A member of a company is a person having
constituent proprietary interest in the company and whose name has been entered
in the Register of members. Also, a person who undertakes to make a
contribution, in the event of the winding up of a company limited by guarantee,
becomes a member of the company when his name is entered in the Register of
members.
Section 79 of the
CAMA
provides for membership as follows:
1)
The subscribers of the memorandum of the company
shall be deemed to have agreed to become members of the company and on its
registration 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,
shall be a member of the company.
3)
In the case of a company having a share capital,
each member shall be a shareholder of the company and shall hold at least one
share.
Thus, a member of a
company is a person who has subscribed to the memorandum of the company or any
person who has agreed in writing to become a member of the company and whose
name is entered in the register of members:
section 79(1) & (2) of the CAMA. A person who subscribes to the
memorandum becomes a member upon the incorporation of the company. They are
deemed to have taken the shares set opposite their names.
Please note that there is a difference between
proof of membership and proof of shareholdership. Proof of shareholdership is
by a share certificate; while prove of membership is by the register of
members: Ponmile v. Sparks Electrics
(Nig.) Ltd (1986) 2 NWLR 519 and
Oilfields Supply Center Ltd v. Johnson (1987) 2 NWLR 625.
Note also that entry in the Register of members is
an indispensable condition for membership. Section
83 of the CAMA provides that a shareholder must be registered within 28 days of conclusion of the agreement
to become a member.
An infant can be a member
of a company only if there are two (2) other adult subscribers: section 20 of the CAMA. The minimum
number of the members of a company is two (2). The maximum number depends on
the type of company as follows: (a) Public Limited Companies (Plc) has no limit;
(b) Private Limited Companies (Ltd) cannot have more than 50 members.
Moreover, a company may
take shares and be a member of another company and be attending the meetings of
the other company by a representative authorised by resolution of its directors:
section 231 of the CAMA. Please note that a company can subscribe to the Memorandum
of another company if its signs through its Secretary, Managing Director or Authorised
Officer. However, a company in liquidation is disqualified from being a member
of a proposed company: sections 20(3)
& 80(3) of the CAMA.
The foregoing apart, the
general rule is that any legal person may be a member or become a
member of a company but, infants, personal representatives of deceased persons,
companies and aliens are subject to special rules. We will highlight these
rules shortly.
a)
Infants
An infant may become a member of a company,
provided that there are two other adults members subject to no legal
disability, subject to the general disability of an infant to contract under
the general law. Thus, his contract to take shares in a company is voidable at
his instance, anytime before he attains the age of 18 or within a reasonable
time thereafter and unless he repudiates his liabilities within this period, an
infant will be liable to pay any calls made on his shares and if he decides to
repudiate, his liability on future calls will cease.
b)
Married Women
Under the Married Women’s Property Laws of the
states, a woman has the same contractual rights and is liable to the same
obligations as anyone else as regards the holding of shares. Accordingly, she
can be a member of a company.
c)
Personal
Representatives
On the death of a shareholder, the shares are
transmitted to his personal representatives, that is, his executors or
administrators and the production of the probate of the Will or letters of
administration of the estate of the deceased person is sufficient evidence for
the grant: section 148 of the CAMA.
The personal representatives of deceased persons are the only persons
recognized as having any title to the deceased interest in the shares. They can
sell and transfer the shares without being first registered as members: section 155(4) of the CAMA. However,
until the personal representations of a deceased shareholder complies with the
provision of section 155(3) of the CAMA,
he cannot, unless otherwise provided in
the company's Articles of Association, be entitled to exercise any right
conferred by memberships in relation to meetings of the company.
Section 155(3) of
the CAMA
states that if the person so becoming entitled elects to be registered himself,
he shall deliver or send to the company a notice in writing signed by him
stating that he so elects and if he elects to have another person registered,
he shall testify his election by executing to that person a transfer of the
shares, (that is to say share Transfer instrument). Thus, if a personal
representative does not want to be a member, he will adopt the procedure for
transfer of shares by executing a share transfer instrument; but where he wants
he will adopt the procedure for transmission of shares by giving notice to the
company of his intention to become a member signed by him.
d)
Companies
A company may take shares
and become a member of another company and be attending the meetings of the
other company by a representative authorised by resolution of its directors: section 231 of the CAMA. However, a
company in liquidation is not capable of becoming a member of a company. By section 20(3) of the CAMA, a company in
liquidation shall not be capable of becoming a member of a company. A company
as a legal person becomes a member through the signature of the director or
secretary in accordance with: section
71(1)(b) of the CAMA.
e)
Aliens
An alien may join in
forming a company (Foreign Direct Investment) or acquire shares in an existing
company (Foreign Portfolio Investment); but must comply with the laws relating
to alien participation: section 20(4) of
the CAMA & section 17 of the Nigerian
Investment Promotion Commission Act. By section 20(4) of the CAMA, an alien may acquire shares in a company
and become a member by complying with the various requirements of the law
regulating the rights and capacity of aliens to engage in trade or business in
Nigeria.
