Allotment to minor(Primary Vs secondary market)


Vinay Raja (student-IPCC)     29 November 2010

Vinay Raja
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RSP Limited allotted 500 fully paid-up shares of Rs. 100 each to Z, a minor, in response to his application without
knowing that he was a minor and entered his name in the Register of members. Later on, the company came to know
of this fact. The company cancelled the allotment and struck-off his name from the Register of members and also
forfeited his entire share money. He filed a suit against the action of the company. Decide whether Z would be given
any relief by the court under the provisions of the Companies Act, 1956.

In simple Allotment was made for a minor for fully paidup shares in primary market.

In solution set it is given that it is valid since the allotment was made to minor for fully paidup shares!!

But as far as I know, it was held by NCLT in Nandita Jain Vs Bennet Coleman&Co. Ltd. that

A minor can become a member only if:

1) company is a limited company

2)Shares are fully paid

3)Application of transfer(means secondary market) is made on behalf of minor by lawful guardian.


I strongly remeber that minor cannot be alloted shares in primary market as he is not competent to contractual relationship(as per Contract Act)

Please clarify me on this, whether allotement can be made, did any provision relating to this change??

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Santhosh Poojary (SIEMPRE AHÍ PARA TI)     29 November 2010

Santhosh Poojary
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i Agree that  that minor cannot be alloted shares in primary market as he is not competent to contractual relationship as per Indian Contract Act 1872.

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Harie (student)     29 November 2010

Harie
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As per Diwan Singh Vs Minerva Films Ltd., A minor can become a member of a company by acquiring shares subject to the following conditions 

                                          - should be by way of transfer 

                                          - The shares are fully paid up 

                                          - No further liability is attached to the shares 

Hence a minor can become a member only by way of secondary  market and not by primary market. 

avater

Sunshine (Helping All)     29 November 2010

Sunshine
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agree with harie...minor can be alloted fuly paid shares with no further liability....

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