A Company (or Corporation) is an ingenious device for obtaining profit without individual responsibility.Ambrose Bierce
Prior to the 17th century, the preferred business structures were sole proprietorships and partnerships, where people invested capital and earned profits for their own benefit.
The first corporations were created in Europe as not-for-profit entities. Their objectives were to build institutions, such as hospitals and universities, for the public good. These organisations had corporate personality conferred upon them by a charter from the Crown or were deemed by prescription to have received such a grant had constitutions detailing their duties overseen by the government. Straying outside the constitution was punishable by law.
However, demand soon shifted from traditional goods to capital goods and manufactured products. These activities required large amounts of labour and capital, and a mechanism for managing risk. This created a need for individuals to form joint stock companies.
Who is a Member of a Company?
The term member and shareholder are often used interchangeably, as they are synonymous in the case of the company limited by shares. The members or the shareholders are the real owners of a company.
The different ways you can achieve membership include:
By subscribing to the Memorandum of Association:
Subscribing to the memorandum of a company means you have agreed to be a member. Memorandum here means the objects the company plans to achieve. So by subscribing to it, you agree to carry out the purposes too. This ultimately makes you a member.
By Transfer of Shares:
Shares of a company (especially public companies) are like the properties you own. These properties are transferrable. This means it can be transferred to another person if the owner wishes too. In other words, you can be a member if an owner of some shares transfers the ownership to you. Automatically, you become a member.
You know how you make a will before you die, so your children can inherit your properties. In the same way, you can make your legal heirs inherit your shares. After your death, your legacy won’t die with you. Your shares live on through your children and they become members of the company. They succeed you automatically.
By application and allotment of shares:
You can also apply to companies to allot their shares to you. If you pass the test and they allot shares to you, you own them. By owning those shares, you are a shareholder and ultimately a member. Your name will also be listed in the register of members.
For better understanding, let’s call it payment for services rendered. Where individuals provide high value services to a company, the vendor may elect to receive payment in shares of that company. Those shares make you a member of the company once you accept them. All you need do is enlist your name in the register of members.
Order of Court:
A court may validly order that an individual be registered as a member of a company. Where such an order is made, the company secretary is legally obliged to register the individual accordingly.
UBR Corporate Services provides company registration and membership advisory services to companies of every size.