Appointment of director elected by small shareholders

Small Shareholders: A shareholder who is holding shares of nominal value not more than Rs.20,000  in a public company. The small shareholders are entitled to elect a director in a listed company and the director elected by such shareholders will be known as small shareholders director.

Let’s see the rules regarding small shareholders director which are as follows:

  • By whom notice is given: A notice to elect small shareholders directors in a listed company is given by not less than 1000 small shareholders or 1/10thof the total number of such shareholders, whichever is lower.
  • Proposal of the candidate: The small shareholders 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 with their signature on it. The notice specifies the name, address, the number of shares held in the company if any if not then no need to fill this column er, and the folio number of the person whose name is being proposed for the post of small shareholders director and such small shareholders.
  • Statement: A statement shall be attached with the notice for election small shareholders director which is signed by the person whose name is being proposed as a  small shareholders director stating the following:
    • His Director Identification Number (DIN).
    • He is not disqualified to become a director.
    • His consent to act as a director in the company. 
  • Such director shall be considered as an Independent director provided he is eligible to become an Independent director and gives a declaration of his independence. But he can not become a Whole-time director or a Managing director.
  • Tenure: The small shareholder’s director shall not be liable to retire by rotation, such director’s tenure as small shareholders director shall not exceed 3 consecutive years, and on the expiry of the tenure such director shall not be eligible for reappointment.
  • Vacation: The person appointed as a small shareholder director shall vacate the office if the director incurs any disqualification, if any ground of vacation which applies to the director is applied to such director as well, and if the director ceases to meet the criteria of independence.
  • Restriction: The small shareholder’s director shall not hold the position of such directorship in more than 2 companies at the same time and one thing should be followed that 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 shareholder’s director after ceases to hold the office as a small shareholder’s director in the company shall not be appointed for a period of 3 years and he can not be associated with the company in any capacity either directly or indirectly.

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