What Every Business Owner and Parent Should Know
In today’s entrepreneurial world, it’s not uncommon to see children involved in startups, family businesses, or even making headlines as “kidpreneurs.” But this raises a crucial legal question in Sri Lanka (and many other jurisdictions):
Can a minor (under 18 years old) legally own or start a private limited company?
Let’s dive into the legal realities, practical limitations, and how families and businesses can work around them legally and safely.
👤 Who Is a Minor?
In Sri Lankan law — and most common law jurisdictions — a minor is anyone under the age of 18 who cannot enter into a legally binding contract unless certain exceptions apply (e.g., for necessities).
Running or owning a company involves contracts, responsibilities, liabilities, and decision-making powers — all of which require legal capacity.
🚫 Can a Minor Be a Company Director or Shareholder?
Let’s break it into two parts:
1. 🔒 Can a Minor Be a Director?
No.
Under Section 203 of the Sri Lankan Companies Act, No. 7 of 2007, a person must be at least 18 years old to act as a director of a company.
Being a director comes with fiduciary duties and legal obligations — which a minor is not legally equipped to carry out. This is a strict restriction.
2. 🧾 Can a Minor Be a Shareholder?
Yes, but not directly.
A minor can own shares, but usually through a guardian or trustee. Here’s how it works in practice:
- The shares are held by an adult (like a parent or legal guardian) on trust for the minor.
- The minor benefits from dividends, appreciation, and other shareholder rights.
- This arrangement must be clearly recorded in the company’s share register as “held in trust.”
📌 Section 86(2) of the Companies Act confirms this:
If shares are held in trust for someone, that beneficiary is treated as a shareholder for all legal purposes, even if their name isn’t directly on the register.
✅ Practical Scenarios Where Minors Hold Shares
- Family-Owned Businesses
Parents often allocate shares to children for wealth transfer or succession planning. - Startups by Young Entrepreneurs
If a minor has a business idea, a parent or adult partner can legally incorporate the company and hold shares on the minor’s behalf. - Trusts and Wills
Shares can be passed to minors via inheritance, but they’ll be held in trust until the minor turns 18.
⚖️ Legal Risks and Cautions
Here’s why direct company ownership by a minor is risky or invalid:
- Minors cannot sign the Articles of Incorporation (Form 1 or 18).
- They cannot be legally liable for unpaid shares or company debts.
- Any contract they sign may be voidable at their option.
That’s why professional legal structuring is essential if you’re involving minors in company ownership.
🛠️ Best Practices for Involving Minors in Business Ownership
If you’re a parent, guardian, or company director considering involving a minor:
✔️ Use a Trust Structure
Hold the shares on behalf of the minor until they reach 18. Clearly document this in the company share register.
✔️ Appoint Adult Directors
Even if the business idea comes from a child, only adults can be directors or form the company.
✔️ Keep Proper Records
Clearly state in board resolutions, shareholder agreements, and company records that shares are held in trust.
✔️ Consider a Family Trust
For large businesses or multiple minors, a formal trust (e.g., discretionary family trust) may provide better legal protection and tax planning.
💡 Final Thoughts
While minors cannot directly own or operate a private limited company in Sri Lanka due to legal restrictions, they can still benefit from business ownership — indirectly through trustees or guardians.
Whether you’re a parent building a legacy or a young entrepreneur’s mentor, proper legal planning makes it completely possible to include minors in business, without violating company law.
