Applicable Provisions: S. 151 of Companies Act, 2013 read with Rule 7 of Companies (Appointment and Qualification of Directors) Rules, 2014.

As per S.151, A listed company may have one director elected by small shareholders. Small shareholder means a shareholder holding shares of nominal value of not more than Rs. 20,000 or such other sum prescribed.

The procedure for appointing them is given below:

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

2. 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 signature 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, then the details of shares held and folio number need not be specified in the notice.

3. The notice shall be accompanied by statement of proposed director stating his DIN, that he is not disqualified and his consent to act as director of the company.

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

5. Ensure that the proposed director shall not hold the position of small shareholder director in more than 2 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.

6. Such director shall not be retired by rotation and shall have tenure of continuous 3 years.

7. After completion of tenure small shareholders director shall not be eligible for reappoint and therefore when small shareholders directors cease to be a small shareholder, he ceases to be a small shareholders director.

8. The company has to file particulars of director in Form DIR – 12 with the Registrar of Companies within 30 days of the appointment after paying the requisite fee electronically with following attachments like letter of appointment, declaration by first director, declaration by appointee director, and any interest in any other entities, if there, thereby need to be disclosed.

9. Ensure that said Form is digitally signed by managing director or manager or secretary of the company and also certified by a Company Secretary or Chartered accountant or Cost accountant in Whole time practice by digitally signing it.

10. In case of listed company, the particulars of appointment of director should also be given to the stock exchange where the shares of the company are listed.

11. The particulars of the director and other aspects of the director have to be entered by the company in the registers maintained under Sections 170 and 189, and once after completing all such formalities when the director gets appointed, he needs to inform of his appointment to other companies where he is holding the post of director.

Note: The above-mentioned procedure is Ad-Verbatim as per the same given under cited Rules of 2014.


Disclaimer: – The entire contents of this document have been prepared on the basis of relevant provisions and rules and as per the information existing at the time of the preparation, and the views expressed here are personal in nature. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information.

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Qualification: CS
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I am Shubham from Batch 2016-21 of GNLU. I am in my final year of 5 years integrated BA LLB course from GNLU, Gandhinagar, and I have completed Company Secretary Course meanwhile with 3rd Rank in Ahmedabad, Gujarat in CS Professional. I am a keen reader and enthusiastic listener of Corporate laws an View Full Profile

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June 2021