12.8.3 (Modes of Acquiring Membership)

A person may become a member or a shareholder of a company by any of the following ways:

            1. By subscribing to the memorandum of association. The subscribers of the memorandum of a company are deemed to have agreed to become members of the company only by reason of their having signed the memorandum. A subscriber to the memorandum becomes a member, the moment the company is registered and it is not necessary that their names must have been entered in the register of members.

Further, by subscribing the memorandum every one of the subscribers is deemed to have contracted to become a shareholder in respect of the shares he subscribed for.

            2. By agreement and registration. Section 41(2) provides that apart from the subscribers of the memorandum, 'every other person who agrees in writing to become a member and whose name is entered in its register of members shall be a member of the company’. It follows that except in the case of the subscribers to the memorandum, a person does not become member of the company, until his name is dult recorded in the register of members.
 

Registration of the name of a person as a member of a company may arise:

            (a) Upon application and allotment.
 

            (b) By transfer, The member may acquire shares from an existing member by sale, gift or some other transaction.

            (c) By transmission. Here a person becomes a shareholder by transmission of shares to him through death, lunacy or insolvency.

            (d) By estoppel. This arises when a person holds himself out as a member or knowingly allows his name to remain on the register when he has actually parted with his shares. In the event of winding up, he will be liable, like other genuine members, as a contributory. However, he may escape liability by applying for removal of his name under s.155.

            (e) By agreeing to purchase qualification shares. A person who signs and delivers to the Registrar a written undertaking to take from the company and pay for qualification shares is in the same position as if he had subscribed to the memorandum for a similar number. As such, he is also deemed to have become a member automatically on incorporation of the company.