Can a Minor Be a Shareholder of a Company?

Last Updated at: Nov 12, 2020
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In October, 2020, the RBI has asked Lakshmi Vilas Bank to reconsider the names proposed for the post of new MD & CEO. The cash-strapped private sector lender is in the midst of a merger process with Clix group. In September, shareholders of the bank voted out seven board members, including the MD & CEO, S Sundar, at the annual general meeting.

 

Well, partnership companies are quite common and it involves two or more people being shareholders. If you are in the idea of making a minor a shareholder, then it is possible only with his or her guardian, then you need to know a few things before attempting to do so. You can get to know more interesting details about the same from here.

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?

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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.

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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.

Well, remember that a minor can be made a shareholder of the company but he or she will not be able to actively take part in buying shares in the company. The same has to be either gifted or transferred to the minor. And, the guardian will be involved in protecting the interests of the minor as well as manage the shares. Remember that you can also make the minor a director of the company.