A Business can attract
investors other than the business owner. A major way for the investor to
participate in these businesses is to invest in the company by purchasing
shares. Anyone who purchases shares is called a shareholder. Shareholders are
very important persons in a company whether it is public or a private limited
company. A shareholder is one who owns at least one share, attracting at least
one vote in a company. A subscriber of shares is not regarded as a shareholder
until shares are actually allotted to him. There is equally a very important
person in a company. They are referred to as the Members of a company.

A member of a company is a
person having constituent proprietary interest in the company and whose name
has been entered in the Register of Members. The right of members is dependent
upon the Companies and Allied Matters
Act Cap C20 LFN 2004
, Articles of Association and any agreement entered
into by a member.

In the ordinary commercial
language, the term “Member’’ denotes a person who holds shares in a company. Members
and Shareholders are often  used
interchangeably. It is pertinent to note that there is a difference between a
shareholder and a member of a company although the difference is not too
visible. A member is one who satisfies the provision of Section 79 of CAMA. This
Section provides that a member of a company is one who agrees to become a
member and whose name is entered in its register of members. The original
subscribers to a company memorandum are considered to have agreed to become a
member of a company. Thus, membership of a company is not synonymous to

between Members and Shareholders

The following are the
differences between members and shareholders:

A shareholder will not become a member of a
company until his name has been input in the register of members. A shareholder
is a person who owns the shares of the company.

All shareholders whose names are entered in
the register of members are the members. Thus, all members may not be

Proof of shareholdership is by a share
certificate; while proof of membership is by the register of members. Ponmile
v Sparks Electrics Nig. Ltd (1986) 2 NWLR 519 AND Oilsfield Supply Center Ltd
v. Johnson (1987) 2 NWLR 625.

For a person to be a member
of a company, he must

Subscribe to shares, that is, he must be
allotted at least a share in the capital of the company

Consent to be a member

Enter his name in the register of members
before he enjoys membership benefits

If any of these conditions
is not satisfied, the person shall not be a member under this Act.

Membership of a company can
be acquired through any of the following ways;

By subscribing to the Memorandum before the
registration of the company.  Section
79 of CAMA

By applying for the shares offered by the
company. Section 125 of CAMA.

By becoming a transferee of a share and being
placed in the register of members. Section 151 of CAMA

By transmission of shares on succession to a
deceased or bankrupt member and the consequent registration in the register of
members. Section 155 of CAMA

By share qualification: the Articles may
require a director of a company to take up shares in the company upon his

The entry in the Register of
members is an indispensable condition for membership. Berliet Nigeria Co. Ltd v.
Francis (1987) 2 NWLR 675.

Every Nigerian company acts
through its member or shareholders either in its general meeting or through the
Board (these are the main organs of a company). The importance of having a
member and a shareholder or both cannot be over emphasized. A business owner
cannot grow a company singlehandedly.  He
is like a coach and the job of a coach is to hire extremely talented,
hardworking and vision minded people to accomplish specific assignments. Every
growing company needs people that will improve the standard of the company in
all ramifications and execute various projects. An illustration is provided in the
preceding paragraph.

Mr A and his family
established a shoe factory. He is the sole owner of the company because he
holds more shares in the company. Along the line, Mr B and C decide to purchase
shares from the company. By doing so, they become part of the company in
relation to the proportion of shares they hold. Mr A, who is the company’s
founder, would give part ownership to Mr B and C. Mr B and C who are now
shareholders in the company would play an important role in the financing,
operations, governance and control aspects of the business. They would appoint
directors to manage the operational activities of a company or in some cases,
they could equally assume the role of directors. Company owners make decisions
about significant matters such as changing the name of the business, appointing
or removing directors, altering the articles of association and so on.

Thus, it can be said that a
person can be a member and shareholder of the company at the same time. E.g, Mr
B has 30 shares in AOL Limited, he was issued a share certificate and his name
appears in the Register of members; A person can be a member but not a
shareholder of the company e.g Mr B has 30 shares in AOL Limited, his name
appears in the Register of members but he has sold all his shares to Mr C; A
person can be a shareholder but not a member of the company eg. Mr B has 30
shares in AOL Limited bought from Mr B, He holds a share certificate but his
name is not included in the Register of members. The main duty of a member who
is also a shareholder is to pay the company the sum which remains outstanding
for the agreed amount of the share(s) that have been issued.

can become a member of the company?

The Articles of Association
of a company may impose certain restrictions or restrain some persons from
acquiring membership in a company. In the absence of any express provision
regarding the contractual capacity or legal personality of a person, the
provisions of Section 80 of the CAMA will apply.  These include:

Minors: A minor is not a competent person to
enter into a valid contract. As a result of this, he is disqualified to acquire
membership. However, minors may be allotted shares, but it shall not be counted
for the purpose of determining the legal minimum number of members of the
company. Although, it is voidable at the instance of the minor when he attains

Unincorporated entities: A partnership firm
cannot be issued shares because it is not a legal person. Although, such firm
may hold shares in a company in the individual name of partners as joint

An undischarged bankrupt

A person of unsound mind

A corporate body in liquidation

The members of a company
enjoy several benefits. Their rights can be classified under two heads;

1.     Statutory
Rights: these are the rights conferred upon members by the CAMA and they
include the following;

Right to receive Dividend once declared by
the board. Section 385 of CAMA

Right to transfer shares

Right to receive, upon request, certain
statutory books and records of the company

Right to inspect statutory registers

Subject to Section 228 of CAMA,
every shareholder shall have the right to attend company meeting and vote. Section
81 of CAMA.

Right to petition for the winding up of a

Right to seek an investigation into the
affairs of a company

Right to receive notice of meeting

Right to demand poll and appoint proxy in
company meeting

Right to take up minority actions Heyting
v. Dupont and Anor 1964 1 WLR 843

Right to requisition Extra-ordinary meeting

Right to be issued certificates within three
months. Section 146 of CAMA.

2.     Documentary
Rights: in addition to Statutory Rights, are certain rights that can be
conferred upon the members by the constitution of the company like the
Memorandum and Articles of Association.

Blessing C. Madu 

Blessing is a lawyer in the firm of
Adedunmade Onibokun & Co., she has a passion for corporate law practice.

If you have any questions or comments on
Membership rights or Shareholders Agreements, you can send a mail to the author
or contact @legalnaija. Kindly note that this article is for educational
purposes only and does not serve as legal advice.