Rights and Duties (Liabilities) of Members of a Company

The rights of members of a company are the legal entitlements that they have as a result of their membership in the company. These rights are typically set out in the company’s articles of association. Some of the common rights of members of a company include:

  • The right to vote at general meetings of the company
  • The right to receive dividends if the company makes a profit
  • The right to transfer their shares to another person
  • The right to inspect the company’s books and records
  • The right to sue the company if their rights are violated

Duties (liabilities) of members of a company

The duties (liabilities) of members of a company are the legal obligations that they have as a result of their membership in the company. These duties are typically set out in the company’s articles of association and the Companies Act, 2013. Some of the common duties (liabilities) of members of a company include:

  • The duty to pay for the shares that they have subscribed to
  • The duty to abide by the company’s articles of association and the Companies Act, 2013
  • The duty to attend and vote at general meetings of the company
  • The duty to keep the company’s secrets confidential
  • The duty to pay for any damages that they cause to the company

Multiple choice questions (MCQs) on the rights and duties of members of a company

  1. Which of the following is not a right of a member of a company?
    • The right to vote at general meetings of the company
    • The right to receive dividends if the company makes a profit
    • The right to transfer their shares to another person
    • The right to inspect the company’s books and records
    • The right to be appointed as a director of the company
    • The answer is (e). The right to be appointed as a director of the company is not a right of a member of a company. It is a privilege that is granted by the board of directors.
  2. A company’s articles of association state that a member who fails to pay their calls on their shares within 30 days will have their shares forfeited. A member fails to pay their calls within 30 days. What will happen to the member’s right to vote at general meetings of the company?
    • The member will still be able to vote at general meetings of the company
    • The member will lose their right to vote at general meetings of the company
    • The member will lose their right to vote at general meetings of the company until they pay their calls
    • The member will lose their right to vote at general meetings of the company and their shares will be forfeited
    • The answer is (c). The member will lose their right to vote at general meetings of the company until they pay their calls.
  3. A company is being wound up. One of the members of the company is insolvent. Will the insolvent member’s liability to pay for their shares be discharged?
    • Yes
    • No
    • It depends on the decision of the court
    • It depends on the interpretation of the articles of association
    • The answer is (b). No, the insolvent member’s liability to pay for their shares will not be discharged. The company’s creditors will still be able to claim payment from the insolvent member.

Answers

  1. (e)
  2. (c)
  3. (b)