Difference between Members and Shareholders
The terms 'member' and 'shareholder' have been used interchangeably in the Companies Act. The word 'shareholder' is used in relation to a company having a share capital and there can be no membership except through the medium of shareholding. A holder of shares becomes a member only when his name is entered on the register of members. But the term 'member' is wider in scope and may be used in relation to all types of company. A person may become a member of a company without holding any shares. Companies limited by guarantee or unlimited companies having no share capital can have no shareholders but do have members.
The following are the points of distinction between members and shareholders :
- A holder of a share warrant is a shareholder but not a member as his name is struck off the register of members immediately after the issue of such share warrant.
- Every registered shareholder is a member but every registered member may not be a shareholder because the company may or may not have share capital.
- The transferor or the deceased person is a member so long as his name is on the register of members whereas he cannot be termed as shareholder.
- Similarly, a shareholder by transfer is not a member until his name is entered in the company's register of members.
- A person who mispresents himself to be a member is estopped from denying his position subsequently. He is said to have become a member by estoppel.
- A person may become a member by an order or decree of a court.