One can register a company in India in two different ways. He can become the director of the company, or he can become a shareholder in the company. A shareholder holds ownership rights in a company by owning equity shares of the company. These corporations are managed under state laws. Thus a shareholder is registered on books as the owner of shares of the company.
A shareholder can either be a person or any legal entity which has been permitted by law to own a personal property through his shares.
According to the Indian Contract Act,1872 a contractual capacity of minor was tested to check who all are eligible to enter the contract. According to the rules of this act, a minor is not eligible to buy or hold any shares in a company. However, he can become a shareholder if he receives the share under his name as a gift or they are transferred to him. In both these cases, the minor can hold shares under the guidance of his guardian till he reaches the age of 18 years.
If the guardian is appointed under the Guardian and Wards Act, 1890 then the maturity age of the person automatically becomes 21 years.
Minor shareholders are people who still haven’t attained the age of maturity according to law, i.e. 18 years — thus controlling his right to vote. Even if he owns or is a shareholder in a company, he cannot vote or manage his interest in the company.
Minority status effects the ability to use any property mentioned under his name.
Often in India, people like to manage the business by the participation of their family members. If the business is more of a private corporation people, tend to involve junior members of their family keeping it more of a personal affair. But they forget that no matter how great it sounds, there are certain drawbacks in issuing shares under the name of minors as it is not feasible on business part as minors are not legally capable of owning company’s shares as they have got no right to vote or take part in any business activity of the company.