Page 111 - DCOM106_COMPANY_LAW

Company Law

Notes a contributory. However, he may escape liability by applying for removal of his
name under s.155.
(v) By agreeing to purchase qualification shares. A person who signs and delivers to the
registrar a written undertaking, to take from the company and pay for qualification
shares, is in the same position as if he had subscribed to the memorandum for a
similar number. As such, he is also deemed to have become a member automatically
on incorporation of the company.

8.4 Who may become a Member

Subject to the provisions of law, the memorandum and the articles, any person sui juris can
become a member of a company. The position of certain persons in this regard is given below:

8.4.1 Minor

The position of a minor as a member of a company is as follows:

As a minor is wholly incompetent to enter into a contract [Mohiri Bibi vs. Dharmodas
Ghose, (1903) 30 Cal. 539 (P.C)], an agreement by a minor to take shares is void and hence,
he cannot be a member of a company.
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 money received from him in respect of the
allotted shares.
The minor can also repudiate the allotment during his minority and he shall be returned
the amount he paid towards the allotment of shares.
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 and he
cannot be held a contributory at the time of winding up [Fazalbhoy Jaffar vs. The Credit
Bank of India (1914) 39 Bom. 331].

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., AIR 1942 Mad. 470 and
875].
If somehow the name of a minor appears on a register of members and in the meantime he
attains majority and if he does not want to continue to be a member, then he must repudiate
his liability on the shares on the grounds of minority. The company cannot take defence
on the principle of estoppel that, the minor had fraudulently misrepresented his age or,
had received dividends and other privileges as a member. However, if he had received
dividends and exercised his rights as a member of the company after attaining majority,
then he cannot repudiate his liability on shares.
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.

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