Distinguish Between · Q3
Q.Distinguish between a Depositor and a Member of a company.
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A Depositor and a Member differ on several fundamental points:
| Basis | Depositor | Member |
|---|---|---|
| Legal relationship to the company | Creditor (lender) | Owner (shareholder) |
| Instrument held | Deposit Receipt | Share certificate |
| Return received | Fixed rate of interest, agreed in advance | Dividend, which varies with profits and the Board's recommendation, never fixed |
| Voting right at general meetings | None | Yes, in proportion to shareholding |
| Repayment | Principal repaid in full on the fixed maturity date | No 'repayment' — capital is returned only on winding up, after creditors (including depositors) are paid |
| Priority on winding up | Ranks as an unsecured (or, where security is created, secured) creditor, ahead of members | Paid only after all creditors, including depositors, have been paid in full |
The governing distinction is simple: a Depositor has lent the company money and wants it back, with interest, by a fixed date; a Member has bought a stake in the company's ownership and shares in its fortunes, for better or worse, without any fixed date for getting the money back.
✓Final answer
A Depositor is a creditor entitled to a fixed rate of interest and repayment of principal by a fixed maturity date, with no voting right; a Member is an owner of the company, entitled to a variable dividend and a vote at general meetings, whose capital is returned only on winding up, after creditors (including depositors) are paid in full.
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