Methods of becoming a member of a company

COMPANY MEMBERSHIP

Definition of member

Although the marginal note to section 28 is "definition of member", the section does not define the word "member". Rather, it states the two basic ways in which a person may become a member of a company, namely—

(a)        by subscribing the memorandum of the company, or

(b)        by agreeing to become a member and the entry of his name in the company's register of members.

Methods of becoming a member of a company

(kasneb cpa company law Dec 2011 Q7 C – Describe six ways through which a person could acquire company membership – 12 marks)

i.          Subscribing to the Memorandum

S.28 (1) provides that the subscribers to the Company's memorandum shall be deemed to have agreed to become members of the Company, and on the registration of the memorandum shall have their names entered in the company's register of members.

ii.         Allotment

A person to whom a company's shares have been allotted acquires his membership by virtue of sub-section 2 of s.28, being a person who has agreed to become a member. However, the membership commences from the moment the name is entered in the members' register

iii.        Transfer

A transfer is a purchase of shares from a Company's shareholder, and not from the company itself.

iv.        Transmission on death of a Member

A transmission is a legal process by which ownership of shares in a company changes automatically on the death of a member to his personal representative.

 

v.         Transmission on bankruptcy of Member

A bankrupt member's shares in a company will be transmitted to his trustee in bankruptcy according to the principles of bankruptcy law.

vi.        Compliance with s.182 (2)

A person who has consented to be a director, and has given the statutory undertaking to take and pay for his qualification shares, is declared by s.182(2) to be, "in the same position as if he had signed the memorandum."

vii.       Estoppel

A person who, without having agreed to be a company's member, is aware that his name is wrongly entered in its register of members but takes no steps to have his name removed therefrom, may be estoppel  from denying his apparent membership to somebody who relied on it and extended credit to the company.