Who is a shareholder of a company?
A shareholder of a company is a person who holds its shares. The holder becomes a member when the name is entered in the register of members. Holding the share does not make the holder a director.
Who is a shareholder?
Section 2(55) treats as a member the subscribers to the memorandum, and every other person who agrees in writing to become a member and whose name is entered in the register. A person, a company, or an LLP can be that member. A subsidiary cannot be a member of its holding company. How a share later changes hands is on the transfer page. Who sits on the board is on the director page.
Which shares carry a vote?
| Share | What the holder gets |
|---|---|
| Equity | A vote in proportion to the paid-up equity. A dividend only if the company declares one |
| Preference | A preferential dividend. A vote on resolutions that affect those rights, on a winding up, and on a repayment or reduction of capital. A vote on every resolution if the preferential dividend stays unpaid for two years |
A private company stops at 200 members. Two or more persons who hold one share jointly count as a single member for that limit. Forming the company is on the private-company page.
Who cannot hold the shares in that name?
A partnership firm is not a legal person, whether or not it is registered with the Registrar of Firms. The partners hold the shares themselves. An LLP can hold them, because an LLP is a body corporate. That form is on the LLP page. A minor is not competent to contract, so a minor does not sign a share application. A guardian may hold shares for a minor. A unit in a mutual fund is not a share in the company the fund has bought.
Frequently asked questions
Four questions cover a director, the 200-member limit, a firm, and a dividend.
Is a shareholder a director?
No. A director is appointed to the board. Holding a share does not appoint the holder. A director need not hold a share unless the articles require it.
Can a private company have any number of shareholders?
No. A private company is limited to 200 members. Joint holders of a share count as one member for that limit.
Can a partnership firm be the shareholder?
No. A firm is not a body corporate. The partners may hold the shares in their own names. An LLP can hold shares in its own name.
Does every shareholder receive a dividend?
No. A dividend is paid only when the company declares it. Preference shares, if issued, stand ahead of equity for that dividend. Equity has no guaranteed dividend.
Sources
A member is defined in section 2(55) of the Companies Act, 2013. Equity and preference shares are section 43. Voting is section 47. The private-company limit is section 2(68).