Methods of becoming a member in a company

  

Date Posted: 1/31/2012 2:14:25 AM

Posted By: Viona  Membership Level: Silver  Total Points: 879

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Company membership

There are two basic ways in which a person may become a member of a company,namely: by subscribing to the memorandum of the company or by agreeing to become a member and therefore the entry of his name in the company''s register of members.

Methods of becoming a member
A person may become a member of a company in either one of the following ways:

i) Subscribing to the memorandum. Section twenty eight,sub-section one provides that the subscribers to the company''s memorandum shall be deemed to have agreed to become members of the company, and on registration of the memorandum shall have their names entered in the company''s register of members.The provision regarding entry in the register is an administrative directive for the company''s implementation and non-compliance which does not affect the pre-existing membership.


ii) Allotment. A person to whom a company''s shares have been allotted acquires his membership by virtue of sub-section two of section twenty eight, being a person who has agreed to become a member.However,it was held in Nicol''s case that the membership commences from the moment the name is entered in the member''s register. If the company wrongfully refuses to enter the name in the register, the allotted must take rectification proceedings for a court order directing the company to enter the name in its member''s register.

iii) Transfer. A transfer is a purchase of shares from a company''s shareholder,and not from the company itself.A transferee, also acquires his membership by virtue of sub-section two of section twenty eight, being a person who has agreed to become a member. The principle in Nicol''s case applies to transferees as well.A transferee becomes a member from the moment his name is entered in the register of members.

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. This is acknowledged in article twenty nine which provides that "Incase of the death of a member, the personal representatives of the deceased where he or she was a sole holder shall be the only persons recognized by the law as having any title to his or her interest in the shares".If the personal representative elects or decides to be registered himself as the holder of the shares, the election constitutes the agreement to be a member. Similarly, he will become a member from the moment his name is entered in the register of members.

v) Transmission on bankruptcy of a member. A bankrupt member''s shares in a company will be transmitted to his trustee in bankruptcy according to the principles of bankruptcy law. The company''s articles may give the trustee an option of being personally registered as a member, as is provided for in article thirty. If the trustee elects or decides to be registered as the holder of the shares, the election constitutes the agreement to be a member. Therefore, the provisions of sub-section two of section twenty eight become applicable - the trustee in bankruptcy will become a member from the moment his name is entered in the register of members.

vi) Compliance with section one hundred and eighty two, sub-section two.A person who has consented to be a director, and has given the statutory undertaking to take and pay for his qualified shares, is declared by section one hundred and eighty two, sub-section two to be,"In the same position as if he had signed the memorandum."The provisions of section twenty eight, sub-section one apply to him, and he becomes a member of the company at the moment the memorandum of association is registered.

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 therefore may be estoppel from denying his apparent membership to somebody who relied on it and extended credit to the company.

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