Can directors be appointed by proportional representation

Ordinarily, directors are appointed by simple majority vote on the resolutions moved for their appointment. As a result majority shareholders

controlling 51 per cent or more votes may elect all directors and a substantial minority, as high as 49 per cent, may find no representation on the Board. In

order to enable the minority shareholders to have a proportionate representation on the Board, Section 265 of the Companies Act gives an option to

companies to appoint directors through a system of proportional representation. The Section provides that a company may provide in its Articles for the

appointment of not less than 2/3^rd of the total directors according to the principle of proportional representation by Single transferable. vote or some

system of cumulative voting or otherwise. BJlt such appointment shall be made once in every tTiree years (Sec. 265). Under the system of single

transferable vote, a quota ot votes is fixed. A person gets elected if he gets the required number of first preference votes fixed as quota.

The quota shall be obtained by dividing the total number of votes cast by the total

number of seats plus one and adding one to the result.

Now, let us see how this system works.

Illustration.

Let it be assumed that 5 directors are to be elected and 7 candidates A, B, C, D, E, F &

G are contesting. . -

The first preferences are counted

A gets 200 votes

B gets 95 votes

C gets 93 votes

D gets 74 votes

E gets 60 votes

F gets 58 votes

G gets 20 votes

Total votes polled b

600

Quota = 5 + 1 + 1 = 101 votes

A gets more than quota and he is declared elected, and since A has surplus 99 votes in his

favour, papers are scrutiIUsed and the second preferences found in them are counted. \

It is found that second preferences are: (

D - 25 E - 5 F - 10 G - 160

Total 200