Modes of Acquiring Membership

(c) Modes of Acquiring Membership

The Companies Act, 2013 and standard company practice recognise five distinct routes by which a

person's name comes to be entered in a company's Register of Members:

1. By subscribing to the Memorandum of Association. Every subscriber to the Memorandum is, under Section 2(55)(i), deemed to have agreed to become a member and is entered as a member the moment the company is registered — before any shares are formally allotted and before any share certificate is issued. A subscriber is bound to take at least the number of shares (or the minimum shareholding) they have written against their name in the Memorandum.
2. By Application and Allotment. A person applies for shares — in response to a prospectus (a public offer) or a private placement offer — and the company's Board allots shares against that application. Membership under this route becomes effective under Section 2(55)(ii) once the applicant's name is actually entered in the Register of Members following allotment; the mere act of applying, or even of allotment being resolved by the Board, is not itself membership until the register entry is made.
3. By Transfer of Shares. An existing member may transfer their shares to another person by executing a valid instrument of transfer (the prescribed Form SH-4) and delivering it to the company along with the share certificate. Once the company's Board approves the transfer and the transferee's name is entered in the Register of Members in place of the transferor's, the transferee becomes a member and the transferor ceases to be one in respect of those shares. This is a transfer by act of the parties — a voluntary, negotiated route.
4. By Transmission of Shares. Transmission is membership passing by operation of law, not by any voluntary act or written instrument — it happens on the death, insolvency, or lunacy of a member. On proof of the event (a succession certificate, probate, or a letter of administration in the case of death, for example), the company recognises the legal representative, heir, or Official Assignee/Receiver and enters their name in the Register of Members in place of the original member's — without needing an instrument of transfer at all.
5. By Holding Shares in Dematerialised Form. Under the Depositories Act, 1996, shares held in electronic ("demat") form are registered in the name of the depository as the registered owner, while the actual investor is recorded as the beneficial owner in the depository's own records. Section 2(55)(c) specifically extends the definition of "member" to cover such a beneficial owner, so a person holding shares in demat form is a member of the company even …