Member ‑ Shares owned by minor ‑Whether his name can be entered in register of members - Companies Law - No. 312(43)‑CL‑III/63,

Circular : No. 312(43) ‑ CL ‑ III/63, dated 30 ‑ 9 ‑ 1963. Subject:- Member ‑ Shares owned by minor ‑ Whether his name can be entered in register of members This Department has been advised that the Judicial Committee of the Privy Council in the leading case of Mohori Bibi v. Dharamdas Ghose [1903] 30 Cal. 539 held that in India a contract by a minor is ab initio void. Apart from the subscribers to the memorandum of association of a company a person can become a member of that company only when he agrees in writing to be a member and when, pursuant to such agreement, the name of the person is entered in the register of members. Since a minor cannot enter into a contract or agreement, except through a guardian, and since, in view of section 153, no notice can be taken of the fact that the guardian holds a share in trust for a minor, it follows that his name cannot be entered in the register of members and, therefore, he cannot become a member of a company. A subscriber to the memorandum of association of a company also enters into an implied agreement to become a member of the company by acceptance of the number of shares of the company written against his name. Since a minor cannot enter into a contract, it follows that he cannot subscribe his name to the memorandum of association of a company. There is, however, no objection in law to the guardian of a minor entering into a contract on behalf of a minor or a minor entering into a contract by or through his guardian. In such an event, however, owing to the operation of section 153, the name of the minor cannot be entered in the register of members along with that of his guardian nor can the name of the guardian be entered in the register of members in a manner which will show that the person concerned (the guardian) is holding the shares in question on behalf of another person, viz., the minor. In view of the fiduciary relationship between the guardian and the minor as laid down in the Guardians and Wards Act, a guardian is responsible for his acts and dealings to the minor in respect of the ward property. There is a distinction between an agreement for sale and the sale itself. Whereas, due to the provisions of section 10 of the Indian Contract Act, a minor is not competent to enter into any contract for the purchase of shares, there is no bar to a minor purchasing fully paid‑up shares since in the event of such purchase there will be no covenant subsequent on the part of the minor. In view of the legal position explained above, the Government feels it desirable that in the case of shares owned by a minor, the name of the guardian and not of the minor is shown in the register of members.