Sections 151 and 152 of the Companies Act 2013: Appointment of Directors
Sections 151 and 152 of the Companies Act, 2013 deal with two connected aspects of board composition: election of a director by small shareholders in a listed company and the general statutory framework for appointment, consent, retirement by rotation and reappointment of directors.
- Section 151: permits a listed company to have one director elected by small shareholders, subject to the prescribed manner, terms and conditions.
- Small shareholder: for Section 151, a shareholder holding shares of nominal value not exceeding Rs. 20,000, or such other sum as may be prescribed.
- Section 152: lays down the basic rules for appointment of directors, DIN and declaration requirements, consent to act, retirement by rotation and deemed reappointment.
Section 151 - Director elected by small shareholders
Section 151 provides that a listed company may have one director elected by its small shareholders in the manner and on the terms and conditions prescribed under the applicable rules.
Meaning of small shareholders: The Explanation to Section 151 defines a small shareholder as a shareholder holding shares of nominal value of not more than Rs. 20,000, or such other amount as may be prescribed.
Procedure under the Companies (Appointment and Qualification of Directors) Rules, 2014
Rule 7 supplements Section 151. A listed company may, on its own, elect a small shareholders' director. It is also required to act on a qualifying notice from small shareholders in accordance with the rule. The rule prescribes the notice requirements, eligibility conditions, tenure, independence-related conditions where applicable, and restrictions on holding the office in more than the permitted number of companies.
Practical point: Section 151 should be read together with Rule 7 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and the current MCA filing requirements. Companies should verify the latest notified rule text and MCA V3 form requirements before an appointment or filing.
Section 152 - Appointment of directors
First directors - Section 152(1)
If the articles do not provide for appointment of the first director, the individual subscribers to the memorandum are deemed to be the first directors until directors are duly appointed. In a One Person Company, the individual member is deemed to be the first director until appointment is made in accordance with the section.
Appointment in general meeting - Section 152(2)
Unless the Companies Act expressly provides otherwise, every director is appointed by the company in general meeting.
DIN and declaration - Section 152(3) and 152(4)
A person cannot be appointed as a director unless the statutory Director Identification Number requirement is satisfied. A proposed director must furnish the required identification number and a declaration that the person is not disqualified from becoming a director under the Act.
Consent to act - Section 152(5)
A person appointed as a director must give consent to hold office, and the consent must be filed with the Registrar within the prescribed period and manner. For appointment of an independent director in general meeting, the explanatory statement accompanying the meeting notice must include the Board's statement that the appointee fulfils the statutory conditions for appointment.
Retirement by rotation - Section 152(6)
Unless the articles provide for retirement of all directors at every annual general meeting, at least two-thirds of the total number of directors of a public company must generally be directors whose period of office is liable to determination by retirement by rotation. The remaining directors are appointed in accordance with the Act and the articles.
At the relevant annual general meetings, one-third of the directors who are liable to retire by rotation, or the number nearest to one-third where necessary, retire from office. Those longest in office since their last appointment retire first; where directors were appointed on the same day, the matter is determined in accordance with the statutory rule unless they agree otherwise.
For this purpose, the expression total number of directors excludes independent directors, whether appointed under the Companies Act or any other law.
Vacancy and deemed reappointment - Section 152(7)
If the vacancy caused by a retiring director is not filled and the meeting has not expressly resolved not to fill it, the meeting is adjourned as provided by Section 152(7). If the vacancy remains unfilled at the adjourned meeting, the retiring director may be deemed reappointed, subject to the statutory exceptions.
The deemed reappointment rule does not apply where, among other circumstances, the resolution for reappointment was lost, the director has expressed unwillingness to be reappointed, the director is not qualified or is disqualified, a special or ordinary resolution is otherwise required, or Section 162 applies.
Related compliance points
| Topic | Relevant provision | Purpose |
|---|---|---|
| Board composition | Section 149 | Minimum and maximum number of directors and categories such as independent directors. |
| DIN | Sections 153 to 159 | Application, allotment, use and related obligations concerning Director Identification Number. |
| Other candidates and additional directors | Sections 160 and 161 | Candidature of persons other than retiring directors and appointment of additional, alternate or nominee directors. |
| Individual voting | Section 162 | General rule requiring appointment of directors to be voted individually. |
Official legal resources
For the current statutory text and filing requirements, refer to the Companies Act, 2013 published by the Ministry of Corporate Affairs and the Ministry of Corporate Affairs portal. The MCA portal should be checked for later amendments, notifications, rules and current V3 filing instructions.
Updated for general legal information. Statutory provisions, rules, notifications and filing procedures should be checked in their latest official form before acting on a specific matter.