Section 151 of the Companies Act, 2013
Here is a detailed explanation of Section 151 of the Companies Act, 2013:
📘 Section 151 – Appointment of Director Elected by Small Shareholders
This section provides for the appointment of a director to represent the interests of small shareholders in a listed company.
👥 Who are Small Shareholders?
Shareholders holding shares of nominal value up to ₹20,000 in a company are considered small shareholders.
🔍 Key Provisions of Section 151
1. Applicability
Applies to listed companies only.
2. Right to Appoint a Director
A listed company may appoint a small shareholders’ director:
Suo motu (on its own), or
Upon notice by small shareholders, who:
Are at least 1,000 in number, or
Hold at least 1/10th of the total paid-up share capital of the company.
3. Manner of Appointment
As per prescribed rules (Rule 7 of Companies (Appointment and Qualification of Directors) Rules, 2014).
The appointment is made through a general meeting.
Such director is not liable to retire by rotation.
4. Tenure and Re-appointment
The tenure of a small shareholders’ director is maximum 3 years.
Not eligible for re-appointment immediately after completion of term.
5. Independence
The director appointed must be an independent person, i.e., not connected with the company in any way that could affect impartiality.
Cannot be a shareholder, promoter, or relative of any promoter/director.
✅ Purpose of Section 151
To provide a voice to small investors in the governance of listed companies.
To ensure inclusive decision-making and protect minority shareholder interests.
📝 Compliance Checklist
| Requirement | Details |
|---|---|
| Applicable to | Listed companies |
| Minimum shareholders for notice | 1,000 or 1/10th of paid-up capital |
| Tenure | Up to 3 years |
| Rotation | Not liable to retire by rotation |
| Eligibility | Must be independent, not a promoter or related to one |
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