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I was wondering if it was unlawful for a minor to own shares of a company in Massachusetts if the company bylaws allow for it.

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    how did he obtain them?
    – Trish
    Commented Aug 31, 2020 at 20:40
  • Gifted by business owner. Commented Aug 31, 2020 at 22:58

2 Answers 2

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It is lawful, but not as straightforward as for an adult

As Dale points out, minor children can own stock (or other property) in Massachusetts. However, because unemancipated minors cannot buy or sell property on their own, managing their stocks can be a hassle. For example, children need a guardian if they want to sell the stock.

To avoid these hassles, in many (most?) cases, the stock is owned through some legal entity that gives an adult control over that stock. These range from custodial IRAs to living trusts. In all of these, the stock belongs to the minor, but is managed by an adult. These entities differ in all sorts of ways, including when (if ever) the minor gets control of the stock, how the stock is taxed, what the stock can be used for, and so on.

One of the most popular entities is a UTMA Account. These are named after the Universal Transfer to Minors Act, found at Chap. 201A of the General Laws of Massachusetts. These are custodial accounts designed specifically to allow minors to hold property, including stock. These accounts simplify the management of the minor’s stock, and offer some tax breaks. In Massachusetts, the custodianship generally terminates when the minor turns 21. At that point, she gets complete control of her stock.

To find out more about the advantages and disadvantages of the UTMA compared to other ways of holding property for children, see here, here and here.

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  • Why do you think children cannot buy or sell property?
    – Dale M
    Commented Sep 1, 2020 at 20:09
  • @DaleM I do not know about Australia, but in the US, with a few exceptions (such as contracts for "necessities") any contract signed by a minor is considered "voidable". As a practical matter, this means minors cannot be legally bound by contracts they agree to. Thus, anyone who buys or sells property from/to a minor, runs the risk the minor will renounce the contract, and demand return of his property or money. Courts have consistently upheld these renunciations (although in a few cases, housing has been considered a "necessity.")
    – Just a guy
    Commented Sep 1, 2020 at 21:12
  • that’s not quite true - they are also not voidable if they are of benefit to the minor. A contract for a chocolate bar that the minor eats, or of shares (at fair value) for which the minor receives dividends are not voidable.
    – Dale M
    Commented Sep 1, 2020 at 21:34
  • @DaleM Again, I don't know about Australia, but that's not how it works in the US. In the US, this is called the retained benefits doctrine because it requires the minor to return any retained benefits as a condition of voiding the contract. Many courts do not require the returned "benefit" to have the same value as the original. For example, courts have held that a minor who wrecks a car only has to return the wrecked car to get his money back. (In some states, the seller may also deduct the benefit the minor got from driving the car from the sales price.)
    – Just a guy
    Commented Sep 2, 2020 at 2:54
  • @DaleM Since chocolate is food, the chocolate bar would probably be covered as a "necessity."
    – Just a guy
    Commented Sep 2, 2020 at 2:55
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No

Minors can possess personal property like shares. Further, s21 explicitly contemplates guardians (among others) exercising the rights of their wards. Now, not only children have guardians but all children do.

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