STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5893

May 8, 1981

CHILDREN AND MINORS:

Children and minors serving as incorporators, directors or officers of corporations

CORPORATIONS:

Children and minors serving as incorporators, directors or officers of corporations

Persons who are less than 18 years of age may neither incorporate nor serve as directors or officers of profit or nonprofit corporations incorporated in Michigan.

Mr. William Lukens

Acting Director

Department of Commerce

Law Building

Lansing, Michigan

Your predecessor requested my opinion concerning the legal capacity of minors with respect to the formation and management of a profit or nonprofit corporation incorporated under Michigan law.

By virtue of the Age of Majority Act of 1971, 1971 PA 79; MCLA 722.51 et seq; MSA 25.244(51) et seq, a person who is at least 18 years of age enjoys the same duties, liabilities, responsibilities, rights and legal capacity as a person would formerly acquire under the common law at 21 years of age. Thus, your inquiry refers to the legal capacity of persons who are less than 18 years of age, such persons being considered minors.

The questions concerning the formation and management of a profit or nonprofit corporation are:

The Business Corporation Act, 1972 PA 284; MCLA 450.1101 et seq; MSA 21.200(101) et seq, providing for the incorporation of profit corporations, does not prescribe qualifications for incorporators. 1972 PA 284, supra, ch 2, Sec. 201, states:

The word 'person' is defined in 1972 PA 284, supra, ch 1, Sec. 108(2) as:

Neither does the general corporation act, 1931 PA 327; MCLA 450.62 et seq; MSA 21.62 et seq, providing for the incorporation of nonprofit corporations, prescribe qualifications for incorporators. 1931 PA 327, supra, Sec. 117, in pertinent part, provides:

Inasmuch as the pertinent incorporation statutes do not address the legal capacity of minors to incorporate, the common law must be reviewed. The common law remains in force in Michigan unless modified by statute. Const 1963, art 3, Sec. 7; Bassier v J. Connelly Construction Co, 227 Mich 251; 198 NW 989 (1924). The Age of Majority Act, 1971 PA 79, supra, has amended the common law by legislatively conferring legal capacity upon persons between the ages of 18 and 21 years. However, it cannot be said that the common law has similarly been abrogated with respect to legal capacity of minors in relation to the formation and management of profit or nonprofit corporations in Michigan. 1972 PA 284, supra, and 1931 PA 327, supra. Since the Legislature may remove the common law disability of minors to contract, Naudzius v Lahr, 253 Mich 216; 234 NW 581 (1931), and the Legislature has not expressly done so with respect to 1972 PA 284, supra, and 1931 PA 327, supra, the provisions of the common law must be examined.

In 1 Fletcher Cyclopedia, Corporations, Sec. 83, p 391 (1974 Rev Vol), the common law rule on the legal capacity of minor (ie, infant) incorporators is stated:

In 43 CJS, Infants, Sec. 182, p 489 (1978) appears a similar statement:

Accordingly, in the absence of express statutory authorization, a minor may not act as an incorporator under Michigan law. While it is noted that neither 1972 PA 284, supra, nor 1931 PA 327, supra, expressly prohibit minors from acting as an incorporator, the common law of this state compels such conclusion. Const 1963, art 3, Sec. 7, supra.

Review of statutes providing for incorporation in other states is instructive. Thirty-one (31) states in their incorporation statutes variously provide that a corporation may be incorporated by one or more person(s), or natural persons(s), of at least 18 years of age (or older), or that such person be capable of contracting. ⁽¹⁾ As to the remaining jurisdictions which do not statutorily address the legal capacity of a minor to incorporate, the general proscription of the common law, as discussed above, would control. ⁽²⁾

In Thies v Weible, 126 Neb 720; 254 NW 420 (1934), the validity of an incorporation was questioned because some of the incorporators were infants. Nebraska law did not expressly exclude infants as incorporators. ⁽³⁾ The Nebraska Supreme Court stated:

The distinction between de jure and de facto corporations, as discussed by the Court in Thies v Weible, supra, is also recognized under Michigan law. For example, 1972 PA 284, supra, Sec. 221, provides that the corporate existence shall begin on the effective date of the articles of incorporation, and that filing of such articles is 'conclusive evidence that all conditions precedent required to be performed under this act have been fulfilled and that the corporation has been organized under this act, except in an action or special proceeding by the Attorney General.' ⁽⁴⁾ The validity of an incorporation can be questioned only by the state in a proper proceeding and cannot be questioned collaterally. Besson v Crapo Toll Road Co, 150 Mich 655; 114 NW 924 (1908). Further, acts of a de facto corporation, or officers thereof, cannot be questioned under circumstances under which there could be no inquiry if the corporation or its officers were de jure. Martin v Miller, 336 Mich 365; 57 NW2d 878 (1953).

