Shareholding of directors

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Dhiraj kumar (Querist)
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18 July 2013 Dear Sir,
I want to know that is it necessary to hold share for becoming director of the company.

Please do also tell me what is Qualification Shares!

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 July 2013 The Companies Act does not prescribe any qualification for a person to become director in a company. However, director of a company may be required by the Articles to hold certain shares in the company to be eligible to become director in the company (Sec. 2 70). These shares are called qualification shares.

The nominal value of these qualification shares must not exceed Rs. 5,000 or the nominal value of one share where it exceeds Rs. 5,000. A director may purchase these qualification shares within 2 months of his appointment.

A person cannot be asked to obtain qualification shares before his appointment as a director or within a period shorter than 2 months of his appointment. The bearer of a share warrant shall not be deemed holder of shares for the purposes of qualification shares.

A person who acts as a director of a company without holding qualification shares after the expiry of the period of two months from the date of his appointment shall have to vacate his office as a director and shall be punishable with a fine extending to Rs 500 for every day from the date of expiry of the period of two months till the date he continues to act as a director (Sec. 272).

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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18 July 2013 Directors not required holding the Qualification Shares:

(i) Directors appointed by the Central Government to prevent oppression or mismanagement of companies.

(ii) Directors appointed by the Public Financial Institutions (i.e. nominee directors), (in) Small Shareholders’ directors.

(iv) Directors exempted by the Articles of Association of the company.

(v) Directors of private companies.

Rajat Poddar

Rajat Poddar (Expert)
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18 July 2013 Agree with the expert.. its not compulsory.. if articles of the company provide for it than only .. a director is required to hold qualification shares...

Dhiraj kumar

Dhiraj kumar (Querist)
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18 July 2013 Thank you sir for your prompt response

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