Shareholders V/S Members of the Company

Shareholders V/S Members

The term “Shareholder” refers to a person who holds or owns share in a company while the term “Member” on the other hand, refers to a person whose name appears on the register of members. For all the purposes of the words shareholder and member are used interchangeably and synonymous because in normal course a shareholder will also be a member and a member will also be a shareholder.

However, there are a few exceptional cases where a person may become a member of a company without being its shareholder and vice versa.

Shareholders- Shareholders of a company are the owners of the company owning equity shares issued by the company.

Members-  It is defined in section 41 of the Act as follows:

1. The subscribers of the MOA of a company shall be deemed to have agreed to become members of the company, and on the registration of the company, shall be entered as members in its register of members.

2. Every other person who agrees in writing to become a member of a company and whose name
is entered in its Register of Members of the company.

Explanation- Unlimited companies or companies limited by guarantee having no share capital will have only members but no shareholders. On the other hand, the holder of a share warrant is a shareholder but not a member as his name is removed from the register of members immediately after the issue of such share warrant. Similarly, a transferor or the legal representative of the deceased person may be a shareholder but he may not be a member until he gets his name entered in the register of the members.