Q.Distinguish between membership acquired by subscription to the memorandum and membership acquired by transfer of shares.

These two modes sit at opposite ends of the membership process — one is automatic on incorporation, the other is a later, voluntary act between two existing parties.

Subscription to the memorandum and transfer of shares are both recognised modes of acquiring membership of a company under the Companies Act, 2013, but they differ sharply in timing, mechanism, and the parties involved.

A subscriber to the memorandum signs the document at the time of the company's formation and, under Section 2(55)(i), is deemed to have agreed to become a member; the moment the Registrar issues the certificate of incorporation, the subscriber must be entered in the register of members — no application, no allotment letter, and certainly no instrument of transfer is needed. The relationship is between the subscriber and the newly-forming company itself, and it exists before the company has any other members at all.

Membership by transfer, by contrast, arises much later in the company's life, between two already-existing parties: an existing member (the transferor) and a new party (the transferee) who wish to pass ownership of already-issued shares. This requires a duly executed and properly stamped instrument of transfer in the prescribed form (Form SH-4) under Section 56, which must be delivered to the company; only when the Board registers the transfer does the transferee become a member, and only then does the transferor cease to be one (to the extent of the shares transferred). …

A common confusion is treating a subscriber as someone who 'applies' for shares in the same sense as a later investor, when in fact subscription requires no applicat …