name is struck out from the register of

members. Moreover, a person may be a holder of share by transfer but would not become a member until the transfer is registered in

the books of the company and his name is entered in the register ofmembers.

Section 68-A further provides that the following provision

Section 68-A further provides that the following provision must be prominently printed in every prospectus and in every application form for shares issued by the company: “Any person, who makes in a fictitious name an application to a company for acquiring any shares therein, or otherwise induces a company to allot or register any transfer of shares therein to him or any other person in a fictitious name, Shell e punishable with imprisonment unto 5 years”. The purpose of this section is to prevent allotment of shares in fictitious names. As per the Latest Government’s Guidelines, it should also be printed in every prospectus and in every application form for shares issued by the company that “An applicant should submit only one application (and not more than one) for the total number of shares required. Application may be mad(; in single or joint names (not more than three). Two or more applications in single and/or joint names will be deemed to bl’ multiple application if the sale and/or the first applicant is one and the same. The Board of Directors reserves the right to reject in its absolute discretion all or any multiple applications. “In addition to the above statutory list of contents of a prospectus, the authors can give any such additional facts which may influence the judgment of the
prospective investor.

Memorandum in the presence of at least one attesting witness

The Articles of Association of every company must be (0) printed, (b) divided into paragraphs numbered consecutively, and (c) signed by cach subscriber
to THC Memorandum in the presence of at least one attesting witness with their addresses and occupations.
Contents or Stubbiest Matter of Article4i of Association. The Articles of Association of a company should usually contain the following matte’s :
I. The extent to which "Table A" is applicable.
2. Different classes of shares and their rights.
3. Procedure of making an issue of share capital and allotment thereof. 4. Procedure of issuing share certificates and share warrants.
5. Forfeiture of shares and the procedure of re-issue of shares. 6. Procedure for transfer and transmission of shares.
7. The time lag in between calls on shares.
8. Conversion of shares into stock.
9. Lien on shares. .
10. Payment of commission on shares and debentures to underwriters. 11. Rules for adoption for 'preliminary contracts', if any.
12. Re-organization and consolidation of share capital.
13. Alternator of share capital.
14. Borrowing powers of directors.
15. Generalmcetings, proxies and polls.
16. V, ting rights of members.
17. Payment of dividends and creation of reserves.
18. Appointment, powers, duties, qualifications and remuneration of
directors.
19. Use of the Common Sea] of the company.
20. Keeping of books of account and their audit.
21. Appointment, powers, duties, remuneration, etc., of auditors. 22. Capitalization of profits.
23. Board meetings and proceedings thereof.
24. Rules regarding resolutions.
25. Appointment, powers, duties, qualifications, remuneration. etc.,
of managing director, manager and secrete!)', if any.
26. Arbitration provision, if any.
27. Winding up.

Central Government is a member of the Government company

As regards Annual Report. (a) Where the Central Government is a member of the Government company. the Central Government shall prepare the
annual report on the working and affairs of the company within 3 months of its Annual General Meeting before which the audit report is placed. The annual
report is to be laid before both the Houses of Parliament together with a copy of the audit report and the comments or supplementary report of the
Comptroller and Auditor-General of India. Section 619 (A)
(b) Where the Central Government and a State Government both are
the members of the Government company, that State Government shall also '"
place a copy of the annual report (prepared by the Central Government) , together with a copy of the audit report and the comments before the House
or both Houses of the State Legislature Sec. 619A (2).
(c) Where the Central Government is no. a member of the Government,
every State Government which is a member shall cause an annual report on the working and affairs of the company to be prepared within the same time
(as referred to above) and then soon after lay it before the House or both the. Houses of State Legislature along with the audit report and comments there
3. As regards the Application of Companies Act. A Government comp . is registered under the Companies Act as a 'public' or a 'private' company. The
Central Government may, by notification in the official Gazette, direct that ilny of the provisions of the Companies Act shall not apply to the central
company or shall apply with such exceptions, modification or adaptations as may be specified in the notific-dtion. Such notification should be approved by
the Parliament (Sec. 620).
Subject to such notifications, the Government companies arc at par in all cases, with any other limited company, public or private (as the case may be)
without any discrimination.
In exercise of the powers conferred us 620, the Central Government has exempted Government companies from the application of many provisions of
the Companies Act.