3.4 Cessation of membership

Termination/Ceasation of Membership

A person ceases to be a member of a company when any of the following event occurs

1. Death

When a member dies, his legal heir or his nominee is entitled to be the owner of the shares held by him by transmission.

2. Insolvency/bankruptcy

In case the existing member becomes insolvent, his membership ceases and the official receiver or the assignee shall be entitled to get its name registered in the register of members.

3. By transfer of shares

Where a member voluntarily transfers his shares to a person and this is approved by the board of directors, he ceases his membership.

4. By sale of shares /lien on shares

When shares are sold out in execution of a decree or exercising the power of lien over shares, the company sells his shares, the membership may be ceased or terminated since the name of the existing shareholder shall be removed from the register.

5. By mortgage of shares

Sometimes the condition of mortgage loan may be that the shares will be transferred to the creditor and in such cases shares if so transferred the creditor shall be deemed to be a member of the company and the mortgager in that case shall cease to be a member.

6. Forfeiture on non-payment of calls

If the articles so provides and the member does not pay the call money his shares shall be forfeited resulting in termination or cessation of membership.

7. By a valid surrender

Where the articles so provide a surrender of shares if acceptable leads to cessation of membership.

8. By conversion of share certificate into share warrants

If articles provide, when share certificates are converted into share warrants the members are deemed to have ceased membership.

9. By redemption of redeemable preference shares

When preference shares are redeemed the preference shareholder ceases to be a member.

10. On winding up

On winding up of a company the existing members shall cease to be members. However, they may remain contributories.

11. Rescission of the contract

A member may rescind a contract on grounds of misrepresentation or mistake. This however does not apply to shares subscribed in the memorandum.