{"id":50902,"date":"2022-11-23T12:45:18","date_gmt":"2022-11-23T07:15:18","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=50902"},"modified":"2024-05-18T13:55:55","modified_gmt":"2024-05-18T08:25:55","slug":"a-complete-analysis-of-section-151-of-the-companies-act-2013","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-151-of-the-companies-act-2013\/","title":{"rendered":"A Complete Analysis of Section 151 of the Companies Act 2013"},"content":{"rendered":"\n<p>As\nper Section 151 of the Companies Act 2013, small shareholders mean a\nshareholder who owns shares in a Public Corporation or Company with a nominal value\nof less than Rs. 20,000\/-. Small Shareholders of a listed company have the\nexclusive right to elect a Director. A Small Shareholders Director (SSD) is a Director\nwho is selected by these shareholders. In this blog, we shall discuss Section\n151 of the Companies Act 2013.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-151-of-the-companies-act-2013\/#What_is_the_Meaning_of_Shareholder\" >What is the\nMeaning of Shareholder?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-151-of-the-companies-act-2013\/#A_Brief_on_Section_151_of_the_Companies_Act_2013\" >A Brief on\nSection 151 of the Companies Act 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-151-of-the-companies-act-2013\/#Requirements_of_Shareholders_Director_as_prescribed_under_Section_151_of_the_Companies_Act_2013\" >Requirements\nof Shareholders\u2019 Director as prescribed under Section 151 of the Companies Act\n2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-151-of-the-companies-act-2013\/#Terms_and_Conditions_for_Small_Shareholders_Director\" >Terms and\nConditions for Small Shareholders\u2019 Director<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-151-of-the-companies-act-2013\/#The_process_to_Appoint_a_Small_Shareholder_Director_of_a_Company_under_Section_151_of_the_Companies_Act_2013\" >The process to\nAppoint a Small Shareholder Director of a Company under Section 151 of the\nCompanies Act 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-151-of-the-companies-act-2013\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Meaning_of_Shareholder\"><\/span>What is the\nMeaning of Shareholder?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul>\n<li>An Organisation, an individual or\nan institution that owns a Company\u2019s stock\/stock options;<\/li>\n\n\n\n<li>In fact, Shareholders are the proprietors\nof the Company &amp; they profit from its success through increasing stock\nprices &amp; dividends. If the Company is losing money, then the portfolio of\nthe shareholders suffers as well;<\/li>\n\n\n\n<li>The obligation of a <strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/shareholders-agreement\">Shareholder<\/a><\/strong>\nis not a personal liability &amp; if the firm goes bankrupt, the personal\nassets of the Shareholders cannot be attached.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"A_Brief_on_Section_151_of_the_Companies_Act_2013\"><\/span>A Brief on\nSection 151 of the Companies Act 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Only\nlisted Companies or entities are eligible to opt for Small Shareholder Director\n(SSD) under Section 151 of the Companies Act 2013. Under Rule 7 of the\nCompanies (Appointment &amp; Qualification of Directors) Rules, 2014, 1000\nsmall shareholders, 1\/10<sup>th<\/sup> of the listed Company&#8217;s total no. of\nshareholders, may recommend the election of SSD. Moreover, the Rule states that\nsmall shareholders intending to propose an individual as a candidate for the\npost of SSD must notify the Company or entity at least 14 days prior to the\nmeeting, stating the name, address &amp; any shares held by the individual\nwhose name is proposed for the post of Director &amp; the Small Shareholders\nwho are proposing such person as a candidate for the Director&#8217;s post.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Requirements_of_Shareholders_Director_as_prescribed_under_Section_151_of_the_Companies_Act_2013\"><\/span>Requirements\nof Shareholders\u2019 Director as prescribed under Section 151 of the Companies Act\n2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Under\nSection 151 of the Companies Act 2013, a listed Company may have only one\nDirector opted by such small shareholders in such a manner &amp; with such\nterms &amp; conditions as we mentioned below. An individual or a person shall\nnot be appointed as SSD or Small Shareholders&#8217; Director of a Company if an\nindividual is not eligible for the appointment as per <strong>Section 164 of the Companies Act, 2013<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Terms_and_Conditions_for_Small_Shareholders_Director\"><\/span>Terms and\nConditions for Small Shareholders\u2019 Director<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Rule\n7 of the Companies (Appointment &amp; Qualification of Directors) Rules, 2014\nlaid down some terms &amp; conditions for the appointment of Small\nShareholders&#8217; Director (SSD), which are as under:<\/p>\n\n\n\n<ul>\n<li><strong>Election\nof Small Shareholders Director<\/strong> (SSD): A listed company\nor entity may, upon notice of not less than:\n<ul>\n<li>1000 small shareholders;<\/li>\n\n\n\n<li>1\/10<sup>th<\/sup> of the total no.\nof such shareholders,<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p>Whichever\nis lower, have an SSD, or a Small Shareholder\u2019s Director opted by the small\nShareholder. A Small Shareholder&#8217;s Director (SSD) may be opted for voluntarily\nby any listed Company. Hence, a listed Company may, on its own can, appoint a\nSmall Shareholder\u2019s Director. In such an instance, no notice from Small\nShareholder(s) (SS) is required.<\/p>\n\n\n\n<ul>\n<li><strong>Small\nShareholders&#8217; Director (SSD) to be an independent director<\/strong>:\nSSD or Small Shareholders&#8217; Director shall be regarded as an independent\nDirector, if:\n<ul>\n<li>He or she is eligible for\nappointment as an independent director in accordance with sub-section (6) of\nSection 149 and;<\/li>\n\n\n\n<li>He or she gives a declaration of\ntheir independence director in accordance with sub-section (7) of Section 149.