MEMBERSHIP OF COMPANIES

MEMBERSHIP OF COMPANIES

1. INTRODUCTION

Any two or more persons associated for any lawful purposes may subscribe to the shares of the company. This maximum number of members will of course depends on the types of companies incorporated.

The veil of incorporation may be lifted if a company carries on its business with less than two members – Section 36

2. SIGNIFICANCE OF BEING A MEMBER

·         Only members or their proxies are entitled to vote at general meeting;

·         Only members are entitled to receive dividends;

·         Members is liable to contribute towards debts of company in event of winding up;

·         If company have surplus assets on a winding up, members is entitled to share the assets;

·         Member may enforce AOA against any other members and the company;

·         Members can petition for court remedy under Section 181;

When does someone stop being a member of a company?

·         They transfer their shares to another person and transferee is registered as the new shareholder.

·         They transfer their shares back to the company under a “buy-back”; Section 67A

·         The shares has been cancelled by the company under a reduction of capital; Section 64

·         Partly paid shares are forfeited when the person fails to pay a call

·         The company is deregistered, and ceases to exist.

Case: OWEN SIM LIANG KIM v PISAU JAYA SDN BHD & ANOR

The A applied to the court for a remedy under Section 181. In defence, the R company argued that the A lacked standing as his name was no longer in the register of members when he initiated the action.

The court held that a petitioner who applies under Section 181 must be able to demonstrate that his name appears in the register of members at the date of the petition.

3. REGISTER OF MEMBERS

All companies must keep a register of their members and the register must contain all information that is listed in Section 158(1).

This includes:

1. Names and address of the members, number of shares held and amount paid up on the shares;
2. Date on which the name of the member was entered;
3. Date on which a person ceased to be a member for the past seven years;
4. Date of allotment and number of shares alloted to each member

The register must be kept at the company’s registered office – Section 159(1)(a)

The register of members is prima facie evidence of any matters inserted in that register in accordance with the Act – Section 158(4)

The fact that someone is a shareholder does not mean he is a member. To qualify as members, the name must be inserted and registered in the register of members. It is important that the name of the member be inserted in the register of members because member will lose membership rights if the name does not appear.

 MAJUJAYA HOLDINGS SDN BHD v PENS-TRANSTEEL SDN BHD

A member had petitioned to the court to have the company wound up. The defence against the petition is that the member had no standing as he was no longer a member of the company because the name had been struck out from register of members.

The court held that the directors of the D company could not strike out a name from register of members without first making an application to the court for striking out order.

Rectification of the Register of Members under Section 162

Section 162 provides remedy to an aggrieved person when their name is purposely omitted from the register of members. The court may summarily make an order of rectification and may award damages to the aggrieved person.

However, if there is serious dispute regarding title, the proceeding cannot be summarily conducted – CENTRAL SECURITIES (HOLDING) BHD v HARON MOHAMED ZAIN  [1983] 1 AC 16

4. DUTY OF A MEMBER TO A COMPANY

A member of a company does not by reason of his position as member owe any fiduciary duty to the company – KUWAIT ASIA BANK EC v NATIONAL MUTUAL LIFE NOMINEES

Since company can sue and be sued under law, a member is not liable for the debts of the company

5. SHAREHOLDER’S RIGHTS

1. Voting  rights
2. Distribution rights
3. Rights to receive information
4. Class rights (where there are more than one class of shares)