Difference Between Members and Shareholders

calendarMay 26, 2023 · 5 min read  ·
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Main Difference

The main difference between Members and Shareholders is that a person whose name entered in the register of members of a company turns into a Member of that company and an individual who holds the share of a public or a private company is known as a Shareholder.

Members vs. Shareholders

Member is a person whose name is entered in the register of members of a company whereas shareholder is a person who owns the shares of the company. The holder of the share warrant is not a member; on the other hand, The holder of the share warrant is a Shareholder. Every company should have a minimum number of members conversely the Company limited by shares can have shareholders. A person who marks the memorandum of association with the company becomes a member while after signing the memorandum, a person can become a shareholder only if shares allotted to him.

Comparison Chart

MembersShareholders
A person whose name enrolled in the register of members of a company is the listed or registered member of the company.The person who holds the shares of a company is known as a shareholder.
Company
Each company must have a minimum number of members.The company limited by shares may have shareholders.
Share Warrant/Option
The shareholder warrant is not a member.The stockholder warrant is a shareholder.
Memorandum/Memo
The person whoever signs or marks the memorandum of association with the company becomes a member.Once signing the memorandum, a person can be a shareholder only when the shares allotted to him.

What is Members?

A person whose name entered in the register of members of a company make a member of that company. The register contains every single detail about the member like name, address, occupation, date of becoming a member, etc. It also includes every person who holds the company’s shares and whose name entered as the beneficial owners in depository records. The responsibilities of members are limited to the number of shares held by them in the case of a company having share capital as long as in terms of a company limited by guarantee the liability of members is small to the amount of guarantee given by them. But, in terms of an unlimited company the members have to assist from his assets to pay the debts.

How to Become a Member?

  • If a person endorses the memorandum of association of a company, he becomes a member by signing it.
  • If a person turns into the beneficial owner of shares whose name registered in the record of the depository, then moreover he becomes a member.
  • If a person takes shares by way of transfer and the transfer is recorded by the company, as well as the entry of the name of the recipient in the register of members.
  • If a person receives shares by way of transmission and the transmission recorded by the company as well as the entry of the name in the register of members.
  • If a person concurs to take the qualification shares of the company and recompense for it then also he makes a member of the company.

What are the Shareholders?

A shareholder is an individual, company, or institution that owns at least one share of a company’s stock. As long as shareholders are a company’s owners, they reap the benefits of the company’s successes in the form of expended stock valuation or profits distributed as dividends. If the company does ailing and the price of its stock declines, though, shareholders can lose money. Unlike the owners of partnerships, corporate shareholders are not personally liable for the company’s debts and other financial obligations – they protected by limited liability. If the company becomes bankrupt, its creditors cannot demand payment from shareholders’ assets. Even though they are partial and residual owners of the company, shareholders do not control a firm’s operations. A nominated board of directors governs the company’s activities and operations.

A sole or individual shareholder that owns and commands more than 50 percent of a company’s outstanding shares is familiar as a majority shareholder. Or else, they are infancy shareholders. A majority shareholder is usually the founder of the company or, in the case of long-established businesses may be the progeny of the founder. By leading more than half the voting interest, the majority shareholder is an essential stakeholder and influence in the business operations and tactical direction of the company. Their powers may comprise replacing a corporation’s officers or board of directors. A majority shareholder is more ordinary in private companies than public companies, and not all companies have a majority shareholder.

Key Differences

  • A member is an individual who signed the memorandum of the company. A shareholder is a person who holds or owns the shares of the company.
  • The carrier or holder of a share warrant is not a member, but the holder of a share warrant can be a shareholder.
  • All shareholders whose name entered in the register of members are the members. On the other side, all members may not be the shareholders.
  • Concerning a public company, there must be a minimum of 7 members. There is no alike cap on the maximum number of members. Equally, a private company can have a minimum of 2 and maximum of 200 members. In place of shareholders, there is no minimum or maximum restrict or limit, in the case of a public company.

    • Conclusion

    Members and Shareholders alike are important persons of any company. Though a member can be a shareholder, and similarly, a shareholder can also be a member subject to specific conditions has to be achieved for the same.

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