Proprietorship firm - a shareholder

[Guest]

Whether Proprietorship firm ,represented by an individual as proprietor ,can be shareholder of a pvt limited company in India?is there any restriction of becoming a shareholder as capacity as proprietorship firm in stead of individal himself for whom no restriction as any individual can be shareholder

[Surender Gupta]

I think proprietorship firm is nothing but a name given by the individual to his activities undertaking in relation to business. Therefore, proprietorship firm has no independent identity. On the other side, since individuals are allowed to do business activities in the name of firm called as proprietorship firm, I think an individual would be allowed to be a member / shareholder of the company in the name of his proprietor ship concern. However, detailed provisions of companies are to be scrutinized in this regard.

[Guest]

Yes, there is no bar in the statutory provision of companies act that an individual in the name name of proprietor ship firm can not become a member. Therefore, you may buy shares in the name of proprietorship firm.

AI Summary

Proprietorship firm may hold shares when its sole proprietor acts as member, as no statutory bar exists. A proprietorship firm lacks a separate legal personality and is a trading name of the sole proprietor; shareholding is therefore effected by the natural person who is the proprietor. The respondents indicated there is no explicit prohibition in the Companies Act preventing an individual from acquiring shares in the name of a proprietorship concern, so shares in the name of the proprietorship are treated as held by the proprietor.