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CS Executive · Company Law and Practice · Members and Shareholders

Godavari Power Ltd, a listed company, wishes to have a director elected by small shareholders. Which statement correctly reflects Section 151 of the Companies Act, 2013 on the number of such directors and the manner of election?

A listed company may have one director elected by small shareholders, in such manner and with such terms and conditions as may be prescribed. The provision is enabling rather than compulsory, and it allows only one such director.

  1. AThe company may have up to three such directors, elected by simple majority of the Board
  2. BThe company may have one such director, elected in such manner and on such terms as may be prescribedCorrect
  3. CThe company must have one such director, chosen by the promoters
  4. DThe company may have one such director, whose manner of election is left wholly to its articles

Explanation

Section 151 uses the word 'may', so it is enabling, and permits one director, elected in such manner and with such terms and conditions as may be prescribed. It is not mandatory, not up to three, and the manner is prescribed rather than left to the articles.

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