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CS Executive · Company Law and Practice · Members and Shareholders

Rohit holds 400 equity shares of Sundaram Engineering Ltd., a listed company, with nominal value Rs 10 each. He wants to take part in electing the small shareholders' director. Under the Companies Act, 2013, what is the test for a 'small shareholder'?

A small shareholder is one holding shares of nominal value of not more than twenty thousand rupees, or such other sum as may be prescribed. The test uses nominal value, not market value. Rohit's holding of Rs 4,000 nominal value qualifies him.

  1. AA shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribedCorrect
  2. BA shareholder holding shares of market value of not more than twenty thousand rupees
  3. CA shareholder holding less than one percent of the paid-up capital
  4. DA shareholder holding only preference shares of any value

Explanation

The Act defines small shareholder by the nominal value of shares held, not more than Rs 20,000 or such other sum as prescribed. Rohit holds 400 x Rs 10 = Rs 4,000 nominal value, so he qualifies. Market value, as in option B, is not the test.

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