Shares to minor

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Upma Madan (Querist)
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13 July 2012 1. Can shares be issued or transferred to minor?
2.If yes then whether his name be admitted in register and share certificate be issued in this name??

Thanks in advance

CS Divya Sorayan

CS Divya Sorayan (Expert)
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14 July 2012 Any contract with minor is VOID ab initio. Hence, in case of listed companies, for opening of Demat account for trading on line, contract need to be entered with Depository and Depository Participant. Therefore, minor cannot open demat account for trading. Minor bank account will be operated Under /Guardian and hence the same is operative by Guardian. As regards trading and to utilize demat services, it is not permissible for a minor to avail these services. Companies Act is allowing minor to acquire shares through guardian. A minor is not legally allowed to trade through the stock exchange. We need to provide details to the depository regarding minor’s age. (now a day’s PAN card is also necessary which is available to a minor through following process.
In case the PAN applicant is a minor, any of above documents (Copy of school leaving certificate or matriculation certificate or degree of a recognized educational institution or depository account or credit card or bank account or water bill or ration card or property tax assessment order or passport or voter identity card or driving license or certificate of identity signed by a MP or an MLA or a Municipal Councilor or a Gazetted Officer; of any of the parents or guardian of such minor shall serve as proof of Identity;).
As such being 18+ of age is a prerequisite to trade in a stock exchange, which automatically avoids minors to trade in the stock market. To transfer the shares in favour of a minor, we have to ensure that transfer deed is signed by the parent (Natural Guardian) on behalf of the minor. Though , in case of a private limited company and a non-listed company , the contract act does not differentiate between a limited and private limited company as regards to contract with a minor either by a sale or by a transfer of shares.
Shares can be transferred in favour of a *MINOR. *There is no legal bar to minor acquiring fully paid shares through his guardian.
In order to transfer fully paid shares in favour of a minor, in the share
transfer from, in the column “Transfer to transferee” the following
particulars should be written:
“XYZ (Minor) through Mr / Mrs. ………………………………. , the natural guardian”.
In the column “Signature(s) of the transferee(s)”, the guardian’s signature shall be put. It is then not necessary to mention that the guardian on behalf of the minor signs the form.
On attaining the majority, the minor can ask the company to register his name where the shares are held in the sole name of the minor. No share transfer form will be required for this purpose and the company shall make a note of this fact in its register so that the minor, now major, can operate his own account of the shares instead of the guardian. The following documents are normally required to be submitted to the company for this purpose:
1. a copy of the certificate of birth;
2. related share certificate;
3. specimen signatures; and
4. an affidavit.
In *Devan Singh vs Minerva Films Ltd (1956)*, the Punjab High Court held that there is no legal bar to a minor becoming a member of a company by acquiring shares (by way of transfer) provided the shares are fully paid up and no further obligation or liability is attached to them. In this case, transfer of shares had been held valid as it is a fully paid up shares and there is no mention about who had signed the transfer deed form. Further, this case, deals with a doctrine of indoor management and has stressed that a minor cannot be held for further obligation or liability is attached to them. Similarly, in *S. L. Bagree v. Britannia Industries Ltd — 1980*, CLB upheld transfer in favour of a minor but silent about who has to sign
the transfer deed in case of a transfer of shares.

Upma Madan

Upma Madan (Querist)
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19 July 2012 Thanks a lot.....Divya

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