Small shareholders appointment and disqualification

I think appointment of small shareholder’s director is not a mandatory provision.

Secondly, provision of the rules will never prevail over the provisions of the Act. Rules are made under the authority of the Act and will always subordinate to it and should read in conjunction to the act.

Hence 274(1)(g) of the act is applicable to appointment of shareholders' directors also.

Any other views please ???

@ sunny: Section 274(1)(g) is one of the most important provisions of the companies act, 1956.. No rules, notifications, circular will prevail over that part of section..  

Most of the director disqualifies under that section only...

Agree with all.

As section 274 and Small Shareholders' Director Rules, 2001 both contain the provision of disqualification.

As Small Shareholders' Director is also a director for all purpose except he cannot be appointed as MD/WTD, so Section 274(1)(g) will also apply to Small Shareholders' Director.

A basic rule of law is when  two law contain the provisions then same should be read in stricter sense so that both can be given meaning.

With Regards

Rajeev Nayak

Dear Sunny,

Companies Act and Rules only specifies the conditions for appointment of the Small shareholder Director, but for the disqualification of tese type of director depends upon the conditions specified in Sec. 274(1)(g). there is no other provision, rule, notification or circular specifying some special conditions for disqualification of small shareholder director.

Yes agree with the experts. 274(1)(g) is applicable to Small Shareholders' Director as well.

Thanks respected members for the reply... 

Agreed with Syam kamal sir as appointment of small share holders' directors is not mandatory, but if the compnay wants to , then the provisions as in the rules regarding appointment should apply right??? If the provisions in rules as regards appointment and disqualification do not apply to small share holders' directors, will it not render the rules redundant? 

And, i am confused as to why disqualification provisions were provided in rules as act was very clear on it.  'act prevails over the rules', but i just wanted to know whether there is any specific reason for excluding 274(1)(g) in rules, (i am raising this question assuming rules are special provision for small shareholders' directors which prevail over general provision for directors in the act) 

please can someone solve my this query

if Mr.A is a small shareholders' director of a public company X Ltd.. and this company commits a default under sec 274(1)(g) then is he allowed to get appointment as an ordinary director in another public company Y Ltd.

and vice versa if Mr.A is an ordinary director in A Ltd. and this company commits a default under sec 274(1)(g) then is he allowed to get appointment as a small shareholders' director in another public company B Ltd.

@ Shyam Kamal, 274(1)(g) will not apply to small shareholders’ director because Rule 5 of the Companies (Appointment of Small Shareholders’ Directors) Rules, 2001 has not included this in the list of disqualification applicable to such director.