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Selection of Director by Small Shareholders

Byadmin

Aug 23, 2022

Section 252 has been amended by the Companies (Amendment) Act, 2000 to provide that a public company (a) having a paid-up capital of five crore rupees or more, and (b) having one thousand or more small shareholders, A director may be elected by the small shareholders in such manner as may be prescribed. It is further stated that for the purpose of this provision, “small shareholder” means a shareholder having shares of face value of Rs.20,000 (Rupees twenty thousand) or less. 

 The following points are clear from the above provision:- 
1. In the case of a public company which satisfies the requirements aforesaid, a director may be elected by the smaller shareholders out of not less than three directors (or more than those prescribed in the Articles of Association) and the director so chosen may himself Must be a small shareholder of the company. Therefore, it is optional to appoint of the operator representing the small shareholders.
2. Only the small shareholders can vote in the election of the operator to be elected as the representative of the small shareholders and shall include both the equity shareholder and the preference shareholder as the ‘paid-up capital’ includes both equity share capital and preference share capital. it occurs .
In exercise of the power obtained under this section, the Central Government has notified the rules regarding the selection of directors by small shareholders on March 9, 2001 (the Companies Appointment of Small Shareholders Director Rules, 2001).  
These rules, inter alia, make the following provisions:-
1. A public company, either by itself or by a small number of shareholders, must be incorporated at least 14 days before the total number of shareholders and the candidate for the post of director of the shareholder.  Must be name.  
2. The operator selected by the small shareholders cannot be elected for more than three years at a time and the condition of retiring by rotation will not apply.  can not be done .  
3. Such director appointed on the post of managing director or whole-time director. 
4. No person can act as a director in more than two companies at the same time, elected by the smaller shareholders.

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