In this article, we will discuss the ‘Differences between Member and Shareholder‘. But first we will discuss the definition of a member which is as follows:
Distinguish between member and shareholder.
Definition of a Member
As per Section 41 of the Act-
1. The subscribers to the memorandum of a company shall be deemed to have agreed to become members of the company. As soon as the memorandum is registered with the Registrar of Companies, such subscribers to the Memorandum shall be entered as members in its register of member.
2. Any person, who agrees in writing to become a member of a company and whose name is entered into its register of members, shall be a member of the company.
On the basis of the above definition, two pre-requisites for a person to become a member of a company are:
a) agreement in writing to take shares of the company;
b) registration of his name in its register of members;
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Member and Shareholder
The terms ‘member’ and ‘shareholder’ are interchangeably used to mean the same person. They are synonymous in the case of a company limited by shares and also a company limited by guarantee and having a share capital. But in the case of an unlimited company or a company limited by guarantee only, a member may not be a shareholder because such a company may not have a share capital.
Difference between Member and Shareholder
1. A registered shareholder is a member but a registered member may not be a shareholder because the company may not have share capital in some cases.
2. A person owning a bearer share warrant is a shareholder but he is not a member as his name has been struck off the register of members.
3. A legal representative of a deceased member is not a member until and unless he applies for registration. He remains a shareholder even though his name does not appear in the register of members.
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