Section 151 of the Companies Act,2013 and Rule 7 of the Companies (Appointment and Qualification of Directors) Rules,2014 deals with the appointment of director elected by small shareholder.
Small shareholders’ director:
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.
It shall not prevent a listed company to opt to have a director representing small shareholders suo motu and in such a case the provisions for appointment of such director shall not apply
“Small shareholders” means a shareholders holding shares of nominal value of not more than Rs.20,000/- or such other sum as may be prescribed.
Notice of Intention:
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 14 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.
Accompanied by statement:
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 DIN
(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
Such director shall be considered as an independent director subject to , his being eligible under section 149(6) and his giving a declaration of his independence in accordance with section 149(7) of the Act.
Appointment of Small Shareholder:
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 3 consecutive years; and
(c) on the expiry of the tenure, such director shall not be eligible for re-appointment.
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.
Holding of office:
A person shall not 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.
A small shareholders’ director shall not be appointed in or be associated with such company in any other capacity, either directly or indirectly, for a period of 3 years from the date on which he ceases to hold office as a small shareholders’ director in a company.
Vacation of office:
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 section 149(6).
CA, 1956 Vs CA,2013:
It enables public companies with paid up capital of Rs.5 Crores or more and having 1000 or more small shareholders to have a director elected by small shareholder.
It enables a listed companies, 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
Practising Company Secretary
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