Minor’s roles in LLP and Private Limited companies?

Who is minor?

Section 3 of the majority act provides that – “

Every person domiciled in India shall attain the age of majority on his completing the age of eighteen years and not before.”

In computing the age of any person, the day on which he was born is to be included as a whole day and he shall be deemed to have attained majority at the beginning of the eighteenth anniversary. (w.e.f. 16-12-1999).

Role of minor in business:

1. Section 11 of Indian contract act – who are competent to contract – Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject. Thus, a minor is not capable of entering into a contract. This principle is based on –
   1. Law must protect minor against their own inexperience – thus, agreement with minors are void and unoperational.
   2. Law should not cause hardship to an adult who deals fairly with minors.

Effect of a contract done with minor:

• A minor can not make an agreement operational after attaining majority.
• However, a minor can be a beneficiary under the contract.
• A minor can not be held liable under the contract even when the minor has misrepresented his age to induce other parties to enter into the contract.
• There can not be specific performance of the contract against the minor.
• A contract entered into by guardian or manager on the minor’s behalf can be specifically enforced if – the contract is within his authority and the same for the benefit of a minor.

 

2. Section – 184 of Indian Contract Act – minor as an agent – As between the principal and third persons, any person may become an agent, but no person who is not of the age of majority and of sound mind can become agent, so as to be responsible to his principal according to the provisions in that behalf therein contained.

Thus, An agent merely a connecting link, a minor can be appointed as an agent. But he can not personally liable for any acts done as an agent. However, the principle will be liable to the third persons for the acts of the minor’s agent which he does in the ordinary course of dealings.

 

3. Section – 30 of Indian Partnership Act – minor as a partner – A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners, for the time being, he may be admitted to the benefits of a partnership.

Thus, a minor can be admitted only for the benefits of the firm with the consent of all others partners.

 

4. Section – 21 of Trade Unions Act – Any person who has attained the age of fifteen years may be a member of a registered Trade Union subject to any rules of the Trade Union to the contrary, and may, subject as aforesaid, enjoy all the rights of a member and execute all instruments and give all acquittances necessary to be executed or given under the rules.

 

5. Minor as director of a company – For being appointed as a director in any company that person should possess a valid DIN (Director Identification Number) and for obtaining DIN, he/she shall have obtained majority. Therefore a minor can neither hold DIN nor can be a director in an Indian Company.

 

6. Minor as a shareholder of a company – The company act 2013 however permits for holding the shares by the minor subject to the consent of his/ her guardian. Also, the shares in a company can be held by the minor if such shares are gifted to him by other persons.

Thus, minors may be admitted as partners/Shareholders with the parent acting as the guardian. However they may not be admitted as Directors/designated partners as for becoming Director/Designated partner, DIN is required and DIN is not given to Minors.