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CS Executive · Company Law and Practice · Members and Shareholders

Meera Textiles Ltd, a listed company, wants to know who counts as a 'small shareholder' for electing a small shareholders' director. Under the Companies Act, 2013, unless a different sum is prescribed, a small shareholder is one holding shares of nominal value of:

A small shareholder is one holding shares of nominal value of not more than twenty thousand rupees, or any other sum prescribed. The test uses nominal value, not market value, and applies to the listed company's option of having one director elected by small shareholders.

  1. ANot more than Rs 20,000Correct
  2. BNot more than Rs 2,00,000
  3. CNot less than Rs 20,000
  4. DNot more than Rs 20,000 in market value

Explanation

Section 151 defines a small shareholder as one holding shares of nominal value of not more than twenty thousand rupees, or such other sum as may be prescribed. The test is nominal value, not market value, so the market value option is wrong. A holding above Rs 20,000 nominal does not qualify.

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