Who may become a member of the company?

Subject to the Memorandum and Articles, any a person who is competent to contract except the company itself, can become a member of a company. However, it is important to note the following points about some organizations and persons:

  1. A company as a member of another company: A company is a legal person and so is competent to contract. Therefore, it can become a member of any other company. However, it should be authorized by its Memorandum of Association (MOA) to invest in the shares of that company or any other company.
  1. Partnership firm: A partnership firm is not a legal person and as such, it cannot, in its name, become a member of a company except in company registered under section 8 of the Companies Act, 2013.
  1. Limited Liability Partnership (LLP): LLP being an incorporated body can become a member of a company.
  1. Section 8 Company: A non-profit making company licensed under Section 8 of the Companies Act, 2013, can become a member of another company if it is authorized by its Memorandum of Association to invest in shares of the other company.
  1. Foreigners: A foreigner may acquire shares in an Indian company and become a member subject to the provisions of the Foreign Exchange Management Act, 1999, but in the event of war, he becomes an alien enemy and his power to vote and rights are suspended.
  1. Minor: A member who is a minor, is wholly incompetent to enter into a contract and as such cannot become a member of a company. An agreement by a minor is void ab-initio.
  1. Insolvent: An insolvent may be a member of a company as long as he is on the register of members. He is entitled to vote; however, he loses all beneficial interest in the shares of the company.
  1. Pawnee: A Pawnee has no right since he never had the absolute ownership at law and his equitable title cannot exceed what is specifically granted by law. In view of the above, a Pawnee cannot be treated as the holder of the shares pledged in his favor, and the pawner shall remain to be a member and can exercise the rights of a member.
  1. Persons taking shares in fictitious names: A person, who acquires shares in the name of a fictitious person, becomes liable as a member besides incurring criminal liability under Section 38 of the Companies Act, 2013, wherein punishment is provided for the commission of fraud. 
  1. Trade Union as a member: A trade union registered under the Trade Union Act, can be registered as a member and can hold shares in a company in its corporate name.

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