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Rights and Duties of Members of Company

The document outlines the rights and duties of company members as defined by the Companies Act, 2013. Members have responsibilities such as adhering to legal limits, paying due shares, and contributing to company assets, while also enjoying rights like access to documents, participation in decisions, and profit sharing. Membership can be terminated through methods such as transfer, transmission, surrender, or forfeiture.

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57 views4 pages

Rights and Duties of Members of Company

The document outlines the rights and duties of company members as defined by the Companies Act, 2013. Members have responsibilities such as adhering to legal limits, paying due shares, and contributing to company assets, while also enjoying rights like access to documents, participation in decisions, and profit sharing. Membership can be terminated through methods such as transfer, transmission, surrender, or forfeiture.

Uploaded by

aovinandi35
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Rights and duties of the members of a Company

According to section 2(55) of the Companies Act, 2013

“member”, in relation to a company, means:

(i) The subscriber to the memorandum of the company who shall be deemed to
have agreed to become member of the company, and on its registration, shall
be entered as member in its register of members;
(ii) Every other person who agrees in writing to become a member of the
company and whose name is entered in the register of members of the
company;
(iii) Every person holding shares of the company and whose name is entered as
a beneficial owner in the records of a depository

Membership in a company involves both rights and liabilities, defining the scope of an
individual’s responsibilities and authority within the organisation.

Duties of Membership:

Liability refers to the state of accepting responsibility for one’s role. In the context of
company membership, individuals assume certain responsibilities, including:

1. Dealings within Legal Limits:

Members are obliged to engage in transactions that align with the legal framework
governing the company.

2. Payment of Due Shares:

Members are required to fulfil their financial obligations by paying any due shares as
stipulated by the company.

3. Adherence to Majority Decisions:


It is the responsibility of members to abide by decisions made by the majority within the
organisation.

4. Contribution to Company Assets:

Members are expected to contribute to the overall assets of the company, supporting its
financial well-being.

Rights of Membership:

Members are endowed with specific rights that empower them within the company
structure. These rights include:

1. Access to Documents and Account Details:

Members have the right to access relevant documents and details pertaining to the
company’s accounts, ensuring transparency.

2. Participation in Fundamental Corporate Decisions:

Members possess the right to participate in and contribute to fundamental decisions that
impact the corporate direction of the company.

3. Attendance and Participation in General Board Meetings:

As members, individuals have the right to attend and actively participate in general
board meetings, where key discussions and decisions are made.

4. Appointment of New Directors:


Members hold the authority to participate in the appointment of new directors,
influencing the leadership structure of the company.

5. Profit Participation:

Members are entitled to a share in the company’s profits, reflecting their financial stake
in the organisation.

6. Opposition to Mismanagement and Wrongdoings:

Members have the right to voice opposition to any instances of mismanagement or


wrongdoing within the company, safeguarding the organisation’s integrity.

Removal of Company Membership:

The termination of membership from a company is the official removal of an individual’s


name from the ‘Register of Members.’

Ways of Removing Membership:

Mentioned are the ways of removing membership from a company:

1. Transfer of Membership:

One of the standard methods for removing a member from the company is through the
transfer of membership. By transferring shares to a preferred individual, the member’s
name is subsequently removed from the registered list of company members.

2. Transmission of Membership:
Slightly differing from the transfer method, the transmission of membership involves the
transfer of membership to a future descendant. This process ensures the continuity of
membership within the family or designated lineage.

3. Surrender of Membership:

Membership removal can also be achieved through the surrender of membership. This
entails submitting partial or full shares to the company, accompanied by the board’s
acceptance report. Once accepted, the individual’s name is removed from the
membership register.

4. Forfeiture of Membership:

Unfortunately, members may face the forfeiture of their membership, resulting in the
loss of their shares due to specific circumstances. Additionally, the membership card
may be terminated if a member claims to sell their share, leading to the removal of their
name from the register of members.

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