The Companies (Amendment) Act, 2000 has provided for the appointment of ‘small shareholders’ director’. State the provisions of the

Some of the small shareholders of Mis Progressive Industries Ltd. approach you for advice regarding appointment of one of them as a director of the

company. Explain the meaning of a small shareholder and the legal position regarding appointment of a

director by such small shareholders. [CA. (Final) Nov. 2001]

.9lns .

Appointment of Small Shareholders’ Director

For provisions of the Companies Act, please see answer to Question 12.

Rules

The Department of Company Affairs, in this regard, ha.s prescribed the Companies (Appointment of the Small Shareholders’ Director) Rules, 2001.

These Rules, inter alia, provide for

the following:

(i) Small shareholders intending to propose a person as their representative on the Board of the company would be required to give 14 days notice prior to

shareholders meeting.

(ii) The proposed name would have to be endorsed by signatures of at least 100

small shareholders who together represent at least a tenth of the total small shareholders in a company.

(iii) The nominee would necessarily have to be a small shareholder of the company.

(iv) The proposed nominee shall give, in writing, his consent to represent small shareholders.

(v) Listed public companies shall elect the small shareholders nominee through a postal ballot while unlisted company shall appoint such nominee if majority of the small shareholders recommend his candidature at their meeting.