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Querist : Anonymous
Querist :
Anonymous
(Querist)
19 June 2013
Can a HUF become a Shareholder in a Company
21 June 2013
Hindu undivided family is represented by its Karta. The Companies Act does not prohibit membership of Hindu Undivided Family. In case of HUF, the shares can be registered in the name of 'A' as Karta of HUF.
21 June 2013
3. Who can become a member?
In addition to an individual person, the following may also become a member of a company:
3.1 A company
A company can become a member of another company. The company must have powers under its Memorandum & Articles to make investment in other bodies corporate.
3.2 A registered co-operative society
A registered co-operative society may become a member of a company, provided it is recognised as a separate legal entity and a society can be treated as a 'person' having separate legal entity apart from the members constituting it and thereby capable of becoming a member of a company under section 41(2) of the Act.
3.3 A Non-Resident Indian [NRI]
Without the general or special permission of the Reserve Bank of India, a person, who is not resident in India (even if he be an Indian citizen), cannot become a member of a company registered in India, as no shares can be issued or transferred to him without general or special approval of the RBI.
3.4 A Minor
Since the minor is incapable of entering into a contract because contract by a minor is void ab initio and thereby not eligible to agree in writing to be a member, he cannot be entered in the register of members.
It has been clarified by the Department of Company Affairs that when a guardian of a minor applies to be a member of a company, the company can allot shares in the name of guardian, the guardian alone will be regarded as the shareholder by virtue of section 153 of the Companies Act, 1956 and he has to be represented by a registered guardian in his stead. It was held in the case of Fazalbhoy Jaffar v Central Bank of India that where the company transferred shares to a minor without being aware of this fact, the company could repudiate the transfer and the transferor would be liable by being restored to the register of members.
There is no bar in the shares of a company being registered in the name of a minor indicating therein the name of the guardian representing the minor. In India, parents of minor, with a view to provide for their major or minor children, do invest funds in several forms; all such investments are for the benefits of minors. Section 11 of the Contract Act is a beneficial provision enacted to protect the interests of minors. Such beneficial provision should not be used to the detriment of minors. [Gautam R. Pardiral (Minor) v Karnataka Theatres Ltd. (2000) 36 CLA 245 (CLB)].
Where a minor was allotted shares and he received dividend after attaining majority and raised no objection to inclusion of his name in register of members, he could not contend that he was not a shareholder. [Fazulbhoy Jaffar v Credit Bank of India Ltd. AIR 1914 Bom 128].
3.5 HUF
Hindu undivided family is represented by its Karta. The Companies Act does not prohibit membership of Hindu Undivided Family. In case of HUF, the shares can be registered in the name of 'A' as Karta of HUF.
3.6 Registered Trade Union
It was held in the case of All India Bank Officers Confederation v Dhanlakshmi Bank Ltd. (1997) 90 Comp Cas 225 that a trade union registered under the Trade Union Act, can be registered as a member and can hold shares in a company in its own corporate name.
3. Who can become a member?
In addition to an individual person, the following may also become a member of a company:
3.1 A company
A company can become a member of another company. The company must have powers under its Memorandum & Articles to make investment in other bodies corporate.
3.2 A registered co-operative society
A registered co-operative society may become a member of a company, provided it is recognised as a separate legal entity and a society can be treated as a 'person' having separate legal entity apart from the members constituting it and thereby capable of becoming a member of a company under section 41(2) of the Act.
3.3 A Non-Resident Indian [NRI]
Without the general or special permission of the Reserve Bank of India, a person, who is not resident in India (even if he be an Indian citizen), cannot become a member of a company registered in India, as no shares can be issued or transferred to him without general or special approval of the RBI.
3.4 A Minor
Since the minor is incapable of entering into a contract because contract by a minor is void ab initio and thereby not eligible to agree in writing to be a member, he cannot be entered in the register of members.
It has been clarified by the Department of Company Affairs that when a guardian of a minor applies to be a member of a company, the company can allot shares in the name of guardian, the guardian alone will be regarded as the shareholder by virtue of section 153 of the Companies Act, 1956 and he has to be represented by a registered guardian in his stead. It was held in the case of Fazalbhoy Jaffar v Central Bank of India that where the company transferred shares to a minor without being aware of this fact, the company could repudiate the transfer and the transferor would be liable by being restored to the register of members.
There is no bar in the shares of a company being registered in the name of a minor indicating therein the name of the guardian representing the minor. In India, parents of minor, with a view to provide for their major or minor children, do invest funds in several forms; all such investments are for the benefits of minors. Section 11 of the Contract Act is a beneficial provision enacted to protect the interests of minors. Such beneficial provision should not be used to the detriment of minors. [Gautam R. Pardiral (Minor) v Karnataka Theatres Ltd. (2000) 36 CLA 245 (CLB)].
Where a minor was allotted shares and he received dividend after attaining majority and raised no objection to inclusion of his name in register of members, he could not contend that he was not a shareholder. [Fazulbhoy Jaffar v Credit Bank of India Ltd. AIR 1914 Bom 128].
3.5 HUF
Hindu undivided family is represented by its Karta. The Companies Act does not prohibit membership of Hindu Undivided Family. In case of HUF, the shares can be registered in the name of 'A' as Karta of HUF.
3.6 Registered Trade Union
It was held in the case of All India Bank Officers Confederation v Dhanlakshmi Bank Ltd. (1997) 90 Comp Cas 225 that a trade union registered under the Trade Union Act, can be registered as a member and can hold shares in a company in its own corporate name.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
21 June 2013
Thanks a lot
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