Chinmay Tarkas
Asked November 03, 2016

Appointment of Director under Companies Act 2013

  • 1 Answer
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In a Private limited Company. Can a Minority Share holder appoint Director of their own? or enforced company to appoint Director? As per which section of Companies Act,2013

Answer 1

Usually, in small private limited companies, there is no separation between the ownership (shareholders) and the management (board of directors). This means that the significant shareholders are also the directors on the Board of the company. The executive directors are accountable to the shareholders of the company as they are involved in the day to day activities of the company and are responsible for execution of business strategies and plans. 

Minority shareholders are shareholders who own minimum percentage of shares in a company which is less than 50% of the company's shares. The company is controlled by majority shareholder. According to S. 152(2) of The Companies Act, 2013[1], every director shall be appointed in the general meetings of the company. Every shareholder, present in this meeting, has the right to vote for the appointment of the director. All the shareholders having the basic right of voting the board members, the minority shareholders, lacking any additional voting rights, very rarely succeed in placing their representative as an executive member of the company's Board of Directors. The appointed director is elected by the shareholders as a whole irrespective of the shares held by them and (s)he acts for the company as a whole and not for a particular group of shareholders.

However, as per S. 151 of The Act[2], a listed company may have one director elected by such small shareholders in such manner and with such terms and conditions as may be prescribed. In this context “small shareholders” means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed. This implies that a particular company may have a provision of exclusive representation for the minority shareholders but it largely depends upon the company’s policies.

 

 

[1] Available at: http://www.advocatekhoj.com/library/bareacts/companies2013/152.php?Title=Companies%20Act,%202013&STitle=Appointment%20of%20directors

[2] Available at: http://www.advocatekhoj.com/library/bareacts/companies2013/151.php?Title=Companies%20Act,%202013&STitle=Appointment%20of%20director%20elected%20by%20small%20shareholders

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