Last updated: June 4th, 2018 12:36 PM

Small Shareholders Director

A small shareholder is a person who is holding shares of nominal value amounting to a maximum of Rs 20,000 in a public company. Small shareholders are entitled to elect a director in a listed company. The directors elected by these shareholders will be known as a ‘Small Shareholders Director’.

Appointment of Small Shareholders Director

A company may appoint a small shareholders director either on its own accord or based on the application of a small shareholder. A small shareholders director is not eligible to become a Whole-time Director or Managing Director of the company. A small shareholders director may be considered as an independent director, subject to the satisfaction of certain conditions.

Procedure to Appoint Small Shareholders Director

If the small shareholders intend to appoint a Small Shareholders Director, a notice for the same must be issued at-least 14 days prior to the general meeting. The notice should include relevant details such as name, address, and number of shares being held by the person proposed to be appointed as a Small Shareholders Director. Along with the notice, a statement with the following declarations must be issued:

• The proposed person's Director Identification Number (DIN)
• The proposed person is not disqualified to become a director.
• The consent of the proposed person to act in the position of a director.

After the completion of above procedures, a resolution for the appointment of Small Shareholders Director should be passed at general meeting. The nominee of the small shareholders will finally be elected through a postal ballot.

Tenure of Appointment

Small shareholders director can be appointed for a maximum period of three years. He/she may not necessarily retire by rotation. He/she cannot be reappointed after the cessation of services. Moreover, small shareholders director cannot be associated with the company in any manner for a period of three years from the cessation of services.

Can a Small Shareholders Director Hold Office in Another Company?

A Small Shareholders Director is entitled to hold office in two companies at the same time, but not more than that. This is subject to the condition that a small shareholders director cannot fulfill the same role in any other company which is a competitor to the company that he/she is currently representing.

Vacation of Office

A small shareholders director can vacate his/her office on the basis of the following circumstances:

• On incurring any specified disqualifications.
• Office of directors becomes vacant due to the discovery of defects in their appointment.
• He/she declined to meet the criteria of independence.
• He/she is removed from the position by the passing of a special resolution.

Know more about appointment of Director in company.