Transfer of shares by a minor

[Kasturi Sastry]

Dear All,

 

As per the department clarifications, it is clear that a minor can hold fully paid up shares through his guardian and a minor can be a transferee of fully paid up shares.

 

Please let me know if any provision of law prohibits the transfer of shares by a minor to his/her guardian.

 

If such transfer is allowed under law, then the guardian has to sign both as transferor as well as transferee.  Will that be valid?

 

Also let me know, when should a guardian take court's permission to sell the property of a minor held by him as his/her guardian?

 

Please revert at the earliest.

 

Thanks & Regards,

Kasturi.S
Company Secretary
9901952524

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PROMAC ENGINEERING INDUSTRIES LIMITED,
Alahalli, Anjanapura post, Off Kanakapura Road,
Bangalore - 560 062.
Ph: 080-26330372.

[CS. Dattatri]

Dear Kasturi,

 

Transfer of any property belonging to minor is subject to his consent after six months from his attaining majority. Particularly in your case where minor transfers to his own guardian, if minor questions it in a court of law even one or two years later to his attaining majority, courts will give him all possible benefits of doubts. Therefore it is always advisable to avoid such kind transfers.

 

Dattatri

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From: csmy...@googlegroups.com [mailto:csmy...@googlegroups.com] On Behalf Of Kasturi Sastry
Sent: Friday, 05 September, 2008 2:18 PM
To: csmy...@googlegroups.com
Subject: [CSMysore] Transfer of shares by a minor

[urvashi pradhan]

Hi Kasturi,

 

As far as my knowledge goes, there is no law that prohibits the transfer of shares from minor to his guardian. A 'natural' guardian is not required to take Court approval for selling the shares. However, in the case of a 'Court appointed' guardian, a Court Order will also be required to be attached to the Transfer Deed.

The share transfer form would have to be signed by the Guardian as Transferor (on behalf of the Minor) and as Transferee (as party to whom the shares are being transferred). This is unavoidable because of the nature of the transaction.

 

You might want to check on the 'type' of guardian involved. 'De facto' guardian, for eg., cannot tranfer property or the right in property of a minor. Such transfer is not only voidable, but void. Again depends on whether we are looking at Hindu or Muslim laws.

 

Thanks & Regards,

Urvashi Pradhan

 

 

 

ii) If shares are allotted to a minor in response to his application, and his name entered on the Register of members, in ignorance of the fact of minority, the company can repudiate the allotment and remove his name from the Register on coming to know of the minority of the member. The company must repay all monies received from him in respect of the allotted shares.

iii) The minor also can repudiate the allotment during his minority and he shall be returned the amount he paid towards the allotment of shares.

iv) If the name of the minor continues on the Register of members and neither party repudiates the allotment, the minor does not incur any liability on the shares during minority (Fazalbhoy Jaffar vs The Credit Bank of India — 1914).

v) If an application for shares is made by a father as guardian of his minor child and the company registers the shares in the name of the child describing him as a minor, neither the minor nor the guardian can be placed on the list of contributories at the time of winding-up (Palaniappa vs Official Liquidator, Pasupati Bank Ltd, Madras).

vii) In case of transfer of partly-paid shares to a minor, the company may refuse to register him as a member. In case the company, in ignorance of the minority, has permitted the transfer, then the company may remove the name of the minor and replace it by that of transferor, even though the latter may have been ignorant of the minority.

viii) In case of fully-paid shares, minor's name may be admitted in the Register of members, if he happens to acquire the same by way of transfer or transmission. In Devan Singh vs Minerva Films Ltd (1956), the Punjab High Court held that there is no legal bar to a minor becoming a member of a company by acquiring shares (by way of transfer) provided the shares are fully paid up and no further obligation or liability is attached to them. Similarly, in S. L. Bagree v. Britannia Industries Ltd — 1980, CLB upheld transfer in favour of a minor.

The position with respect to a minor becoming a member of a company would be in terms of the following two circulars issued by the Department of Company Affairs in this regard:

i) Circular No. 8/18/(41)/63-PR, dated November 2, 1963: Government of India Publication, Clarifications and Circulars on Company Law, 1977 Edition, page 23; and

ii) Letter No. 8/18(41)/63-PR, dated March 31, 1964: Government of India Publication, Clarifications and Circulars on Company Law, 1977 Edition, page 23).

One may thus conclude that there is no objection to a minor being admitted as a member in respect of fully-paid shares provided he happens to acquire the same by way of transfer or transmission.

Guardian will have to furnish Court Order granting permission to sell/transfer the shares held by him on behalf of the minor.

A natural guardian is not required to take court approval for selling demat securities on behalf of a minor, so look at the nature of guardian.

the transferee can be a minor represented by the natural guardian. In other words, transfer deeds which are in the name of a minor have to be signed by the natural guardian.

However, in case of a court guardian, a court order will also be required to be attached to the transfer deed, only then will the units be considered as good delivery.

 

Member can hold fully paid shares, but the name entered in the Register of Members is that of the Guardian. 

The revised SEBI norms reads as: "In the case of units of UTI, the transfer deed bearing the name of a minor and signed by a natural guardian and in the case of court guardian, a court order is the pre-requisite for treating the paper good and the shares cannot be held in the name of a minor unless accompanied by court order granting permission for sales/purchase which is beneficial to the minor."

[urvashi pradhan]

Kindly ignore the text that follows my name. It has been inadvertently included in the mail.

 

Thanks & Regards,

Urvashi

 

[Kasturi Sastry]

Dear all,

 

Any further views on this subject?

 

Regards,

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