How
to be a Member of a Company
In
a company having a share capital, whether limited or unlimited, public or
private, membership can be acquired by:
a)
Subscribing to the memorandum: section 79 of the CAMA
b)
Allotment and registration in the register of
members: section 125 of the CAMA
c)
Transfer and registration in the register of
members: section 151 of the CAMA
d)
Transmission: section
155 of the CAMA
Where a company is limited by guarantee,
membership may be acquired by subscription and by an undertaking as in section 27(4)(b) of the CAMA followed
by registration of the person by the company in the register of members. We
propose to briefly explain the purport of the above means of acquisition of
membership of a company.
i. Membership by subscription
This is only available to
the first subscribers, or promoters of the company. A subscriber to the
memorandum becomes a member upon the incorporation of the company. They are deemed to have taken the shares set
opposite their names.
Again, the first
members of a company acquire their membership by subscription, that is by
signing the Memorandum and Articles of the company. Agreement to become member
is a prerequisite. The subscribers must together subscribe to shares amounting in
value to at least 25% of the authorized share capital. Section 27(3) of the CAMA now enables a
subscriber of the memorandum to hold shares as a trustee for another person;
but he shall disclose in the memorandum that fact and the name of the
beneficiary.
ii. By Allotment and being placed on the Register
of Members: section 125 &
129 of the CAMA.
This is based upon an application for shares. The
provides for notification of acceptance of the offer by the company within 42 days of allotment by letter of
allotment and entry of the successful applicant's name in the register of
members within 28 days.
Thus, allotment
follows an application for shares in a company by desirous members of the
public. The company's Board of Directors, where it accepts the offer will allot
shares to the person(s) within 42 days via letter of allotment: section 125(1) of the CAMA and within 2 months after allotment, issue a
certificate of allotment: section 146(1)
of the CAMA. Thereafter, the name of the allottee will be written in the Register
of Members.
iii.
By
transfer of shares (sale) from existing shareholders and the name of the
transferee being placed on the Register of Members: section 151 & 152 of the CAMA.
Subject
to the company's Articles, transfer is from an existing member to another,
either by sale, gift or some other lawful transaction and a Share Transfer Certificate is usually
issued to evidence the transaction. Transfer of Shares is the
assignment of shares held in a company by the holder of the shares called
transferor to another person with whom a agreement has been reached known as
the transferee as gift or with consideration. Upon the transfer, steps are
taken to register the transfer with the company so that the name of the
transferor is substituted with the name of the transferee: section 152 of the CAMA. Please note that a part of the shares held
by a member may be transferred. A new share certificate for transferee is to be
made available within 3 months of
the transfer: section 146(1) of the
CAMA.
Please note the grounds for rectification of the register of members under section 90 of the CAMA. If that is the case, the transferee should
first notify the company that he is the holder of the shares in question. Where
the company does not respond to the notification, the transferee may apply to
the court (Federal High Court) for rectification of the register of members.
iv. By transmission of shares (usually
inheritance upon the death of the holder).
This is by succeeding to the estate of a decreased, or
bankrupt member, and being placed on the register of members: sections 148 & 155 of the CAMA. Transmission
of shares is an involuntary transfer by operation of law
occurring on the death or bankruptcy of a member and subject to the conditions
in section 155(3) of the CAMA and
registration in the Register of members. Transmission
of shares occurs by operation of law – where the shares of the deceased
shareholder or shareholder who is bankrupt devolves or transmits to the
successor-in-title or his personal representative (like the administrator of his
estate upon intestacy or executor if there is a Will). In relation to transmission
of shares, section 156 of the CAMA
provides for the protection of a beneficiary. By that section, when shares are
given to a personal representative, the beneficiary should file an affidavit of interest with the Registrar
of the Corporate Affairs Commission. The Registrar will inform the beneficiary
if the personal representative tries to sell the shares without the
beneficiary’s notice (or whenever the personal representative wants to deal
with the shares).
v. By Estoppel
By the doctrine of estoppel, where a person’s name is
inadvertently placed on the Register of members, and he knows and consents or assents
to it, he will then be stopped from denying that he is a member.
It is crystal clear from
the foregoing that every person other than the subscribers must meet two
conditions to become a member of a company.
i. An
agreement in writing to become a member and
ii. Entry
of his name in the register of members.
Please take note that there are two conditions a
person has to comply with before becoming a member of a company as indicated
above - agreement to become a member and
entry on the Register of members of the shareholders name. The only exception
is in the case of transmission of shares where shares are vested in the
personal representatives of the deceased or in the trustee in bankruptcy.
How
to Cease to be a Member of a Company
It may be by any of the
following means:
1.
Transfer of all one's shares to another
2.
Forfeiture of shares
3.
Transmission of shares
4.
Surrender of shares
5.
Liquidation of a company
6. Repudiation
by an infant
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