“Who can be a Shareholders of a Company?” And information on “How to become a Shareholder?”  

Introduction

An individual who has shares in a firm is referred to as a “Member” in common parlance. A company’s true owners are its shareholders. They form the corporate body of the company as a whole. Shareholders have ultimate control over the selection and dismissal of directors, auditors, and other managerial staff. The Board’s powers are also subject to the general body of members’ control and monitoring. In this article information on Shareholders of a Private Company, “Who can be a Shareholders of a Company?” And information on “How to become a Shareholder?”

Meaning of a Shareholder of a Company

A company’s share represents the units into which its total capital is divided. To put it another way, it is dividing the company’s whole paid-up capital into small units in order to raise funds. The donor to this unit becomes the shareholder, and the percentage or part of money provided by a person to make up the capital is known as shares. Shareholders of a company are also known as Members of a Company under the Companies Act, 2013.

Information on “Who can be a Shareholders of a Company?”

• HUF (Hindu Undivided Family)

For all intents and purposes, a HUF (Hindu Undivided Family) is treated as an individual rather than a legal entity. A company’s shares can be registered in Karta’s name as (A’s HUF) As a result, a HUF can become a shareholder in a Company.

• Partnership Firm

A firm, it has been maintained, is not a separate person or legal entity from the partners who make up the partnership, but rather a collective designation for the individuals who make up the partnership. As a result, a partnership firm is neither a legal entity nor a living individual. A partnership firm’s partners can become joint shareholders of a business, and their names can be recorded on the shareholder register. If the partnership firm is registered, it can also become a shareholder of the company.

• Company

A company may join another company if its MOA or AOA permits it, or if it acquires the shares of another company through a Compromise or Arrangement. A Company, on the other hand, cannot purchase its own stock. Additionally, there are some exclusions, such as a company’s holding company’s shares being prohibited from being purchased.

• Minors

A minor lacks the legal capacity to enter into a contract, hence his or her contract is void. A minor lacks the legal capacity to enter into a bond or empower another person to act on his behalf. The accepted guardian, on the other hand, is permitted by Hindu Law to engage into a bond on behalf of the minor, and such a contract would be binding. It can be used for both the selling and acquisition. As a result, a guardian can enter into a share purchase agreement on behalf of a minor, and the agreement will be lawful.

• Non-Resident Indian

Foreign companies, Foreign nationals, and non-resident Indians are all permitted to become shareholders in Indian companies, subject to FDI (Foreign Direct Investment) legislation and FEMA standards.

• LLP (Limited Liability Partnership)

A Limited Liability Partnership (LLP) is a legal entity that can own assets and properties in its name. LLP can become a shareholder of a corporation by signing the company’s Memorandum of Association (MOA) or purchasing shares subsequently.

• Trust

A trust that has not been incorporated cannot be considered as a person, the trust’s shares cannot be registered in its name. It could, however, be set up in the names of one or more trustees. If a trust or co-operative society is registered, shares can be registered in its name. As a result, a registered trust or cooperative organization can become a corporate shareholder.

• Central or State Government

The President of India or the Governor of a state can become a shareholder of a corporation on behalf of any of the state governments or the central government. According to the Act, either the President of India or the Governor of a state may designate anyone to attend any meeting of the company. The person so nominated might be regarded as a shareholder of a firm, with the same rights and powers that the President of India or the Governor of the State would have if they were shareholders.

Responsibilities of a Shareholder

Being a shareholder entails more than just getting income; it also entails certain duties. Let’s take a look at some of these duties.

• They are brainstorming and considering what powers they will give the company’s directors, such as appointing and removing them.

• Choosing the amount of money the directors will be paid. The method is complicated because investors must ensure that the amount they will provide will cover the director’s costs and cost of living in the city where he or she lives while not jeopardizing the company’s finances.

• Making judgments on matters over which the directors have no authority, such as revisions to the company’s constitution.

• Examining and signing off on the company’s financial statements.

How to become a Shareholder?

Stock is issued by a corporation to signify an ownership stake in the company and to make the owner a shareholder. This news frequently represents stock market changes, as well as daily stock market results. This is a grouping of equities based on size or industry that serves as a barometer of the overall investment world’s performance.

Becoming a shareholder in a public corporation entails purchasing the company’s stock through a brokerage firm. To become a shareholder in a private corporation, on the other hand, you must contact the company directly and make an investment offer. To invest in companies and become a shareholder, we’ll go over several key factors that will help us understand ‘how to become a shareholder of a firm.

• Investing in Stocks through Brokerage Firms

Stocks and other financial instruments are bought and sold through brokerage houses. These companies provide varying levels of service depending on the sort of information and service required.

• Brokers who provide a full range of services

It all depends on the requested service. For example, if a person wants to invest in a firm, he must employ a full-service broker to research the companies and provide market analysis, as well as no other information. However, if the stock is being purchased for a future date, such as for one’s grandchildren, one can request discounted information from a full-service broker who will just supply the necessary information without going into depth.

• Stocks of Various Types

Stocks are not all created equal. There are many kinds of equities that an investor should be aware of. He can invest in the company with his appropriate type of stocks after gaining complete knowledge of the stock.

• Purchasing a Product

The stock can be purchased after a thorough analysis. This necessitates placing a “purchase” order. This is accomplished via the broker or an online brokerage platform. In most cases, new accounts demand a minimum balance to ensure that the stock price can be paid before it is purchased.

Information for becoming a Shareholder of a Private Company

There is a different procedure for purchasing shares from private corporations. The majority of small firms are private corporations controlled by a small group of shareholders and investors. Private firms keep track of their stock in a ledger kept by the Corporate Secretary.

An interested person should contact the secretary or president and express his willingness to invest in the company. He must then negotiate the price per share as well as the number of shares. The owners are hesitant to give up majority shareholder power in order to protect their ownership.

The remuneration is transferred to the corporation once the number of shares and their value have been determined. The president and the company secretary sign a paper stock certificate that is issued to the new shareholder as proof of ownership, and notes are made in the ledger of the new ownership.

Conclusion

Members of a firm are also known as shareholders. Any person can become a shareholder under the Companies Act of 2013, and a person can be an individual, a body corporate, an association, or a company, regardless of its formation. If the company is liquidated and its assets are sold, the shareholder may be entitled to a percentage of the proceeds, if all creditors have been paid. When such a situation happens, being a stockholder has the advantage of not being obligated to shoulder the company’s debts and financial commitments, which means creditors cannot force stockholders to pay them.