Can a partnership firm be a shareholder ?

Dear members,

Pls tell me, can a partnership firm be a shareholder/member in a company?

If yes, then where is this mentioned in Companies Act and what are the compliances to be complied with in this regard ?

If no, then can a partner hold shares representing the firm and what are the compliances to be complied with in this regard also.

Pls help. Its urgent.

Regards,

Shridhi Jain

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.

Section 41 of the companies act 1956, defines a member as a person who has signed the memorandum of association and every other person who agrees in writing to become a member and whose name is entered in the register of members.

A partnership firm, being not a person in the eyes of law, cannot be a member of a company. However, a firm can purchase shares of a company in the individual names of its partners as joint shareholder.

Hi

A partnership firm is not a legal person and as such it can not, in its own name, become the member of the company. However, its partners may become joint shareholders of the company and their name be entered in the register of members. However, it can become member of section 25 company.

Regards

Ajay Mishra

A partnership firm can hold shares in a company as an investment. But shares can be only in the name of partners.

Hi

No Arvind, a parnership firm can not invest in company, however partners can do so.

Regards

Thanks dear members for your replies.

Pls tell me is there any legal compliance to be complied with in this regard? Sec. 187C is to be complied, wat do u think? any other compliances?

Actually shares have already been transferred in the name of the firm and money is also transferred by the firm to the respective company. Wats the way out?

Hi

Actually the whole transaction is in valid.

Regards

187C is not applicable as it is for when a company is a beneficial holder.

Further you can rectify your register of holding pass a board resolution for that and mention name of partners of the firm

 Partnership firm is not considered as artificial person in eye of law, so that it cannot be member/shareholders of any company but partners of firms can be members of company. the section 187c is applicable if company is beneficiary owner, in our case 187C is not applicable. whole transaction is invalid, consider the matter in board meeting and transfer shares in the name of partners.