Here are the various modes of becoming a member of a company, along with some MCQs and answers:
Mode 1: By subscribing to the Memorandum of Association
This is the first and most common way to become a member of a company. When a company is incorporated, the subscribers to the Memorandum of Association are deemed to have agreed to become members of the company. Their names are entered in the register of members of the company.
MCQ 1: A person who subscribes to the Memorandum of Association is a:
(a) Member of the company (b) Shareholder of the company (c) Both member and shareholder of the company (d) Neither member nor shareholder of the company
Answer: (a)
Mode 2: By agreeing in writing to become a member
A person can also become a member of a company by agreeing in writing to become a member. This can be done by:
- Applying for shares in the company
- Executing an instrument of transfer of shares
- Consenting to the transfer of shares of a deceased member in his name
- Acquiescing or being estopped from denying that he is a member
MCQ 2: A person who applies for shares in a company becomes a member when:
(a) The shares are allotted to him (b) The shares are fully paid up (c) He is issued a share certificate (d) His name is entered in the register of members
Answer: (d)
Mode 3: By operation of law
A person may also become a member of a company by operation of law. This can happen in the following cases:
- On the death of a member, his legal heirs become members of the company.
- If a company is wound up, the liquidator may allot shares to the creditors of the company. These creditors become members of the company.
MCQ 3: A person who is allotted shares by the liquidator of a company becomes a member of the company:
(a) By operation of law (b) By agreement in writing (c) By subscribing to the Memorandum of Association (d) By transfer of shares
Answer: (a)
Here are some additional points to note about the modes of becoming a member of a company:
- A person can be a member of only one company at a time.
- A minor cannot become a member of a company. However, he can become a member of a company through his guardian.
- A company cannot be a member of another company.