Difference Between Member and Shareholder

Difference between member and shareholder

The main difference between member and shareholder is, a member is a person whose name is entered in the register of members of the company while a shareholder is a person who buys and hold the share of the company. It means shareholders and members are very different from each other where one of the person names is entered in the register of the members of the company and the other one holds and buys the share of the company.

Member is like one of the owners of the company but shareholder is the person who is not the member of the company, he is only like an investor who invests his money in the company. To understand the difference between member and shareholder in detail at first you have to know more about member and shareholder. So let’s discuss members and shareholders in detail to understand it in a much easier way.

What is a member?

A member is one of the owner of the company whose name has been entered in the register of members of that company in case he is holding shares in physical form i.e. share certificates . To become a member there have some of the requirements which the person willing to become a member have to full fill. A member is a person whose name is entered in the register and this register of the members of the company contains all the details of a member like his name, address, telephone number, date of becoming a member, etc.

This means it contains all the information about a member in that register. In case of any emergency will occur then this information will help to find. As to become a member of the company there has some of the requirements need to be full fill and those requirements are discussed below.

Requirements to become a member

There are some of the requirements which a person has to follow if he/she wants to become a member of the company. And these are as follows:-

Subscribing MOA

• To become a member of the company he/she has to sign the memorandum and will have to show his presence to the company.

• His name will be entered in the register of the members of the company.

• Member can be a shareholder if he/she holds the shares capital.

Agreement writing

If a person wants to become a member of the company then he or she has to sign an agreement which will be offered by the company to sign. And if the person has agreed to sign the agreement he will become a member of the company. And when he or she will become a member of the company then his name has been entered in the register of members of that company. And after that, he will become a member of the company. Now he has all the rights which a member has, after signing the agreement which offered by the company.

Holding shares

A member of the company is whose name is entered in the register of the members of the company and also he or she holds the shares of the company.

These are the main points which should be in mind while becoming a member of the company. And if the person full fill all these requirements then he can become a member of the company. In case if the member or company wants to remove the membership of the company then there are some of the processes which has to follow while removing the membership.

Removal of membership

There are some of the processes through which the membership of the member can be removed. And those processes of removing the membership are as follows:-

Transfer of membership

• If the member transfers his shares to the other person then his membership has been removed and after that, he won’t be a member of the company.

• And when the membership of the member is removed then his name is removed from the register of the members of the company.

• And after that the person is legally removed when his name is removed from the register of the members of the company.

Transmission of the membership

• Transmission of membership occurs in case if the member of the company dies then the membership has transferred to his representative. And then after, that representative becomes a member of the company and his name enters the register of the members of the company.

Surrender from the membership

• If the member of the company surrenders from the membership then the membership of the company has been removed from that person. It is the desired way to remove the membership of the company. If a person wants to remove his membership then he surrenders to the company and then his membership has been removed.

Share buys back

• If the company buys the share back from the member then the membership has been removed of that person. And then his name has been removed from the register of the members of the company. And after that, he has legally removed.

So these are some of the ways through which a person can get removed from his membership or a company can remove the membership of a person. And these are legal procedures to remove the membership of the company. Eight rights have been given to the member of a company according to the Indian companies act 1956. And these rights are as follows:-

Rights of a member of the company

• One of the right of a member is to access books and documents.

• A member has the right to make a fundamental corporate decision for the company.

• If a member wants then a member has the right of participation in a general meeting.

• A member has the right to appoint directors.

• They have also the right to access accounts and audit.

• Right of shareholding

• A member has the right to oppression and mismanagement.

These are some of the rights which have been given to the member of a company under the Indian companies act 1956.

What is the shareholder?

A shareholder is a person who buys and hold the shares of a company. To be a shareholder it is must to be at least one share otherwise they won’t be a shareholder. Because if the person has no shares then how can he or she be a shareholder for that company? So for a shareholder, at least one share is a must to have. If the company performs well or if the company gets profit then some of the dividends have gone to shareholders. And there are some of the rights which are given to the shareholders according to the India act 2013. Those rights are as follows:-

Rights of shareholder

• Right to ownership

• Right to informed.

• Right to participate.

• Right to transfer ownership.

• Right to vote.

• Right to ask questions.

• Right to inspect books and registers.

• Right to treat equally.

Right to ownership

A shareholder has become one of the owners of the company when the shareholder buys any shares of the company.

Right to informed

The company has to inform the details of the shareholders if anything occurs.

Right to participate

A shareholder can participate in any general meeting which has organised by the company or any program which has been organised by the company.

Right to transfer ownership

A shareholder has the right to transfer his ownership of the shares to anyone else. There is no restriction by the company in transferring shares to anyone else.

Right to vote

A shareholder has the right to vote, in case if he is not available at the moment then he can also vote online.

Right to ask questions

In case of a shareholder has any doubt regarding anything then he has the right to ask questions.

Right to inspect books and registers

A shareholder can inspect books and registers of the company at any business hour. There is no restriction to inspect books and registers.

Right to treat equally

The company will treat all the shareholders equally either it is big or small. If any big shareholder has more shares of the company and a shareholder who has fewer shares of the company, both will treat equally.

These are some of the rights which have been given to the shareholders according to the Indian constitution. There are two types of shareholders.

Types of shareholder

1. Common shareholder

2. Preferred shareholder

1. Common shareholder

That shareholder who owns the company’s common shares stock. They are the most common shareholder as they can be identified from their names. They have the right to vote and to control the companies how is that going. This means they have to manage the company. They don’t have a fixed dividend.

2. Preferred shareholder

This shareholder is unlike the common shareholder means the shareholder who buy the preferred share stock and who have no voting right. Their dividend has been fixed and they got their dividend before it distributes to common shareholders.

Also, Read

 Comparison

• Member is a person whose name is entered in the register of the members of the company while shareholders are those who buy and holds the share of the company.

• Shareholders have the right to vote while the member has no right to vote.

• The company which has limited by the shares have shareholders while every company must have the least number of members to operate the company.

• If a person signs the memorandum then that person becomes a member of the company and when he allot a share then he also becomes a shareholder.

These are the main difference between a member and a shareholder in which a shareholder buys and hold the shares while a member is one of the owners of the company whose name has been entered in the register of members of that company

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