Description

Description: This course develops understanding and application of the law relating to directors and management, members’ rights.

Background: The means of becoming a member of a company in Australia
Section 231 of the Corporations Act 2001 sets out ways of becoming a member. In practical terms there are several methods of becoming a member of a company:

• With the member’s consent, being named in the application lodged with the ASIC s 120 for registration. The member’s name must be entered in the register of members.

• Application And Allotment:
This is the way in which membership results from a contract with the company.
The application is the offer and acceptance made by allotment, which is communicated to the offeror by a letter of allotment. Membership of the company does not occur until the allottee’s name is entered in the register of members.

• Transfer Of Shares:
Where a shareholder sells shares in a company to another person, the buyer of the shares does not become a member of the company until his/her name is entered in the register of members and the seller does not cease to be a member until his/her name is removed from the register.
This may cause problems where the directors of the company have the power, under the constitution, to restrict the transfer of shares. The legal position is that the company only recognises as a member of the person who was a member on the registration of the company or whose name is on the register.

• Transmission of shares:
This is a transfer of shares effected by the operation of law, e.g. upon death or bankruptcy. By logic the trustee in such cases is entitled to have his/her name entered on the register as the legal owner of the shares, but, again, these are held for the benefit of the persons entitled to such benefits.

A trustee, in such cases, does not become a member until his/her name is entered on the register – he/she need not cause this to be done. He/she can leave the shares registered, for example in the name of the estate, and transfer them directly to the beneficiary.