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June 17, 2016 Registrationwala

Can I become shareholder or Member in the Company?

Public Limited Company

Can I become shareholder or Member in the Company?

Members of the company whether public limited company or private limited company are those persons who constitute the company and bring initial capital to run the company. But, it does not mean that after incorporate of the company, nobody can become shareholder or member in the company. Therefore, you can also become the shareholder/member in the company if:

  1. You agree to become a member of a company and your name has been entered in the register of member;
  2. You are holding shares of the company and your name is entered as a beneficial owner in the records of the depository.

One more thing which must be kept in mind that the person desirous of becoming shareholder or member of the company must have a legal capacity to enter into an agreement. Now, the question arises how to check the eligibility or capacity of the person to enter into an agreement? This is provided under the Indian contract Act, 1872, which states that any person can be eligible to enter into contract if:

  • He is of the age of majority
  • He is of sound mind
  • He is not disqualified by any law.

Let’s have a glance at the legal provisions:

A member may acquire membership of a company if:

  1. He subscribes to the MOA of the company.
  2. The Public limited Company comes out with the issue of shares then he can make an application to purchase shares.
  3. An existing member is willing to sell his shares then he can purchase the shares from that person. This is called transfer of shares.

Joint Members:

You can also hold share jointly with some other person. In this case, both persons shall be considered to be members of the company.

Following entity can also become member in the company:

  • One company can also become member or shareholder in the other company. But the subsidiary company can’t hold the share of the holding company.
  • Limited Liability Partnership can become the shareholder in the company.
  • Section 8 company can also become a member of the company if it is authorised to invest by its articles of association

A foreigner can also become a shareholder in the company after complying the provision of the Foreign Exchange Management Act, 1999 but in the event of war with his country, his shareholding’s right are suspended.

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