Small Shareholder Directors Eligibility, Tenure & Regulations

Small shareholders are the persons who has done the very minimal amount of investment in the shares of the company and due to that in most of the companies, they are not considered for taking the important decisions and always the big investors who hold the majority shares in the company abuses the power and ignore the interests of the small shareholders. Due to the reason mentioned above Section 151 of the companies act, 2013 has come up with the concept of small shareholder director who shall represent the small shareholders and protect their interests.

SMALL SHAREHOLDER:

A small shareholder means a shareholder holding shares of nominal value of not more than Rs 20,000.

Every listed company may have one Director elected by such small shareholders.

> ELIGIBILITY AND APPOINTMENT OF SMALL SHAREHOLDER DIRECTORS

A listed company may by notice of not less than 1000 or 1/10^th of the total number of small shareholders, whichever is lower, appoint a small shareholder director elected by the small shareholders.

Nominated small shareholder director shall at least before 14 days of date of meeting, give a notice of intention to be appointed as the small shareholder director.

The notice shall be signed by the proposed Director and shall state his DIN, consent to act as a Director and a confirmation that he is not disqualified to be appointed as a Director.

> TENURE AND RESTRICTIONS

Appointed small shareholder director shall not be liable to be retire by rotation, and shall hold the office for maximum 3 years.

After completing the tenure of 3 years, the said small shareholder director shall not be allowed to be appointed as the director or being associated with company in any other capacity for the next 3 years.

A person can-not hold the position of the small shareholder director in not more than 2 companies.

If the second company is in the competitive business or in the same industry being in conflict with the interest of the first company, the said person shall not be appointed as the small shareholder director in the first company.

> CONDITIONS FOR VACATING THE OFFICE

Small shareholders’ director shall vacate the office if –

1. He ceases to be a small shareholder, on and from the date of cessation;

2. He incurs any of the disqualifications specified in section 164;

3. The office of the director becomes vacant in pursuance of section 167;

4. He ceases to meet the criteria of independence as provided section 149 (6).