Can a partnership firm be a shareholder ?

Page no : 3

CA Adarsh Madrecha (Chartered Accountant) (200 Points)
Replied 28 June 2012

Originally posted by : taran
	A partnership firm can be a member but not a director in the company. Only individual can be director in a company. Partnership firm can become shareholder of a company. Shares will be held in the name of partnership firm.

This statement is wrong in the first, Patnership firm cannot be member, hence not even Shareholder. Partners name apper in Members List, for Co.

Upgrade to CAclubindia Pro. Subscribe Now!

(Guest)

A partnership firm can not be a member of the company bcozzzzz it is not a legal person in the eye of law,, and its registration is not mandatory its purely optional,, but its partners can be a member of the company whether solely or jointly not a partnership firm same as HUF can not be member only its KARTA may be..

jasmin (trainee) (29 Points)
Replied 21 October 2013

hiii members,

I have one Query can a proprietorship be a member of the company?

Jasmin

Ajay Mishra (Company Secretary) (74337 Points)
Replied 21 October 2013

Section 41(2) provides that only a person can be a member of a company who has agreed in writing to become a member and whose name is entered in the Register of members.

As per Department's Circular No. 4/72, dated 9-2-1972, it has been clarified that "a firm" not being a person, cannot be registered as a member of a company.

However, section 25(4) of the Act, provides that when the company is licenced under section 25, a firm may become a member of any association or such company licensed under section 25. In such case the membership of the association or company shall cease upon the dissolution of the firm. However, partners of the dissolved firm may continue to be members of the association or company in their individual capacities.

1 Like

jasmin (trainee) (29 Points)
Replied 22 October 2013

Thanks Ajay....

So in the above case is it possible that t he owner of the proprietorship firm be a member in a company?

Upgrade to CAclubindia Pro. Subscribe Now!

Ajay Mishra (Company Secretary) (74337 Points)
Replied 22 October 2013

Owner and partner of firm can be a member of the company.

jasmin (trainee) (29 Points)
Replied 22 October 2013

ok thanks a lot Ajay Mishra for your reply....

(Guest)

no.. a partnership firm can not be a member of company... just because of reason that it is not legal person in the eye of law and not a seperate entity from its members.. but it is also provided that a partnership firm can be a member of NPO(non profit org. section 25) and cease to be member when partnerashp firm become dissolved.... anuj malik

Kush Kanodia (Student) (38 Points)
Replied 17 January 2016

Hi,

A private limited co. has a partnership firm as a shareholder for 20 years now. No disclosures have been made for the same as the partnership owns approx. 9% of the co's. shares and as such there was never a need to disclose the same.

Now the partnership, consisting of two partners, is to dissolve. Can one partner relinquish his right to the co's shares in favour of the other partner, and if so, is dissolution mandatory. Also, is the recipient partner liable to tax u/s 56(2)(vii) for the value of the shares to be received shall be above 50000/- ?

Also if we were to advice the co. to change the name of the members in the Register of Members, from Partnership name to the name of the two individual partners, would it not be construed as a share transfer?