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Proportional Representation for Appointment of Directors
The Appointment of
Directors by the Principle of Proportional Representation
The provisions relating to Proportional
Representation for Appointment of Directors are governed by the Section 163 of the Companies Act 2013 (earlier Section 265 of
the Companies Act 1956).
Applicability of the provisions: The Provisions of Section 163 are applicable to
both Public & Private Companies.
Meaning of Proportional
A system of
Election, wherein parties standing for a Post, gets voted in proportion to the
number of votes cast for them. In the context, we are discussing herein, it
means Election of Directors by the Shareholder by different methods, mainly two
methods, whereby the Shareholder gets a chance to vote for their choice of
Director in proportion to his holdings.
Method of Appointment
through Proportional Representation:
(1) Single transferable vote: In
this method, suppose there are six candidates and out of which 3 are to be
elected. Then a Shareholder is eligible to cast a total of Three votes, which
he can cast in favour of candidates in accordance with his preferance.
(2) Cumulative voting: In
this method, suppose there are six candidates. Then a Shareholder is
eligible to cast a total of Six votes, which he can cast in favour of
one candidate or distribute his six votes among different candidates.
(3) Other methods: The
Company may adopt methods other than the above two as approved by the Members
of the Company in the General Meeting and provisioned in the Articles of
Association of the Company.
Time Limits: The appointments being made once in every three
Casual Vacancies: The interim casual vacancies arising out, may be
filled-in in accordance with the provisions, mutatis mutandis, of Section 161(4)
of the Cos. Act.
Optional in Nature: The Provisions of Section 163 are of
Optional in nature, only if the Articles of a Company provides for such
appointment provision, it will apply.
(1) File form DIR 12 with ROC within 30days
of the Appointment;
(2) Make Necessary Entries in the
Register of Directors & Register of Directors' Shareholding.
Intention of Law: This system of Election of Directors, in a
Company, ensures a fair representation of the minority interest of