In our previous blog, we discussed, “what is a company”. Now, we are explaining the term, “Member of a company”. Here in this blog, legal references are taken from corporate laws of Pakistan.
- Who is member of a company?
- In simple words, a member is:
- Other terms used for Members
- Meaning of Member in Pakistan corporate law
- Register of members
- How many members are there in a company under the Companies Act 2017?
- What is the difference between members and shareholders?
- Who cannot be a member of a company?
- Do directors have to be members?
- Conclusion
Who is member of a company?
Member is a person who agrees to become a member on company formation or buys shares later on or guarantees to undertake a decided amount on company winding up and whose name is entered in the register of members.
In simple words, a member is:
- a founding person and bringing initial capital;
- a person who buys shares (stocks) of a shares limited company:
- a person who undertakes or guarantees an amount (which is decided on company formation) in the event of winding up (closing) of a guarantee limited company towards the loans, winding up expenses etc.:
- a person to whom shares are inherited from a deceased member;
- a person to whom shares are allotted; and
- names of persons of above cases have been entered in the register or list or document of members.
Above cases (1 to 5) are all the possible cases when an investor or any person can become a member (owner) of a corporation.
Other terms used for Members
- Shareholder
- Stockholder
- Company owner
Meaning of Member in Pakistan corporate law
Every person who has agreed to become a member of a company or to whom shares are allotted or who becomes holder of shares of any class of company and whose name is entered in the register of members, is regarded as a member of the company under the Companies Act 2017. Whereas Subscriber to the Memorandum becomes a member on registration of the company.
Register of members
The term register refers to a list or database or any document that has details of owners of a company. As per corporate laws it is a common requirement for corporations in each country to keep a register of its members. This document might be physical or electronic or cloud based as per the respective laws of territory where the business is operating.
The register contains almost personal particulars of a member, name, father or mother or spouse name, Computerized National Identity Card, national ID number, passport number, registered address, class and number of shares etc.
If a member is a legal person (trust, govt, NGO, charity etc.) its details might be legal name, registered address, registered number, country of original incorporation, authorized person (it must be a natural one) and then his / her personal details.
How many members are there in a company under the Companies Act 2017?
As per Companies Act 2017, for private companies, minimum number of its owners is 2 maximum limit is 50. There is no maximum limit of shareholders for public (listed) companies whereas, minimum 3 members are required for public unlisted companies and it is 7 for public listed companies. However, a single member company works with only one shareholder.
What is the difference between members and shareholders?
All the shareholders are members but all the members are not shareholders. In case of a company limited by guarantee, persons who have undertaken to contribute in case of winding up, are the members. Usually, the Company limited by guarantee does not have share capital. However, the companies act 2017 now allows guarantee limited corporations to have share capital.
Who cannot be a member of a company?
Minor (under 18 age), lunatic, unsound mind, insolvent cannot be the members of a company.
Do directors have to be members?
As per Section 153(i) of the Companies Act 2017, directors must be company members. Exceptions to this general rule are: a) whole-time employee, b) chief executive, c) person representing a member which is a legal person and d) a person representing a creditor or other special interests by virtue of contractual arrangements.
Conclusion
Member is normally the legal name of the owners of a company. Concept of members in different regional corporate laws is the same. Wording of legal language may vary. It is the common understanding that a member is the owner of a company.
In other blogs I am throwing light on other topics – duties and rights of members, who are directors, their duties, rights etc.
Stay tuned to my site.
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