Whether HUF can be a Shareholder / Subscriber to the MOA (Memorandum Of Association) of a Company

 

In the present age of globalization, it is often seen that HUF as an entity is required to promote a company for the purpose of its own business or other activities. The question which arises is whether a HUF can become a shareholder in a company or whether it can become subscriber to the Memorandum of Association of a company for the purpose of promoting a company.


In this regard, it may be noted that Section 12 of the Companies Act,1956 dealing with the Modes of forming incorporated company reads as follows:

 
Section 12.     Mode of forming incorporated company.- (1) Any seven or more persons, or where the company to be formed will be a private company, any two or more persons, associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability.


Thus, it is important to refer to the meaning of the word person. Though the income-tax Act, 1961 defines the word Person in Section 2(31) of the Act which is as follows:

 

Section 2(31).


‘Person’ includes –


(i) an individual,


(ii) a Hindu undivided family,


(iii) a company,


(iv) a firm,


(v) an association of persons or a body of individuals, whether incorporated or not,


(vi) a local authority, and


(vii) every artificial juridical person, not falling within any of the preceding sub-clauses;


However, unfortunately, the Companies Act, 1956 is silent on the matter. We may therefore have to refer to the definition as given in the General Clauses Act, 1897.


Section 3(42) of the General Clauses Act, 1897 defines the word person as follows:-


(42) “person” shall include any company or association or body of individuals, whether incorporated or not:


The definition as given above is an inclusive definition and not an exclusive definition and therefore it follows that the word person is of wide import.


Though Companies Act, 1956 doesn’t directly refer to the HUF becoming shareholder or promoting a company, however Section 11 of the Companies Act, 1956 dealing with the Prohibition of Association and partnership exceeding certain number unless it is registered as a company refers to HUF in a negative way. Section 11(3) of the Companies Act, 1956.

MORE TOPICS ....

HUF -  Capital Gain Account
HUF -  Deduction from HUF Business Income
Income Derived From Funds Of HUF -Whether Individual Income Or Family Income
Gift by HUF to its Member
Gift To Minor Daughters Out Of HUF Property Prior To Marriage
Gift of HUF Property to Stranger or to any Person who is a Alien to HUF
Clubbing Provisions In Case Of Gifts Received By HUF
Applicability of Clubbing Provisions in case Karta of a HUF is a Partner in a Firm
Gifts received by HUF from Aliens / Strangers
HUF - Investment Options
Concept of Multiple HUF’s
Whether a Single Member can Constitute a HUF ?
Whether any Limit is placed on Number of Members of a HUF ?
Whether HUF- Can Be Constituted with only Female Members ?
Drawings / Expenses of HUF
Whether HUF can be a Shareholder / Subscriber to the MOA ( Memorandum Of Association)  of a Company
Whether HUF can be a Member of a Cooperative Society ?
Whether HUF can be a Partner ?
Can KARTA of a HUF enter into Partnership with another Member of HUF ?
Can There Be A Partnership Between Two HUFs?
Effect Of Death Of Karta In Case Of Partnership Firm
Whether HUF Can Be A Proprietor ?
Whether HUF Can Be A Trustee / Settler ?
HUF - Aliyasantana Law
HUF - Marumakkattayam Law
Power of KARTA in relation to HUF
Managing Members in relation to HUF
Whether a Female can become a Karta ?
Tax Planning TIPS for HUF
HUF - Meaning Of Important Term- “Ancestral”
HUF - Meaning Of Important Term- “Stridhan”
HUF - Meaning Of Important Term- “Mitakshara”
HUF - Meaning Of Important Term- “ Dayabhaga”
Meaning of the term ‘Coparcener’ of HUF
Power of ‘Coparcener’ of HUF
Difference between a ‘Coparcener’ and a ‘Member’
Whether Husband / Wife Can Constitute A HUF ?
HUF - RECOVERY PROVISIONS
‘Maintenance of Accounts’ by HUF
‘Audit of Accounts’ by HUF
Applicability Of The ‘Accounting Standards’ On HUF
Whether Merger Of Two HUF is Possible ?
Residential Status of the HUF under I.T. Act.1956
‘Coparcener Property’ under HUF
 
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