Difference Between Members and Shareholders

In the world of businesses and organizations, two terms-members and shareholders-are super important. Even though they both involve ownership or being part of something, they're actually quite different. Members are folks who belong to organizations, while shareholders are people who own a piece of a company. It's crucial to get how their roles and rights vary, especially if you're navigating through the business world. So, in this chat, we'll break down the key differences between members and shareholders, explaining what they do and how they contribute to their groups. Understanding these distinctions helps everyone know their place and what they're supposed to do within their organization.

What is a Member?

A member of a company is someone whose name appears in the company's register of members. This register contains detailed information about each member, including their name, address, occupation, and the date they became a member. It also encompasses individuals who hold shares of the company and whose names are listed as beneficial owners in depository records.

The liabilities of members are typically limited to the extent of the shares they hold in companies with share capital. In companies limited by guarantee, members' liability is restricted to the amount of guarantee they've provided. However, in unlimited companies, members may have to use personal assets to settle debts.

Members generally do not participate in the day-to-day management of the company, as this responsibility falls to the Board of Directors. However, members do hold the right to appoint and dismiss directors.

How to Become a Member of a Company?

There are several ways through which an individual can become a member of a company:

1. By subscribing to the memorandum of association of a company and signing it, a person automatically becomes a member.
2. Another way to become a member is by becoming the beneficial owner of shares registered in the depository's records.
3. If a person acquires shares through a transfer and the company records the transfer along with entering the transferee's name in the register of members, that person becomes a member.
4. Similarly, if shares are obtained through transmission and the company records the transmission along with adding the individual's name to the register of members, that person becomes a member.
5. Additionally, agreeing to take the qualification shares of the company and fulfilling the payment requirement also qualifies an individual to become a member of the company.

Duties of Members:

Fulfill Financial Obligations:

• Members must ensure timely payment of their liabilities as determined by their membership status.
• In the event of company liquidation, each member is required to contribute to the company's debts in accordance with their liability limits.

Financial Liability:

• For companies limited by shares, members are obligated to pay only the value of the shares allotted to them.
• In the case of companies limited by guarantee, members are liable to contribute a predetermined amount, often as low as €1.
• Members of companies with unlimited liability are responsible for settling all debts if the company is wound up.

Supervisory Role:

• Members are expected to actively participate in overseeing the company's performance and monitoring the actions of its directors.
• This engagement is essential to safeguarding their financial and other interests within the company.

What is a Shareholder?

A shareholder is an individual who possesses shares in either a public or private company. However, it's important to note that a person subscribing to shares is not considered a shareholder until those shares are officially allotted to them.

Shareholders essentially represent the owners of the company, but only to the extent of the share capital they hold. For instance, the legal representative of a deceased member is considered a shareholder, not a member, unless their name is registered in the company's official register of members. Thus, while every shareholder is also a member, the reverse isn't necessarily true.

The rights of a shareholder encompass several key privileges:

• The right to transfer or sell their shares.
• The right to receive dividends.
• The right to attend general meetings and vote on company matters.
• The right to obtain copies of the Memorandum and Articles of Association.
• The right to receive a copy of the statutory report.

Conclusion

Both members and shareholders play vital roles in any company, whether it's publicly traded or privately held. We've outlined numerous distinctions between these two roles, highlighting how they differ from each other. Nonetheless, it's crucial to note that a member can also be a shareholder, and conversely, a shareholder can be a member, provided certain conditions are met.