Minors as Securityholders

There appears to be no legal restriction preventing the registration of a minor (a person under18 years of age) as a securityholder, except as may be included in a company’s constitution.

However, it is understood that in most jurisdictions a minor cannot legally enter into a contract and would experience difficulties if registered.

Problems would occur with the following situations:

  • The contract to purchase the securities in the first place may not be valid
  • They may not be bound by the company's constitution
  • They may not be legally entitled to sign any transfer out of their name
  • Appointment of proxies or voting at meetings

Instructions for the following items:

  • Change of address
  • Dividend reinvestment elections
  • Banking instructions

Recommended Registration Procedures

It is recommended that any securities to be held for a minor are registered in the name of the parent or trustee with an account designation including the minor’s name. This would distinguish the holding from any other holding in the name of the parent or trustee. This could be subject to the parent or guardian seeking legal advice regarding the possible need for the parent to be appointed as trustee for the child.

For Example:

MR JOHN WILLIAM SMITH
,
100 SMITH STREET
MELBOURNE VIC 3000

Refer to: FORM 28 "MINOR(S) STATEMENT AND INDEMNITY

CHESS

Under the CHESS procedures, it is possible for participants to process a transfer complying with SCH procedures which a company cannot refuse to register. This carries the backing of the Corporations Law, the SCH Business Rules and the ASX Listing Rules. Therefore it is possible that minors may be registered as shareholders under the SCH Business Rules and be bound by a company’s constitution even though CHESS procedures recommend against it.

Where a transaction to dispose of shares is processed by a CHESS participant who is not aware of the securityholder’s capacity, the company is obliged to register that transfer. It should be noted that there is a general broker warranty and indemnity to indemnify the company against any action brought against it as a result of it processing a CHESS transfer.

In respect of proxies and other instructions however, where the company is aware of the shareholder’s capacity, it should notify the securityholder (parent or guardian) that there are legal impediments to these actions and suggest that the securities be transferred so as to accord with the recommended registration procedures above.

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