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Minor as a member of a limited company


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Minor as a member of a limited company

  1. 1. Minor as a member of a Limited Company- The legal position - Agreement by a minor in India to take shares is VOID. - Shares allotted to a minor in ignorance of the fact of minority can be (and not should be, ie the option is left to the company) repudiated and minor’s name removed from the Register of Members(R/M). The company to repay the money received in respect of the shares allotted. - Minor CAN repudiate allotment and claim the amount paid on the shares. - If the name of the minor continues on the R/M and neither party repudiates the allotment, the minor does not incur any liability on the shares during minority and he cannot be held a contributory at the time of winding up. -If an application for shares is made by a father as guardian of his minor child and the company registers the shares in the name of the child, describing him as a minor, neither the minor nor the guardian can be placed on the list of contributories at the time of winding up. However, if the name of the guardian is written in the R/M as “guardian for a minor”, then the guardian will be liable since the company does not take notice of the trust.(ie a company does not consider on whose behalf the guardian holds the share) -If a minor’s name appears in the R/M, the minor can, on attaining majority REPUDIATE HIS/HER LIABILITY on the shares on the grounds of MINORITY. The Company cannot take the defence of ESTOPPEL that the minor had fraudulently misrepresented his age or had received dividends and other privileges as a member. However, if he had received dividends and exercised his rights as a member of the company AFTER ATTAINING MAJORITY,then he cannot repudiate his liability on shares. -In case of transfer of PARTLY PAID SHARES, the company MAY REFUSE TO REGISTER him as a member. In case the company, IN IGNORANCE OF MINORITY, has permitted the transfer, the company may remove the name of the minor and replace it by that of transferor, even though the transferor may have been ignorant of the minority. -In case of FULLY PAID SHARES, minor’s name may be admitted in the R/M, if he happens to acquire the same BY WAY OF TRANSFER OR TRANSMISSION. What is meant by “placing on the list of contributories”? When a Company is being wound up, a list will be prepared by the Liquidator or any person in charge of the winding up, of the persons who are liable to contribute to the winding up. The names of the member/shareholders of the Company will be placed in the list of the contributories if they have not paid fully the amount due on the shares held in their respective names.