Chapter XI - Appointment and Qualifications of Directors
Section 151
Section 151: director elected by small shareholders
A listed company may have one director elected by small shareholders, in the manner and on the terms and conditions prescribed.
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Need advice on Section 151?
This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
A listed company may have one director elected by such small shareholders in such manner and with such terms and conditions as may be prescribed. Explanation.—For the purposes of this section “small shareholders” means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.
Introduction
Section 151 applies only to listed companies. It allows one director to be elected by small shareholders. The manner of election and the terms and conditions are left to rules.
The Explanation defines a small shareholder as one holding shares of nominal value of not more than twenty thousand rupees, or another sum that may be prescribed. The test is nominal (face) value, not market value.
Key takeaways
Listed companies only
The section is limited to a listed company.
One director
The company may have one director elected by small shareholders.
Nominal value test
A small shareholder holds shares of nominal value of not more than twenty thousand rupees, or another prescribed sum.
Check whether the section applies
Confirm that the company is a listed company. Section 151 does not apply to unlisted companies.
Identify small shareholders
Under the Explanation, a small shareholder holds shares of nominal value of not more than twenty thousand rupees, or another sum prescribed. Measure the holding at nominal value.
Follow the prescribed manner
The section says the director is elected “in such manner and with such terms and conditions as may be prescribed”. The Act leaves the detail to rules (“as may be prescribed”). Read the current rules made under this Chapter, as published by the Ministry of Corporate Affairs, for forms, fees and procedure before acting.
Practical preparation
Confirm listed status; identify small shareholders on the nominal value test; check the current rules on how the election is triggered and conducted and on the director’s terms; record the election and appointment.
Practical checklist
Do
- Use nominal value, not market value, when classifying small shareholders.
- Check the current rules before acting on a request or notice from small shareholders.
Avoid
- Do not apply section 151 to an unlisted company.
- Do not assume more than one small shareholders’ director is contemplated.
Illustrative example
Hypothetical: classifying shareholders
A listed company with shares of face value ten rupees wants to know which members are small shareholders.
Measure
Multiply each member’s number of shares by the face value.
Classify
Treat members whose nominal holding is not more than twenty thousand rupees (or another prescribed sum) as small shareholders.
Apply rules
Follow the prescribed manner for any election.
Outcome
- The company identifies the electorate for the section 151 director on the statutory nominal value test.
Glossary
- Small shareholder
- A shareholder holding shares of nominal value of not more than twenty thousand rupees, or another prescribed sum.
- Nominal value
- The face value of a share, as distinct from its market price.
Frequently asked questions
Is a small shareholders’ director compulsory?
The section says a listed company “may have” one such director, elected in the prescribed manner. Check the current rules for when the company must act.
Does a shareholder with a high market value holding qualify?
The definition uses nominal value. A holding of nominal value of not more than twenty thousand rupees (or another prescribed sum) qualifies, whatever its market value.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026