Membership of a company is a crucial aspect of corporate law. A company is a separate legal entity and its members are its owners. The members of a company have certain rights and obligations, including the right to receive dividends, the right to vote at shareholder meetings, and the obligation to contribute to the company’s debts in the event of liquidation. In this article, we will explore the acquisition and termination of membership in a company.

Acquisition of Membership

Membership in a company can be acquired in several ways. The most common methods are through subscription, transfer, and transmission.

Subscription

Subscription is the process of becoming a member of a company by subscribing to its shares. This is the most common way of acquiring membership in a company. A person becomes a member of a company as soon as their application for shares is accepted by the company. The acceptance can be either express or implied. Express acceptance occurs when the company issues a share certificate to the subscriber, indicating that they are now a member. Implied acceptance occurs when the company accepts the subscription amount without issuing a share certificate.

Transfer

Membership in a company can also be acquired through transfer. This occurs when a member transfers their shares to another person. The transferor ceases to be a member of the company, and the transferee becomes a member. The transfer of shares must comply with the provisions of the company’s articles of association, as well as any relevant laws and regulations.

Transmission

Transmission is the process of acquiring membership in a company through inheritance or succession. This occurs when a member passes away or becomes insolvent, and their shares pass to their legal heirs or representatives. The legal heirs or representatives become members of the company by operation of law.

Termination of Membership

Membership in a company can also be terminated in several ways. The most common methods are by resignation, transfer, and forfeiture.

Resignation

A member of a company may resign from their membership at any time by giving notice to the company. The articles of association of the company may specify the notice period required for resignation. If the articles do not specify a notice period, the member must give reasonable notice to the company. Once the notice period has expired, the member ceases to be a member of the company.

Transfer

Membership in a company can also be terminated through transfer. This occurs when a member transfers their shares to another person. The transferor ceases to be a member of the company, and the transferee becomes a member.

Forfeiture

Forfeiture is the process of terminating membership in a company due to non-payment of calls or other amounts due to the company. A call is a demand for payment made by a company on its members for unpaid shares. If a member fails to pay the call amount within the specified time period, the company can forfeit their shares. The shares are then sold by the company, and any surplus amount is refunded to the member. If the sale amount is less than the amount due, the member is liable to pay the difference.

Other Methods

Membership in a company can also be terminated through other methods, such as by expulsion or disqualification. Expulsion occurs when a member is expelled from the company by a resolution passed by the shareholders. Disqualification occurs when a member becomes disqualified from being a member of the company due to certain legal or regulatory provisions.

Conclusion

Membership of a company is a crucial aspect of corporate law. Members have certain rights and obligations, and membership can be acquired or terminated in several ways. The most common methods of acquiring membership are through subscription, transfer, and transmission. The most common methods of terminating membership are by resignation, transfer, and forfeiture. It is important for companies and their members to understand the legal requirements and procedures for acquiring and terminating membership. By doing so, they can ensure that they comply with the relevant laws and regulations and avoid any legal disputes or issues. It is also important for companies to maintain accurate records of their members and their membership status, as this information may be required for various legal and regulatory purposes. Overall, membership in a company is a complex and dynamic concept that requires careful attention and management by both the company and its members. By understanding the legal framework and best practices for acquiring and terminating membership, companies can ensure a smooth and successful operation, and members can protect their rights and interests in the company.