Search Your Query Here

Who is a Small Shareholder and Small Shareholders' Director?

Reference

Section 151 of the Companies Act, 2013
Rule 7 of the Companies (Appointment and Qualifications of Directors) Rules, 2014
Regulation 2(i)(n) of the SEBI (Buy-Back of Securities) Regulations, 2018

Definition of Small Shareholder

There is no specific definition provided in the Companies Act for the term 'small shareholder'.

However, in relation to the appointment of a director by small shareholders under section 151, the meaning of small shareholder is as provided.

Small shareholder means a shareholder holding shares of nominal value of not more than Rs. 20,000 or such other sum as may be prescribed.

Small Shareholders' Director Appointment

Refer Rule 7 for detailed provisions. Some important points are noted hereunder.

A small shareholders' director:
• is considered as an independent director subject to section 149;
• is not be liable to retire by rotation;
• is not eligible for re-appointment on the expiry of his tenure.
His tenure shall not exceed a period of 3 consecutive years.

A person can not be a small shareholders’ director in more than 2 companies simultaneously.

A person can not be appointed as a small shareholders’ director in 2 companies who are in competing business or having conflict of business with each other.

Min. # Small Shareholders to request candidature

A listed company may, upon receipt of notice by such a number of small shareholders as mentioned below, have a small shareholders’ director elected by the small shareholders:
• not less than 1000 small shareholders; or
• 1/10th of the total number of small shareholders;
• whichever is lower.





Such small shareholders shall serve a notice at least 14 days before the meeting, specifying their intention to proposing the candidature of a person for the post of small shareholders’ director.

Suo motu appointment by the listed company

A listed company may have a director representing small shareholders appointed if it deems fit to make such appointment.

Comments

  1. Mahesh Sambharwal10 August, 2018

    The rights and welfare of small shareholders are grossly ignored in big corporates. Benefits are highly exploited by the major stake-holding shareholders and not passed on at all to the small shareholders or very disproportionately given to them. Crooked thoughts of highly paid executives safeguarded by the auditors is saving these major stakeholders who are generally the promoters of the company. More transparency needed in the system. Most importantly the small shareholders must analyse the company affairs intelligently and raise their voice once in a while to pull the strings on these promoters.

    ReplyDelete

Post a Comment