Company : Sol Infotech Pvt. Ltd. Website : www.courtkutchehry.com COMPANIES (APPOINTMENT OF THE SMALL SHAREHOLDERS DIRECTOR) RULES, 2001 CONTENTS 1. Short title and commencement 2. Definitions 3. Applications 4. Manner of election of small shareholders director 5. Disqualification 6. Vaction of the office 7. Restriction on number of directorship COMPANIES (APPOINTMENT OF THE SMALL SHAREHOLDERS DIRECTOR) RULES, 2001 In exercise of the powers conferred by section 642 read with section 252 of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following rules, namely: - 1. Short title and commencement :- (1) These rules may be called the Companies (Appointment of the Small Shareholders' Director) Rules, 2001. (2) They shall come into force on the date of their publication in the Official Gazette. 2. Definitions :- " In these Rules unless the context otherwise requires- (a) "Act" means the Companies Act, 1956 (1 of 1956); (b) "small shareholder" means a shareholder holding shares of nominal value of twenty thousand rupees or less in a public company to which section 252 of the Act applies. 3. Applications :- These rules shall apply to public companies having- (a) paid-up capital of five crore rupees or more; (b) one thousand or more small shareholders. 4. Manner of election of small shareholders director :- (1) A company may act suo motu to elect a small shareholders' director from amongst small shareholders or upon me notice of small shareholders, who are not less than 1/10th of the total small shareholders and have proposed the name of a person who shall also be a small shareholder of the company. (2) Small shareholders intending to propose a person shall leave a notice of their intention with the company at least 14 days before the meeting under the signature of at least 100 small shareholders specifying name, address, shares held and folio number and particulars of shares with the differential rights as to dividend and voting, if any, of the person whose, name is being proposed for the post of director and of other small shareholders proposing such person as a candidate for the post of director or small shareholders. (3) A person whose name has been proposed for the post of small shareholders director shall sign, and file with the company, his consent in writing to act as a director. (4) The listed public company shall elect as small shareholders' nominee subject to sub-rules (1), (2) arid (3) above through postal ballot (5) The unlisted company may appoint such small shareholders' nominee subject to the above conditions if amajority of small shareholders recommend his candidature for the post of director in their meeting. (6) The tenure of such small shareholders' director shall be for a maximum period of three years subject to meeting the requirement of the provisions of the Companies Act except that lie need not have to retire by rotation. (7) On the expiry of his tenure, the same person if so desired by small shareholders, may be elected for smother period of three years. (8) Such director shall be treated as director for all other purposes except for appointment as whole time director or managing director. 5. Disqualification :- A person shall not be capable of being appointed as small shareholders' director of a company, if- (i) he has been found to be of unsound mind by a court of competent jurisdiction and the Finding is in Force; (ii) he is an undischarged insolvent; (iii) he has applied to he adjudicated as an insolvent, and his application is pending; (iv) he has been convicted by a court of any offence involving moral trupitude and sentenced in respect thereof to imprinsonment for not less than six months, and a period of live years lias not elapsed from the date of expiry of the sentence; (v) he has not paid any call in respect of shares of the company held by him, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or (vi) an order diqualifying him for appointment as director has been passed by a court in pursuance of section 203 and is in force, unless the leave of the court has been obtained for his appointment in pursuance of that section. 6. Vaction of the office :- A person appointed as small shareholders' director shall have to vacate the office if- (i) such person so elected, as director of small shareholder ceases to be a small shareholders' director on and from such date on which he ceased to be a small shareholder; (ii) he has been rendered disqualified by virtue of sub-rule (1) of rule (5); (iii) he tails to pay any call in respect of shares of the company held by him, whether jointly or with others, witin six months from the last date fixed for the payment of the call. (iv) he absents himself from the three consecutive meetings of the board of directors, or from all meetings of the board for a continous period of three months, whichever is longer, without obtaing leave of absence from the board; (v) he is a partner of any private company of which he is a director, accepts a loan, or any guarantee or security for a loan, from the company in contravention of section 295 ; (vi) he acts in contravention of section 209 ; (vii) he becomes disqualified by an order of court under section 203 ; (viii) he is removed in pursuance of section 284 . 7. Restriction on number of directorship :- No person shall hold offica at the same time as small shareholders' director in more than two companies.