Members and directors of a Company Ltd by Guarantee
By Magelah Peter G.
Many times people confuse members of a company to be directors of a company. Whereas in companies Ltd by shares the distinction between members of the company and its directors is easy to see, in Companies Ltd by Guarantee there are times when there is a thin line between the two.
First let us deal with who is a member of a company?
S. 47 of the Companies Act provides for 2 situations on which a person can be considered a member of the company. The section provides that;
(1) The subscribers to the memorandum of a company shall be taken to have agreed to become members of the company, and on its registration shall be entered as members in its register of members.
(2) A person who agrees to become a member of a company, and whose name is entered in its register of members shall be a member of the company.
The first category of members in a Company is straight forward, the people who sign the Memorandum of the Company are the members. However, in practice, companies add more members as time goes on. These are the people provided for under the second category.
A lot of times people confuse members of a company to be directors of a company. Whereas in companies Ltd by shares the distinction between members of the company and its directors is easy to see, in Companies Ltd by Guarantee there are times when there is a thin line between the two.
First let us deal with who is a member of a company?
S. 47 of the Companies Act provides for 2 situations on which a person can be considered a member of the company. The section provides that;
(1) The subscribers to the memorandum of a company shall be taken to have agreed to become members of the company, and on its registration shall be entered as members in its register of members.
(2) A person who agrees to become a member of a company, and whose name is entered in its register of members shall be a member of the company.
The first category of members in a Company is straight forward, the people who sign the Memorandum of the Company are the members. However, in practice, companies add more members as time goes on. These are the people provided for under the second category.
When it comes to Companies Ltd by Guarantee, the Memorandum and Articles normally spell out how a person can be a member and at times it spells out different categories of members. For example paragraph 3 of Table C of the second schedule to the Companies Act provides that the Directors shall admit [new] Members to the Company. (this may however be different depending on the Companies Memorandum and Articles).
Many Companies Ltd by Guarantee in Uganda (mainly NGOs) appoint new members. Once a company makes changes to its register of members (by adding or removing members), it has an obligation to inform the registrar of Companies within 30 days from the date of making such changes (R. 22 of Companies General Regulations). The Company has to keep an updated register of Members (S. 119 of Companies Act).
Who are directors?
Once a company is formed it appoints directors and a secretary. In Uganda this is through filing Company Form 20 with the registrar of Companies. The directors could be selected from the members or could be persons not members of the Company. Directors are ideally persons charged with general running of the Company. They monitor the performance of management in terms of running the company in the interest of the members (shareholders). Directors in Company Ltd by Guarantee are ideally charged with making of policies, appointment of the chief executive and in some cases are involved with banking transactions and take major decisions in relation to purchase and sale of company property, nature of business (or projects in cases of Company Ltd by Guarantee.
The directors report to the Annual General Meeting which is a meeting of members of a Company. They are hired and can be fired by the Members through an Annual General Meeting. Company law in Uganda requires that the directors rotate or be replaced over time. in most cases the term of office for the directors is set in the Memorandum and Articles of the Company.
It is therefore important for a Company to keep a register of Members which should be separate from the register of directors. The members of the Company meet in an AGM while directors meet in directors’ meetings. Minutes for these meetings need to be kept separate and distinct even where the members and directors are one and the same.
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