Member and Shareholder — Distinction

(d) Member and Shareholder — Distinction

In everyday usage, and for a company limited by shares, the words "member" and "shareholder" are

used almost interchangeably — a person who holds shares and appears on the register is both at

once. The Maharashtra HSC Secretarial Practice syllabus, however, tests the technical gap between

the two terms, because the two ideas are not always co-extensive:

• A company without share capital can have members but no shareholders at all. A company limited by guarantee (typically a club, chamber of commerce, or a not-for-profit body) issues no shares whatsoever, yet it has members who have agreed in writing to join and whose names are entered in the register. Such a person is a member in the fullest legal sense, but there is no "share" for them to hold, so calling them a "shareholder" would be meaningless.
• A subscriber to the Memorandum is a member from the moment of incorporation, before becoming a shareholder in the fuller sense of holding an actual share certificate. For that brief interval between incorporation and the formal allotment/certificate stage, such a person is a member by law but has not yet received the documentary evidence (the share certificate) that ordinarily marks someone out as a shareholder.
• A holder of a share warrant was historically a shareholder without being a member. A share warrant was a document (issued by a public company, under conditions set out in its Articles) stating that its bearer was entitled to the shares specified in it, and it was transferable by mere delivery, without any instrument of transfer or entry in the register at each transfer. When a company issued a share warrant, it was required to strike the original holder's name off the Register of Members — so the bearer, while still economically a shareholder, ceased to be a member in the technical sense. (Share warrants are a legacy instrument from the older Companies Act framework and are not freshly issued under the Companies Act, 2013 regime; the illustration is retained here only because it is the classic teaching example used to explain the conceptual gap between the two terms, not because new share warrants are issued today.)