Lesson 1,
Topic 1
In Progress
3.3 Rights and liabilities of members
3.3 RIGHTS AND LIABILITIES OF MEMBERS
Rights of members
- Voting rights: Members typically have the right to vote on significant matters that affect the company, such as the appointment of directors, changes to the company’s constitution etc.
- Dividend rights: Members may be entitled to receive dividends, which are a portion of the company’s profits distributed to shareholders.
- Right to information: Members have the right to access certain information about the company, such as financial statements, annual reports, and minutes of shareholder meetings.
- Pre-emption rights: Members may have pre-emption rights, also known as rights of first refusal, which allow them to purchase new shares or shares being transferred by existing shareholders before they are offered to external parties.
- Right to attend shareholder meetings: Members have the right to attend and participate in general meetings of the company.
- Right to share in distributions upon liquidation: In the event of the company’s liquidation or winding up, members have the right to share in the company’s assets after the payment of debts and other liabilities. The distribution of assets is typically based on the proportion of shares held by each member.
Liabilities of members
- Liability for shares: Members are generally liable to pay the nominal value or the subscription price of the shares they hold.
- Liability to third parties: Members are generally not personally liable for the company’s debts and obligations. The concept of limited liability protects members from being held individually responsible for the company’s liabilities.
- Compliance with company’s constitution: Members have a responsibility to comply with the provisions outlined in the company’s constitution, including any restrictions on share transfers, voting procedures, or other obligations imposed on members.
- Fiduciary duties: In some jurisdictions, members who are also directors have fiduciary duties to act in the best interests of the company and its shareholders.
