Notes On Share Holder And Member:

           Section 4 of the Companies Act 1956, provides that on registration of a Company, the subscriber to the memorandum shall be considered to have agreed in writing to become the members of the company and their names shall be entered in the Register of Members. The clause of the same section further provides that any other person who agrees in writing to become member and whose name is entered in the register of members shall become members of the company.

           It is to be noted that a subscriber to the memorandum become a member of the company immediately after its incorporation even before his name is entered in the register of members.

           There are two important elements which must be present to become a member:

  1. Agreement in writing to become a member
  2. Entry of the name of the person agreeing in the Register of Members of the company.
Distinction between Shareholder and Member:

          The term "Shareholder" and "Member" are used interchangeably. They are used as same in case of company limited by shares, company limited by guarantee and having a share capital. But in case of unlimited company, a member may not be a shareholder for such a company.

           The distinguishing points between a shareholder and a member are as follows:

  1. A registered shareholder is a member but a registered member is not a share holder because the company may not have the share capital.
  2. A person who owns a bearer share warrant is a shareholder but he may not be a member because his name is withdrawn from the Register of Members of the company. This means that member may be a shareholder but a shareholder may not be a member.
  3. A legal representative of a deceased member is not a member until he applies for registration. He is however; a shareholder even though his name is not in the Register of Members may be a member.