Chapter 4 - The members

Question 1

What two criteria must be met in order to be a member of a company?

Answer 1

1. Consent to be a member
2. Be entered into the company’s register of members

Question 2

Other than as a shareholder, what other forms can company membership take?

Answer 2

Guarantor, or for an unlimited company without a share capital, some other method of dividing ownership.

Question 3

Is there a minimum or maximum number of members that a company must have?

Answer 3

Minimum 1, no maximum.

Question 4

What are the main disadvantages of registering shares for a long term investment in children’s names?

Answer 4

As minors, Children can void any obligation to pay funds to the company, and a minor cannot deal with any transaction themselves which would require a court order to ensure it was in their interests

Question 5

Can anyone become a member of a company?

Answer 5

Subject to the Articles, any natural person or entity with legal capacity may be a member, However Subsidiaries are generally prohibited from owning shares in the parent entities.

Question 6

A professional partnership wishes to acquire some shares. How should they be registered?

Answer 6

In the name of one or more partners, unless it is a Scottish partnership which can register the shares in the partnership name.

Question 7

In order to establish the rights of a shareholder, which documents should be referred to?

Answer 7

The Articles or any separate terms stipulated at the time of the issue of the shares.

Question 8

Are members always shareholders?

Answer 8

No - some members are guarantors

Question 9

How can a guarantor transfer their membership to someone else?

Answer 9

They can’t

Question 10

Does the guarantee cease immediately on the guarantor resigning?

Answer 10

No, it remains for one year

Question 11

Which type of organisation is best suited to use a guarantee company structure?

Answer 11

Not for profit

Question 12

Why is aligning the interests of directors and shareholders difficult to achieve in practice?

Answer 12

Shareholders have many different reasons for becoming and remaining as shareholders so their interests are not aligned with each other

Question 13

What are the main differences between activists and pressure group shareholders?

Answer 13

Activist shareholders use their holding and infleunce to bring about change.
Pressure group shareholders try to bring about change through publicity achieved through campaigns and meeting disruptions.

Question 14

Rights attached to shares can be divided into three broad categories. What are they?

Answer 14

1. Rights to vote
2. Rights to distribution of profits
3. Rights to capital

Question 15

What protection is given to members holding non-voting class shares if the member holding voting shares resolve to amend the Articles in general meeting to increase their dividend rights?

Answer 15

Rights attaching to shares of a class cannot be amended without their consent, even if they are non-voting shares.

Question 16

Can a company with two classes of shares, ordinary shares and redeemable shares, purchase back all of the ordinary shares?

Answer 16

No - this is because a company cannot have only redeemable shares

Question 17

What two tests must be satisfied in order to bring a claim for unfair prejudice?

Answer 17

1. The conduct complained of must be unfair
2. The conduct must have caused or is causing prejudice or harm to the interest of the members or a group of members

Question 18

Can anyone bring a derivative action claim against a company?

Answer 18

Must be brought be a member

Question 19

What is the difference between beneficial and legal ownership of shares?

Answer 19

Legal ownership is where the person is the registered member, the beneficial owner retains the economic benefit of ownership but is not the legal owners as the shares are registered in a nominee name.