Joint Shareholding – Companies Act
A joint shareholder refers to a person who holds one or more shares jointly with one or more persons. This article provides a brief note on the fundamental aspects pertaining to joint shareholding in a company.
The Basis of Distinction
Joint shareholders, in general, are distinct members. The only exception is that joint shareholders in a private limited company do not fall under the purview of distinct members. Hence, while counting the number of members of a private limited company, the joint shareholders holding shares together are to be counted as a single member. The reason behind this thought is that if every joint shareholder is counted as a member, the number might exceed 200, which is the maximum number of shareholders a private limited company is allowed.
Joint shareholding is devoid of the concept of legal entity, as unlike incorporated companies, joint shareholders do not emerge as a separate legal entity or a separate legal person. As a result of that, shares held by joint holders are not regarded in a distinct manner. Likewise, in the case of a legal entity holding shares, it is not regarded as a joint holding by the members forming the company.
All joint holders are in theory, members of a company. For practical purposes, the Companies Act and the articles of association make provisions by virtue of which it is only the first-named shareholder who is regarded as a member. But, to re-iterate, every person whose name is enrolled in the register of members is a member of the company.
Maximum Number of Joint Shareholders
The stock exchange regulations specify that, with reference to listed companies, one or more shares cannot be held by more than three persons jointly. Effectually, one or more shares in a company, whether listed or not listed, cannot be held jointly by more than three persons.
Death of a Joint Shareholder
The existing joint-shareholders will be entitled to the shares of one/more deceased joint-shareholders. It is vital to note that the surviving holders can be the only beneficiaries of this provision, and none of the legal heirs of the deceased member can be entitled to be recognized as members of the company, unless the court issues an order on the contrary.
Know more about share nomination.
For a company to register a legal heir of any deceased member, the company will require a share transfer instrument to be submitted, where the surviving holder will be the transferor and the legal heir of the deceased holder will be the transferee.
Splitting of Joint-holding into Individual Holding
Akin to the registration of a member as a legal heir, splitting of joint-holding into individual holding in the name of each or some of the joint shareholders mandates the need of a share transfer instrument.
Rights and Duties of Joint Shareholders
The following are the rights and duties of joint shareholders:
- A document to be served by a company on its members will be served first on the joint holder named first in the register of members.
- Any dividend payable may be paid by cheque or warrant, sent through the post directed to the registered address of one of the joint shareholders who is first named on the register of members.
- At a company’s general meeting, the vote of the first-named joint holder, whether he tenders the vote in person or by proxy, would be accepted to the exclusion of the votes of the other joint holders.
- If any of the shares are being held jointly, the company would not be bound to issue more than one share certificate, and if the share certificate is delivered to one of the several joint holders, it is considered as sufficient delivery to all such holders.
- The joint holders of a share can be jointly and severally liable to pay all calls in respect thereof.
- One or more joint holders of a share can give effectual receipts for any dividends, bonuses or other perks payable in respect of such share.
- One or more of the joint shareholders can sign a requisition for conveying a general meeting or notice calling a meeting.
Post by Sreeram Viswanath
IndiaFilings is India's largest online compliance services platform dedicated to helping people start and grow their business, at an affordable cost. We were started in 2014 with the mission of making it easier for Entrepreneurs to start their business. We have since helped start and operate tens of thousands of businesses by offering a range of business services. Our aim is to help the entrepreneur on the legal and regulatory requirements, and be a partner throughout the business lifecycle, offering support at every stage to ensure the business remains compliant and continually growing.