The Act defines a small shareholder as anyone holding less than Rs 20,000 worth of shares in a publicly-listed company.
Any company having paid-up capital of more than Rs 5 crore and having more than a 1,000 small shareholders can appoint the representative of small shareholders on its board.
The shareholders will have to leave a notice of their intention with the company at least 14 days before the AGM with the signature of at least 100 small shareholders along with the details of the person they want to be nominated as director.
The election will be conducted through postal ballot. Such directors are elected for a maximum of three years or until you remain a small shareholder.
The director so appointed shall be treated at par with other directors, except for appointment as whole-time director or managing director.
Tenure of such small shareholders’ director shall be for a maximum period of 3 years subject to meeting the requirement of provisions of Companies Act except that he need not have to retire by rotation.
All this may sound like a good deal if you wish to represent small shareholders on a company board. But the reality is harsher as there are very very few examples of anyone actually being nominated to a board.
Currently I remember that members of Krebs Biochemicals & Industries Ltd. had appointed Mr.R.Ch.Satyanarayan as Small Shareholders Director through Postal Ballot held on August 27th, 2010.
Contrary to popular belief, under Section 252 of the Act and the Rules, the discretion solely lies with the company to appoint such a director on its board even after the shareholders have approached the company with their proposal in accordance with the rules. That is why it is very tough to get elected as a small shareholder's director...