Can Partnership Firm become a share holder of Pvt. Ltd. Co.

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A partnership firm generally cannot become a shareholder in a private limited company as it is not a separate legal person under Companies Act. Only individuals can be directors. Shares must be held in the names of individual partners, not in the name of the firm itself.

Sumitr

Sumitr (Querist)
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11 November 2010 I want to ask if a partnership firm become a share holder of Private Limited Company.if YES tell me the modalities of issue and transfer of shares and if NO then the reasons thereof.

taxindiaconnect

taxindiaconnect (Expert)
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11 November 2010 yes

Sumitr

Sumitr (Querist)
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11 November 2010 Please give me a detailed answer of the query asked above.

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)
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11 November 2010 Yes, A partnership firm may be a member or director (representing by the partner of the firm) in the company.

Share shall be in the name of the Firm which is investing in the company.
There is no harm in forming a company by a partnership firm.

Other views are also welcome

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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11 November 2010 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.

CA.Madhusudan B.P.

CA.Madhusudan B.P. (Expert)
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11 November 2010 Sanjay,
I agree that only individual can be Directors of a compnay.Sec 253
But an individual being Partner in a firm, may represent as Director in the company on behalf of the partnership firm.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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11 November 2010 Sir an individual of a partnership firm can be director in a company but not the partnership firm, the director will represent only himself he will sign as a director and not as a director representing the firm.

Please see following link---

https://www.caclubindia.com/forum/companies-act-1956-directorship-111834.asp

Ajay Mishra

Ajay Mishra (Expert)
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12 November 2010 Society/Trust as a member

Department Clarification- A society registered under the Society Registration Act, 1860 should not be deemed to be a ‘body corporate’ within the meaning of the section 2(7) of the Companies Act, although such a society can be treated as a ‘person’ having separate legal entity apart from the members constituting it and thereby capable of being a member of a company under section 41(2) of the Companies Act, 1956. [Circular Letter, dated-24-11-1962]

Shares belonging to society held in the name of trustee simpliciter

Department Clarification-In 1957 the Department of Company Affairs was advised that the shares in the company, being the property of a charitable trust, can be held in the name of the trustee. (Extracts from Department’sFile No. 1(43)-PT/67)

Regards
CS Ajay Mishra

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Sumitr

Sumitr (Querist)
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12 November 2010 thanks to everybody for the opinions.

please also throw light as to whether shares will be held in the name of the partnership firm or the partner representing the firm.

opinion is also sought for if there is a change in constitution of partnership firm. what if all the partners get retired and new partners take over.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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12 November 2010 Shares will be held in the name of the partnership firm and not in the name of the partner representing the firm.

Aditya Maheshwari

Aditya Maheshwari (Expert)
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12 November 2010 If a demat account can be opened in the name of the firm then i think shares of companies can be held by the firm also.

AMAN Gupta

AMAN Gupta (Expert)
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30 November 2010 No. Partnership firm can never become a member or a director in any Private Limited Company. It can have a Demat a/c and purchase shares of listed companies. But, it can never become a shareholder in Private Limited Company

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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14 February 2011 A partnership firm ,not being a person, cannot be registered as a member of a company except where the company is licenced u/s 25 of the Companies Act,1956.

ref :- Circular 4/72 dated 9/3/1972.

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CA Sreenivasa Rao Munaga

CA Sreenivasa Rao Munaga (Expert)
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08 May 2012 same as in the above case, whether a society registered under societies registration act can become a member of private limited company?
or
as a director of private limited company?

Please let me know

Thanks

Ajay Mishra

Ajay Mishra (Expert)
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08 May 2012 Society/Trust as a member

Department Clarification- A society registered under the Society Registration Act, 1860 should not be deemed to be a ‘body corporate’ within the meaning of the section 2(7) of the Companies Act, although such a society can be treated as a ‘person’ having separate legal entity apart from the members constituting it and thereby capable of being a member of a company under section 41(2) of the Companies Act, 1956. [Circular Letter, dated-24-11-1962]

Shares belonging to society held in the name of trustee simpliciter.

Only Individual can be a director as per section 253 of the Companies Act, 1956.

Regards

Charu Srivastava

Charu Srivastava (Expert)
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09 May 2012 No, a partnership firm cannot become the shareholder of the Company because it has a separate entity from its partners.

According to section 253, only individual can be directors.

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