CS Deepak Pratap Singh
When a person holds one or more shares jointly with one or more person(s) in a Company, he/she is called Joint shareholder.
Since a Joint Shareholder is different person, but in relation to private limited companies, joint shareholders are considered as a member.
According to the provisions of Section 2(68)(ii) of the Companies Act, 2013 in case of a private limited company joint shareholders are considered as one member, while counting number of members 200. If they are not considered so then the number of members may be increased 200, while counting joint shareholder as distinct person.
Since Joint Shareholders are not considered as legal entity or incorporated entities, which acquires legal status after incorporation.
In case of legal entities holding shares, it does not mean that the members of that legal entities holding shares jointly.
In case of joint shareholders , each of joint shareholder is a separate member of the Company except where the Act provides that the Joint Shareholders would be treated as single member as provides in Section 2(68)(ii) of the Companies Act, 2013 in case of a private limited Company.
The rights and obligation of each Joint Shareholder will be governed by the provisions of Clauses of Articles of Association of a private limited Company.
All Joint Holders are members of the Company in general law, but provisions of the Act and Clauses of Article of Association of the Company may provide that the first named shareholder will be treated as member of the Company to the exclusion of others. The First Named Joint Shareholder will be treated as member and all correspondences or transactions will be done with him only.
As we know every person who holds shares in a Company, whether singly or jointly and whose name is appear on the Register of Members of the Company, will be treated as member of the Company.
Not in case of listed companies the regulations provides that one or more shares cannot be held by more than three persons jointly.
Similar provisions generally found in case of non listed companies such that “one or more shares in a company, can be held by not more than three persons jointly.”
IN CASE OF DEATH OF JOINT SHAREHOLDER;
Joint Shareholdings are beneficial in some cases, such in case of death of a Joint Shareholder; the remaining Joint Holders will be entitled to the shares under Joint Shareholdings not the legal representatives of deceased Joint Shareholder.
Regulation 23 of Table F in Schedule I to the Companies Act, 2013; provides that on the death of a member of a company, the survivor or survivors, where the members was a Joint holder and his legal representatives , where he was the sole holder , shall be the only person(s) recognised by the company as having any title to his interest in the shares.
Now in case of Joint Shareholding, the remaining Joint Shareholders only have right and interest in the shares held in Joint Shareholding, not the legal representatives of the deceased Joint Shareholder. A Legal Representative will acquired rights and interest in the shares of the company only in case of Sole Holding of shares in the name of deceased holder.
TRANSFER OF SHARES IN CASE OF JOINT SHAREHOLDING;
No instrument of transfer in necessary in case of transfer of share in the name of Joint Shareholder.
Since Legal Representative/ Heir of a deceased Joint Shareholder has not right and interest in share held in Joint Shareholding and also he/she cannot claim that the shares will be registered in his/her name.
If the legal representative / heir of the deceased shareholder is to be registered as a member of the company, the company will require Transfer Instrument to be submitted, where surviving Joint Holders will be treated as Transferor and the Legal / Heir of deceased Joint Holder will be treated as Transferee.
In case of split of Joint Shareholding in the name of separate joint shareholders is also required Transfer Instrument as transferor(s) and the respective individual holders(s) , in whose name(s) the split is to be made , will sign as transferee(s) in the respective transfer deed(s) and same to be submitted with the Company.
SPECIAL PROVISIONS FOR JOINT SHAREHOLDINGS UNDER PROVISIONS OF THE COMPANIES ACT, 2013;
1. Joint Shareholders may acting together appoint a nominee in respect of their Joint Shareholdings according to the provisions of Section 72(2);
2. In respect of any share or shares held jointly a company is not bound to issue separate Share Certificate to all Joint Shareholders. The delivery of one share certificate for a share to one of the several Joint Shareholders shall be sufficient according to [Regulation 2(iii) of Table F of Schedule I].
3. The Joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.[ Regulation 15 of Table F of Schedule I]
4. On the death of Joint Shareholder, the survivor or survivors shall be the only person(s) recognised by the company having any to his interest in the shares [Regulation 23 of Table F of Schedule I].
5. In case of Joint Shareholding the senior member will vote at the meetings, whether in person or by appointing a proxy to the exclusion of vote of other Joint Shareholders .The seniority will be determined by the order in which their names stand on the Register of Members of the company[ Regulation 52 of Table F of the Schedule I].
6. All dividend, interest or other payments payable in cash may be paid by cheque or warrant sent through the post directed to the registered address of the one of the joint holder who is first named in the Register of Members or such person to such address as the holder or joint holders in writing direct[ Regulation 85 of Table F of the Schedule I].
7. Any one the two or more joint holders of a share may give effective receipts for any dividends, bonuses or other monies payable in respect of such share [Regulation 86 of Table F of Schedule I].
(Author can be reached at firstname.lastname@example.org)