SMALL SHAREHOLDERS DIRECTORS


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. [Section 151]

“Small shareholders” means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.

Rule 7 of the companies (Appointment and Qualification of Directors) Rules 2014

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. [Sub – Rule (1) of Rule 7]

Any other listed company may also 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.

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. 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. [Sub – Rule (2) of Rule 7]

The notice for appointment of a person as small shareholders’ directors shall be signed by not less than one thousand small shareholders. This notice shall also comply provision of Section 160 read with Rule 13 of these Rules.

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

(a)  his Director Identification Number;

(b)  that he is not disqualified to become a director under the Act; and

(c)  his consent to act as a director of the company. [Sub – Rule (3) of Rule 7]

Small shareholders’ 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. [Sub – Rule (4) of Rule 7]

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. [Sub – Rule (5) of Rule 7]

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. [Sub – Rule (6) of Rule 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. [Sub – Rule (7) of Rule 7]

No person shall hold the position of small shareholders’ director in more than two companies at the same time. 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. [Sub – Rule (8) of Rule 7]

This sub – rule clarify that two companies in which a person is a small shareholders’ director shall not be competing with each other or other conflict with the business of each other.

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. [Sub – Rule (3) of Rule 7]

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3 responses to “SMALL SHAREHOLDERS DIRECTORS

  1. Pingback: Designation and Category of Directors | AishMGhrana

  2. Pingback: Index of Companies Law Posts | AishMGhrana

  3. as per the companys act 2013 can any person means who holds more than 20000 sc can be eligible for appointment as a small shareholders director

    Like

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