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Tenure\nof Office &amp; no retirement by rotation<\/strong>: The\ntotal tenure of Small Shareholders&#8217; Director (SSD) shall not exceed a time period\nof 3 consecutive years &amp; he or she shall not be liable to retire by\nrotation. Moreover, he or she shall not be eligible for re-appointment after\nthe expiry of their tenure.<\/li>\n\n\n\n<li><strong>Grounds\nof Disqualification<\/strong>: Disqualifications of a Small Shareholders&#8217;\nDirector (SSD) are the same as that of any other Director as prescribed under\nSection 164 of the Act.<\/li>\n\n\n\n<li><strong>Statement\nby the Proposed Small Shareholders\u2019 Director<\/strong> (SSD):\nThe notice shall be followed by a statement signed by the proposed Director for\nthe Small Shareholders\u2019 Director post stating:\n<ul>\n<li>His or her DIN (Director\nIdentification Number);<\/li>\n\n\n\n<li>He or she is not disqualified or\neligible to become a Director under the Act;<\/li>\n\n\n\n<li>His\/her consent to act as a Company\u2019s\nDirector.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>No\nassociation with the Company or entity for the next 3 years<\/strong>:\nA Small Shareholders&#8217; Director (SSD) shall not serve for a period of 3 years\nfrom the date on which he\/she ceases to hold Office as a Small Shareholders&#8217;\nDirector (SSD) in a Company be appointed in\/be associated with such Company or\nentity in any other capacity, either indirectly or directly.<\/li>\n\n\n\n<li><strong>Grounds\nof Vacation of Office<\/strong>: A SSD or a Small Shareholders&#8217;\nDirector shall vacate the Office, if:\n<ul>\n<li>He or she ceases to be a small\nshareholder on &amp; from the cessation date;<\/li>\n\n\n\n<li>Ge or she incurs any of the\ndisqualifications prescribed under Section 164;<\/li>\n\n\n\n<li>The Office of the Director\nbecomes empty in pursuance of Section 167;<\/li>\n\n\n\n<li>He or She ceases to meet the\ncriteria of independence as mentioned in Section 149.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>No.\nof Small Shareholders\u2019 Directorship<\/strong>: An\nindividual shall not hold the Office of SSD or Small Shareholders&#8217; Director\nmore than 2 Companies at the same time.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_process_to_Appoint_a_Small_Shareholder_Director_of_a_Company_under_Section_151_of_the_Companies_Act_2013\"><\/span>The process to\nAppoint a Small Shareholder Director of a Company under Section 151 of the\nCompanies Act 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A\nfirm may appoint a Small Shareholder Director (SSD)&nbsp; on its own initiative\/in response to a request\nof a Small Shareholder. A Small Shareholder Director is unable to become a\nCompany\u2019s Managing Director or Whole-Time Director. Some conditions must be met\nbefore a Small Shareholders Director may be declared an independent Director.<\/p>\n\n\n\n<p>A\nnotice must be provided at least 14 days before the general meeting if the\nSmall Shareholders want to designate a Small Shareholders Director. The name,\naddress &amp; number of shares held by the individual sought to be nominated as\na Small Shareholders Director should all be mentioned in the notice. A\nStatement with the following declarations must be issued along with the notice:<\/p>\n\n\n\n<ol>\n<li>DIN or Director of the\nprospective person;<\/li>\n\n\n\n<li>The recommended candidate is not ineligible\nto serve as a Director;<\/li>\n\n\n\n<li>The proposed person&#8217;s or\nindividual&#8217;s permission to act in the capacity of a Director.<\/li>\n<\/ol>\n\n\n\n<p>A\nresolution for the appointment of a Small Shareholders Director (SSD) should be\npassed at the General Meeting (GM) after the preceding formalities are\ncompleted. Then, a postal ballot will be used to opt for the Small Shareholder\nNominee.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>So it is concluded that the purpose of Section 151 of the <strong>Companies Act 2013<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/content\/mca\/global\/en\/acts-rules\/companies-act\/companies-act-2013.html\"><strong>[1]<\/strong><\/a><\/sup> is to defend the interests of Small Shareholders. Small Shareholders who want to propose a candidate for the position of Small Shareholder Director or (SSD) must give the Company written notice of their intention at least 14 days prior to the meeting, comprising the name, address, no. of shares held &amp; other vital details of the person or individual whose name is being proposed for the position of Director.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/nidhi-company-incorporation-step-by-step-approach\/\">Nidhi Company Incorporation: A Step By Step Approach<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As per Section 151 of the Companies Act 2013, small shareholders mean a shareholder who owns shares in a Public Corporation or Company with a nominal value of less than Rs. 20,000\/-. Small Shareholders of a listed company have the exclusive right to elect a Director. A Small Shareholders Director (SSD) is a Director who [&hellip;]<\/p>\n","protected":false},"author":35,"featured_media":50903,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[2890],"acf":{"service_id":"1"},"authorName":"Karan Singh","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/01\/processed-1-150x150.jpeg","authorDescription":"A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.","postViews":4531,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50902"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/35"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=50902"}],"version-history":[{"count":3,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50902\/revisions"}],"predecessor-version":[{"id":64206,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50902\/revisions\/64206"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/50903"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=50902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=50902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=50902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}