Procedure for Appointment of Director to be Elected by Small Shareholders


Procedure for Appointment of Director to be Elected by Small Shareholders

A listed company may have one director elected by small shareholders. Small shareholders means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum prescribed. [Section 151]

Rule 7 of the Companies (Appointment and Qualification of Directors) Rules, 2014

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 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 the post of small shareholders’ director shall leave a notice of their intention with the company at least fourteen 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.   The notice shall be accompanied by statement of proposed director stating his DIN, that he is not disqualified and his consent to act as director of the company.
4.  Such director shall be considered as an independent director subject to his giving a declaration of his independence in accordance with sub-section (7) of section 149 of the Act.
5.     The small shareholder director shall be elected through postal ballot.
6.  Such director shall not be retire by rotation and shall have tenure of continuous three years.
7. After completion of tenure small shareholders director shall not be eligible for reappoint.
8.  When small shareholders directors cease to be a small shareholder, he cease to be a small shareholders director.
9.    Small share holders director shall not be appointed in two companies. 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.
10.    For the purpose of filing Form DIR 12, the following attachments are required:
a.     Letter of appointment
b.     Consent letter of appointee director
11. Ensure that said Form is digitally signed by managing director or manager or secretary of the company.
12.   In case of listed company, the particulars of appointment of director should also be given to the stock exchange if the shares of the company are listed.
13.   The particulars of the director and other aspects of the director have to be entered by the company in the registers maintained under Sections 170 and 189
14.    After appointment the director concerned has to inform other companies in which he is director about his appointment.

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