Whether a Minor can be a Signatory to the Memorandum of Association of a Company ?

In case if during a incorporation of a private limited company, if only two signatories are there to the Memorandum of Association and if one is a minor, then it will not be valid as in such situation, a minor who is a signatory to the memorandum of Association of the company will become director automatically by the operation of law if no other name is mentioned in the Articles of Association of such company

Even otherwise , a minor cannot be a signatory to the memorandum of association of a company. Since, signatory to the memorandum of association will automatically become the first directors of the company, in such scenario, a minor cannot be a signatory to the memorandum of association of a company.

Generally , a minor cannot enter into contract hence cannot be the subscribers to MOA. Subscribers to MOA means the person promises to take the shares in proposed company. In this situation Minor cannot promise.

The Companies Act, 1956 generally not define the minimum age limit for becoming a director of the company. A minor is not competent to contract. Under section 184 of the Indian Contract Act, 1872, a person who is not the age of majority can not become an agent. In consequence a minor cannot be appointed to an office of director of a company.

For appointment of a Managerial person he should be one who has completed the age of 25 years and has not attained the age of 70 years.

As per Part I of Schedule XIII is as under, for appointment of MD or WTD , minimum age is fixed as the age of 25 years and has not attained the age of 70 years.

Exception: A special resolution is required for the appointment of a managerial person if he

(i)    Has attained the age of 70 years; or

(ii) Has not completed the age of 25 years, but has attained the age of majority (i.e. 18 years).

Form 32 - there is an instruction that appointee as a director should be of more than 18 age.

Thus, a minor cannot be a subscriber to a memorandum  of any company as he lacks capacity to contract and subscription to memorandum is a contract to subscribe a particular amount of shares and a minor cannot do that under existing laws.

In view of the above , a minor cannot be signatory to the memorandum of association of a company.

THE STAMP PAPERS DO NOT HAVE ANY EXPIRY PERIOD

Citation: Thiruvengada Pillai Vs Navaneethammal and Anr.

Brief: According to a recent Supreme Court judgement dated 19/02/2008 in the case of Thiruvengada Pillai Vs Navaneethammal and Anr,     

Judgment:According to a recent Supreme Court judgment dated 19/02/2008 in the case of Thiruvengada Pillai Vs Navaneethammal and Anr, the stamp papers do not have any expiry period. Relevant extract from SC Judgment is reproduced herein below:

 "The Indian Stamp Act, 1899 nowhere prescribes any expiry date for use of a stamp paper. Section 54 merely provides that a person possessing a stamp paper for which he has no immediate use (which is not spoiled or rendered unfit or useless), can seek refund of the value thereof by surrendering such stamp paper to the Collector provided it was purchased within the period of six months next preceding the date on which it was so surrendered. 

The stipulation of the period of six months prescribed in section 54 is only for the purpose of seeking refund of the value of the unused stamp paper, and not for use of the stamp paper. Section 54 does not require the person who has purchased a stamp paper, to use it within six months.

 Therefore, there is no impediment for a stamp paper purchased more than six months prior to the proposed date of execution, being used for a document

Whether the Whole Time Director can be held personally liable for the defualts done by him or if he is the known party to the defaults?

The whole -time directors are like the employees of the company and if they commit any violations , they will be held responsible.

If you are talking about the violations under the Companies Act, unless otherwise is proved the WTD being officer in default will be personally liable for all violations.

Each section of the Companies Act defining the liability, provides for the persons who would be personally liable for the violations.

 WTD is the officer in default under Section 5(g) of the companies Act, 1956 and for any willful default he will be personally liable and corporate veil can be lifted to see who is behind the scene.

he whole -time directors are like the employees of the company and if they commit any violations , they will be held responsible.

For instance , Section 372A of the Companies Act, Sub-section 1 of Section 372A stipulates that no company can acquire shares in any other “body corporate” through “subscription purchase or otherwise” for an amount exceeding 60 per cent of the acquiring company’s share capital and free reserves or 100 per cent of its free reserves, whichever is higher, as loans, guarantees and investments.

If company wants to invest more than the above limit , it would require shareholder authorization through a special resolution passed in a general meeting. The law also states that such a resolution has to be passed only through a postal ballot and with advance intimation to the RoC.

For instance , Satyam Board under Mr.Raju chairmanship ,approved a proposal to invest Rs 7,920 crore in the Maytas firms ( a subsidiary of Satyam group) whereas under section 372 A, it can invest only to the maximum level of Rs 2,136.37 crores without shareholders approval. Without Shareholders approval , Satyam invested Rs 7920 crores in Maytas.

Satyam board at that time consisted ts like prominent personalities as former cabinet secretary T R Prasad, Harvard Business School’s Krishna Paleppu, designer of the Pentium chip Vinod Dham etc.

Please note that Violating Section 372A would make the officers-in-default (which include the managing director, company secretary and whole time director) liable for punishment, which includes a fine of Rs 50,000 or imprisonment up to two years.

Thus , whole-time directors can be held liable for the violation or infringement of section 372A .