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CS Executive · Company Law and Practice · Members and Shareholders

Ms. Leela holds shares of Orchid Pharma Ltd, a listed company, with a nominal value of exactly Rs 20,000. Assuming the limit has not been changed by rules, how does the definition of small shareholder apply to her?

She qualifies as a small shareholder. The statute says nominal value of not more than Rs 20,000, so a holding of exactly Rs 20,000 falls within the limit. The definition is inclusive and does not depend on the mode of holding or the articles.

  1. AShe is not small, since the holding must be below Rs 20,000
  2. BShe is small, since the test is 'not more than' Rs 20,000Correct
  3. CShe is small only if she holds through a demat account
  4. DShe is small only if the company's articles say so

Explanation

The Explanation uses the words 'not more than twenty thousand rupees', so a holding of exactly Rs 20,000 is included. The option requiring a holding below Rs 20,000 wrongly treats the limit as exclusive. Mode of holding and the articles do not alter the statutory definition.

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