Therefore, in response to your first question, it is my opinion that in the absence of express statutory authorization, a minor may not act as an incorporator of a profit or nonprofit corporation incorporated pursuant to Michigan law.

Your second question inquires whether a minor may serve upon the board of directors, or as an officer, or a profit or nonprofit corporation in Michigan. 1972 PA 284, supra, Sec. 501, provides that qualification for members of the board of directors may be prescribed in the articles or by-laws of the corporation, although '[a] director need not be a shareholder of the corporation unless the articles or by-laws so require.' Further, with respect to officers, 1972 PA 284, supra, Sec. 531(1) provides:

Thus, as with members of the board of directors, unless the articles or by-laws so provide, an officer need not be a shareholder under 1972 PA 284, supra.

With respect to nonprofit corporations, 1931 PA 327, supra, Sec. 124(3)(e), provides that the day-to-day operation of a nonprofit corporation be conducted by a member or members of the board of trustees or directors. 1931 PA 327, supra, does not specifically provide for officers. Pursuant to 1931 PA 327, Sec. 124(3), supra, qualifications for members of the board of trustees or directors may be prescribed in the articles or by-laws. Similar to 1972 PA 284, Sec. 501, supra, no provision of 1931 PA 327, supra, requires that a person must be a member or shareholder of a nonprofit corporation to be eligible for appointment or election to the board of trustees or directors.

Both 1972 PA 284, supra, and 1931 PA 327, supra, are silent on the question whether a minor may serve on the board of directors or as an officer.

As indicated in my response to your first question, in the absence of statutory authorization, a minor may not act as an incorporator. Similarly, and in the absence of statutory authorization, a minor may not act as a member of a board of directors or as an officer of a profit or nonprofit corporation in Michigan. While both 1972 PA 284, supra, and 1931 PA 327, supra, accord considerable discretion to a corporation with respect to its internal governance, and provide that the articles or by-laws may prescribe qualifications for directors or officers, in the absence of remedial legislation abrogating the common law, a minor may not act as a board member or officer.

This conclusion is not affected by the fact that a minor may own stock in a corporation. The Uniform Gifts to Minors Act, 1959 PA 172; MCLA 554.451 et seq; MSA 27.3178 (241.21) et seq is legislation which, in pertinent part, permits an adult person to make a gift of a security or money to a person who is less than 18 years old on the date of the gift. Under 1959 PA 172, supra, Sec. 3(1), a gift made under the act vests legal title in the minor, and such gift grants to the custodian thereof the powers provided by the act. In pertinent part, 1959 PA 172, supra Sec. 4(6) provides that with respect to securities, the custodian '. . . may vote in person or by general or limited proxy' any security which the custodian holds and manages on behalf of the minor. Therefore, where a gift to a minor is made pursuant to 1959 PA 172, supra, legal title is vested by the act in the minor, and the custodian casts on behalf of the minor the vote represented by the security. ⁽⁵⁾ Thus, while legal title is vested in the minor, the custodian is provided broad powers in acting as a fiduciary or trustee of the minor under 1959 PA 172, Sec. 4, supra, and the minor may not exercise or possess full rights to a gift made under the act until reaching majority.

1972 PA 284, supra, Sec. 445 specifically provides for the voting of shares held by a fiduciary such as a custodian:

See 1931 PA 327, supra, Sec. 101.

There is no law which provides a minor from purchasing stock. ⁽⁶⁾ However, as in the case of all contracts with a minor, the common law rule is that, with certain exceptions:

Accord, 4 Fletcher Cyclopedia, Corporations, ch 12, Sec. 1389, pp 5255.

It is further noted that the Commissioners on Uniform State Laws have promulgated the Uniform Securities Ownership By Minors Act, 9C Uniform Laws Annotated, 1967 pocket part (pp 85-87). This act, in part, prevents a minor from disaffirming or avoiding a security transaction unless prior notice of minority is given to affected parties. This act also modifies the common law in providing that a minor may vote, by proxy or in person, a shareholder interest held by the minor. Michigan is not one of the five jurisdictions which have adopted this act. ⁽⁷⁾

It should be noted that while a minor can not be a de jure board member or officer of a profit or nonprofit corporation in Michigan absent statutory authorization, actions of de facto board members or officers cannot be questioned, where there would be no inquiry under circumstances where the board members or officers were de jure. Martin v Miller, supra. See also fn 4, supra.

Therefore, in response to your second question, it is my opinion that in the absence of express statutory authorization, a minor may not serve upon the board of directors or as an officer of a profit or nonprofit corporation in Michigan.

Frank J. Kelley