[Opinion] Can a Cooperative Society be a Member of a Company?

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Dr K R Chandratre – [2023] 150 taxmann.com 27 (Article)

Introduction

A question that been raised recently by a company which has borrowed some money from a Multi-State Cooperative Society, in the context of Companies (Acceptance of Deposits) Rules 2014, which, among others, exempt from the definition of ‘deposits’ money received by a company from a member of the company. So, if a company receives money from its member (whether called a deposit or loan), it would be a deposit from a member for the purposes of the provisions of sections 73 and the Rules mentioned above. The definition of ‘depositor’ in the abovementioned Rules includes

“any member of the company who has made a deposit with the company in accordance with the provisions of sub-section (2) of section 73 of the Act”.

Who can be a member of a company?

Section (2)(55) of the Companies Act, 2013 (The Act) provides for the definition of the term member as follows:

“(55) “member”, in relation to a company, means—

(i) the subscriber to the memorandum of the company who shall be deemed to have agreed to become a member of the company, and on its registration, shall be entered as a member in its register of members;

(ii) every other person who agrees in writing to become a member of the company and whose name is entered in the register of members of the company;

(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository.”

The definition refers to three classes of persons who can be members of a company, namely:

(i) persons who have subscribed to the company’s memorandum of association;

(ii) persons who have agreed to become members; and

(iii) persons who hold shares and whose names are entered as beneficial owners in the records of a depository.

Under the third of the abovementioned three categories, in order to be registered as a member of the company, the person must agree in writing to be a member and his name should also find a place in the register of members.

In all three categories, the keyword is ‘person’. According to the definition, the basic condition to become a member is one who can be a member must be a ‘person’. In other words, only persons can be members.

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