Can a Minor Be a Shareholder of a Company?

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As per Section 3 of Indian Majority Act, 1785, a minor is a person who has not yet attained majority or the age of eighteen years. As per Indian Contract Act, 1872, such a person (minor) cannot enter into any agreement. Therefore, a minor cannot enter into contract. However, Companies Act, 2013, states that any person, irrespective of age, can be appointed as a director and hold shares in the company. So how is this possible?

As you may have guessed, a minor can only be a shareholder through his or her guardian. Furthermore, a minor cannot actively buy shares in a company. They must either be gifted to him/her or transferred. The guardian safeguards the interests of the minor and must manage the shares.

Similarly, a minor may also become a director, if a guardian is appointed as director for the same duration.

Right of a Minor as Shareholder

Minors have the right to vote in the general body meeting and the voting rights will depend upon the proportion of shares the minor holds within the company.

It is, however, essential to note that the minors do not hold any liability to the company. They will, therefore, not need to pay up in case the company is dissolved. They, however, will receive their dues if the company goes into liquidation.

Thus, a minor can enjoy all the benefits of the company, without being liable for any issues the company might encounter.

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Priya holds a masters in accounting and is well-versed with compliance and legal issues a small business may face.

2 COMMENTS

  1. Mam,you forgot to mention that ,Only in case of transmission & by operation of law ,minor can become shareholder of the company and such shares should be fully paid up .

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