Procedure for Appointment of Directors to be elected by Small Shareholders

A listed company may have one director elected by small shareholders. Small shareholders mean a

shareholder holding shares of the nominal value of not more than Rs. 20,000s or such other sum prescribed.

1. A listed company having a paid-up capital of five crore rupees or more and having one thousand or more small shareholders holding shares of the nominal value of Rs. 20,000 or less may have a director elected by such small shareholders.

2. Small shareholders intending to propose a person as a candidate for small shareholders director shall leave a notice of their intention with the company at least 14 days before the meeting under their signature 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.

3. Notice shall be accompanied by a statement of proposed director stating his DIN, that he is not

disqualified and his consent to act as director of the company.

4. A small shareholder director shall be considered as an independent director subject to being eligible and giving a declaration of his independence.

5. Small shareholder directors shall be appointed through postal ballot.

6. Ensure that the proposed director shall not hold the position of small shareholder director in more than 2companies at the same time. Provided that the second company shall not be a business that is competing or is in conflict with the business of the first company.

7. Such directors shall not retire by rotation and shall have tenure of continuous 3 years.

8. Small shareholders directors shall not be eligible for reappointment after completion of tenure.

9. When small shareholders directors cease to be a small shareholder, he ceases to be a small shareholder director.

10. The company has to file particulars of director in Form DIR – 12 with the Registrar of Companies within thirty days of the appointment after paying the requisite fee electronically.

11. Ensure that said Form is digitally signed by the managing director or manager or secretary of the company and also certified by a Company Secretary (CS) or Chartered accountant (CA) or Cost accountant (CMA) in Whole-time practice by digitally signing it.

12. For the purpose of filing Form DIR – 12, the following attachments are required:

  • Letter of appointment
  • Declaration by the first director
  • Declaration of the appointee Director, in Form DIR-2;
  • Interest in other entities;

13. In the case of a listed company, the particulars of the appointment of the director should also be given to the stock exchange if the shares of the company are listed.

14. The particulars of the director and other aspects of the director have to be entered by the company in the registers maintained.

15. After the appointment, the director concerned has to inform other companies in which he is the director of his appointment.

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