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Difference between shareholders and shareholders

When we talk about a company, the terms shareholders and members are commonly used interchangeably, as you can become a member of the company, if not through holding shares. In this way, a member is a shareholder and a shareholder is a member. The true statement but not completely, as subject to certain exceptions, that is, a person can become owner of shares by transfer, but not a member, until the transfer is entered in the register of members.

Likewise, the transferor of shares lacks share ownership, but continues as a member, until entries are entered in the company books regarding the transfer. Likewise, there are a few more points of difference between shareholder and shareholder which are elaborated in detail in the article.

Comparative chart

Basis for the shareholder comparison
Sense A person whose name entered in the register of members of a company, the registered member of the company. The person who owns the shares of a company known as a shareholder.
Defined in Section 2 (27) Undefined
Share Warrants The holder of an equity mandate is not a member. The holder of a share mandate is a shareholder.
Company Each company must have a minimum number of members. The limited company can have shareholders.
Memorandum The person who signs the association memorandum becomes a member. After signing the memorandum, a person can only be a shareholder when the shares are assigned to him.

Member definition

A person whose name entered in the register of members of a company becomes a member of that company. The register includes every single detail on the member such as name, address, profession, date of registration, etc. It also includes any person who holds shares in the company and whose name is entered as a beneficiary in the filing records.

The liabilities of the members are limited to the amount of the shares they hold in the case of a company with share capital while, in the case of a limited liability company, the liability of the members limited to the amount of the guarantee they provide. But, in the case of an unlimited society, members must contribute their own personal assets to pay off debts.

Members cannot take part in the management of the company, i.e. the management of the company managed by the Board of Directors. Although the right to appoint and remove directors in the hands of the members.

How to become a member of a company

  • If a person signs a company association memorandum, they become a member by signing it.
  • If a person becomes the beneficial owner of shares whose name is registered in the repository register, then he too becomes a member.
  • If a person obtains shares through transfer and transfer registered by the company, together with the inclusion of the name of the transferee in the register of members.
  • If a person obtains shares by means of transmission and transmission registered by the company together with the entry of the name in the register of members.
  • If a person agrees to take the company's qualifying shares and pay for it, he also becomes a member of the company.

Definition of Shareholder

An individual who owns the share of a public or private company known as a "shareholder". A shareholder not considered the shareholder until the shares are actually assigned to him.

The shareholders are the owners of the company, i.e. to the extent of the share capital they hold. The legal representative of the deceased member is a shareholder, not the member, until and unless his name is registered in the register of members of the company. Hence, it can be said that every shareholder is a member but every member, not a shareholder.

The following are the rights of a shareholder:

  • Right to transfer or sell their shares.
  • Right to obtain the dividend.
  • Right to participate in the general meeting and vote.
  • Right to take a copy of the Memorandum and the Statute.
  • Right to receive a copy of the statutory report.

Key differences between members and shareholders

The following are the differences between members and shareholders:

  1. A member a person who signed the company memorandum. A shareholder a person who owns the shares of the company.
  2. The term member defined in section 2 (27) of the Indian Companies Act, 1956. Conversely, the term shareholder not defined in the Indian Companies Act, 1956.
  3. The bearer of an equity mandate is not a member, but the bearer of an equity mandate may be a shareholder.
  4. All shareholders whose name entered in the register of members are members. On the other hand, all members may not be shareholders.
  5. In the case of a public company, there must be a minimum of 7 members. There is no maximum limit on the maximum number of members. Likewise, a private company can have a minimum of 2 and a maximum of 50 members. Unlike shareholders, there is no minimum or maximum limit in the case of a public company.

Conclusion

Partners and shareholders are both important people of any company, be it a public company or a limited liability company. We have explained many differences between them, which makes it clear that these two terms differ from each other. However, a member can be a shareholder and in the same way, a shareholder can also be a member subject to certain conditions must be met for the same.