Cessation of Membership in a Company

Cessation of membership in a company means that a person’s name is removed from the register of members of the company. This can happen in a number of ways, including:

  • Death of the member. When a member of a company dies, their name is automatically removed from the register of members.
  • Resignation of the member. A member of a company can resign their membership by giving notice to the company.
  • Forfeiture of shares. If a member of a company fails to pay their calls on their shares, the company may forfeit their shares. This means that the member’s name is removed from the register of members and their shares are sold to another person.
  • Compulsory acquisition of shares. In certain circumstances, the company may be able to compulsorily acquire the shares of a member. This may happen, for example, if the member is in breach of their obligations to the company.
  • Winding up of the company. When a company is wound up, the names of all the members are removed from the register of members.

Multiple choice questions (MCQs) on cessation of membership in a company

  1. Which of the following events will not result in the cessation of membership in a company?
    • The death of the member
    • The resignation of the member
    • The forfeiture of the member’s shares
    • The compulsory acquisition of the member’s shares
    • The winding up of the company
    • The answer is (a). The death of the member will result in the cessation of membership in a company, but the other events will not.
  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 name in the register of members?
    • It will be removed immediately
    • It will be removed after 30 days
    • It will not be removed until the company has taken legal action against the member
    • It will not be removed at all
    • The answer is (b). The member’s name will be removed from the register of members after 30 days.
  3. A company is being wound up. One of the members of the company is insolvent. Will the insolvent member’s name be removed from the register of members?
    • Yes
    • No
    • It depends on the decision of the liquidator
    • It depends on the interpretation of the articles of association
    • The answer is (c). It depends on the decision of the liquidator. The liquidator may decide to remove the insolvent member’s name from the register of members, but they are not required to do so.

Answers

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