Appointment of Director Elected by Small Shareholders- Section-151 of Companies Act,2013

Small shareholders” means a shareholder holding shares of nominal value of not more than twenty thousand rupees.

♠ As per section 151 of companies act 2013 read with Rule 7 of the companies ( appointment and qualifications of directors ) Rules, 2014

♠ A listed company may appoint one director elected by such small shareholders

1. On its own or

2. Upon notice of not less than one thousand small shareholders or one-tenth of the total number of such shareholders, whichever is lower, have a small shareholders director by the small shareholder:

♠ The small shareholders intending to propose a person as a candidate for the post of small shareholders’ director shall leave a notice of their intention with the company at least fourteen days before the meeting under their signatures specifying the name, address, shares held and folio number of the person whose name is being proposed for the post of director and of the small shareholders who are proposing such person for the office of director

♠ And if the person being proposed does not hold any shares in the company, the details of shares held and folio number need not be specified in the notice

♠ The notice shall be attached along with a statement signed by the person whose name is being proposed for the post of small shareholders’ director stating –

(a) His DIN (Director Identification Number )

(b) He is not disqualified to become a director under section 164 and

(c) His consent to act as a director of the company

♠ Such directors can also become an independent director, his being eligible under section 149 (6)and he has to give declaration of his independence according to section 149 (7) of companies act 2013.

♠ The appointment of small shareholders’ director  shall not be liable to retire by rotation

♠ The tenure of such director shall not exceed a period of three consecutive years; and

♠ After the expiry of the tenure, such director shall not be eligible for re-appointment.

♠ If the person is not eligible for appointment in terms of section 164 then such person cannot be appointed as small shareholder director

♠ A person appointed as small shareholders’ director shall vacate the office if –

(a) Incurs any of the disqualifications under section 164

(b) The office of the director becomes vacant as per section 167 

(c) The director ceases to meet the criteria of independence as provided in section 149(6)

♠ A person shall not hold the position of Small Shareholders’ director in more than two companies at the same time.


Extract of Section 151 of Companies Act, 2013

Appointment of Director Elected by Small Shareholders

Notified Date of Section: 01/04/2014

151.A listed company may have one director elected by such small shareholders in such manner and with such terms and conditions as may be prescribed.

Explanation.—For the purposes of this section “Small shareholders” means a shareholder holding shares of nominal value of not more than twenty thousand rupees.

7 Small Shareholders’ Director The Companies (Appointment and Qualifications of Directors) Rules, 2014 ]

(1) A listed company, may upon notice of not less than one thousand small shareholders or one-tenth of the total number of such shareholders, whichever is lower, have a small shareholders’ director elected by the small shareholders:

Provided that nothing in this sub-rule shall prevent a listed company to opt to have a director representing small shareholders suo motu and in such a case the provisions of sub-rule (2) shall not apply for appointment of such director.

(2) The small shareholders intending to propose a person as a candidate for the post of small shareholders’ director shall leave a notice of their intention with the company at least fourteen days before the meeting under their signatures specifying the name, address, shares held and folio number of the person whose name is being proposed for the post of director and of the small shareholders who are proposing such person for the office of director:

Provided that if the person being proposed does not hold any shares in the company, the details of shares held and folio number need not be specified in the notice:

(3) The notice shall be attached along with a statement signed by the person whose name is being proposed for the post of small shareholders’ director stating –

(a) His DIN (Director Identification Number )

(b) He is not disqualified to become a director under section 164 and

(c) His consent to act as a director of the company

(4) Such director shall be considered as an independent director subject to , his being eligible under sub-section (6) of section 149 and his giving a declaration of his independence in accordance with sub-section (7) of section 149 of the Act.

(5) The appointment of small shareholders’ director shall be subject to the provisions of section 152 except that-

(a) such director shall not be liable to retire by rotation;

(b) such director’s tenure as small shareholders’ director shall not exceed a period of three consecutive years; and

(c) on the expiry of the tenure, such director shall not be eligible for re-appointment.

(6) A person shall not be appointed as small shareholders’ director of a company, if the person is not eligible for appointment in terms of section 164.

(7) A person appointed as small shareholders’ director shall vacate the office if –

(a) the director incurs any of the disqualifications specified in section 164;

(b) the office of the director becomes vacant in pursuance of section 167;

(c) the director ceases to meet the criteria of independence as provided in sub-section (6) of section 149.

(8) No person shall hold the position of small shareholders’ director in more than two companies at the same time:

Provided that the second company in which he has been appointed shall not be in a business which is competing or is in conflict with the business of the first company.

(9) A small shareholders’ director shall not, for a period of three years from the date on which he ceases to hold office as a small shareholders’ director in a company, be appointed in or be associated with such company in any other capacity, either directly or indirectly.

Author Bio

Qualification: CS
Company: N/A
Location: New Delhi, New Delhi, IN
Member Since: 25 May 2020 | Total Posts: 1

More Under Company Law

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

October 2020
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031