Chapter XI - Appointment and Qualifications of Directors
Section 163
Section 163: option to adopt proportional representation for appointment of directors
Section 163 allows a company’s articles to provide for the appointment of not less than two-thirds of its directors by the principle of proportional representation. It is an option, not an obligation, and gives minority shareholders a route to board representation.
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Need advice on Section 163?
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
Notwithstanding anything contained in this Act, the articles of a company may provide for the appointment of not less than two-thirds of the total number of the directors of a company in accordance with the principle of proportional representation, whether by the single transferable vote or by a system of cumulative voting or otherwise and such appointments may be made once in every three years and casual vacancies of such directors shall be filled as provided in sub-section (4) of section 161.
Introduction
The articles may use the single transferable vote, cumulative voting or another proportional system. Appointments under such a scheme may be made once in every three years, and casual vacancies are filled as provided in section 161(4).
Section 163 commenced on 12 September 2013 under S.O. 2754(E). The India Code consolidated text shows no amendment, and its text matches the 2013 Gazette.
Key takeaways
Optional
It applies only if the articles provide for it.
At least two-thirds
The scheme covers not less than two-thirds of the total number of directors.
Methods
Single transferable vote, cumulative voting or another proportional system.
Three-year cycle
Appointments may be made once in every three years; casual vacancies follow section 161(4).
What the articles may provide
Notwithstanding anything in the Act, the articles may provide for the appointment of not less than two-thirds of the total number of directors in accordance with the principle of proportional representation, whether by the single transferable vote, by a system of cumulative voting or otherwise.
Timing and casual vacancies
Appointments under such a provision may be made once in every three years. Casual vacancies among directors so appointed are filled as provided in sub-section (4) of section 161.
Why it matters
Under ordinary majority voting, a majority shareholder can fill every board seat. A proportional system lets a minority holding a sufficient share of votes elect at least one director. Because the section overrides other provisions of the Act ("notwithstanding anything contained in this Act"), the articles’ scheme governs appointments within its scope.
Practical preparation
Decide whether proportional representation suits the shareholding structure; draft the article carefully, covering the method, the proportion of seats (at least two-thirds) and the three-year cycle; amend the articles by special resolution under section 14 if needed; align the casual-vacancy process with section 161(4).
Exemption notifications issued under section 462 can modify how some provisions apply to particular classes of companies (for example private, Government, Section 8 or Nidhi companies); check whether any applies to your company before relying on this guide.
Practical checklist
Do
- Spell out the voting method and vote-counting mechanics in the articles.
- Model outcomes for different shareholding splits before adopting the scheme.
Avoid
- Do not apply the scheme to fewer than two-thirds of the directors; the section requires not less than two-thirds.
Illustrative example
Hypothetical: investor seeks a board seat
A minority investor holding a substantial stake negotiates a cumulative voting article covering all directors.
Article
The articles are amended to adopt cumulative voting for the board under section 163.
Election
At the next election the investor concentrates its votes on one candidate.
Vacancy
If that director later leaves, the casual vacancy is filled as section 161(4) provides.
Outcome
- The investor secures representation that simple majority voting would not give it.
Glossary
- Proportional representation
- A voting principle under which seats are allotted broadly in proportion to the votes held by different groups.
- Cumulative voting
- A system in which a shareholder may concentrate all votes (shares multiplied by seats) on one or more candidates.
- Casual vacancy
- A vacancy arising otherwise than by expiry of term, filled under section 161(4).
Frequently asked questions
Is a company required to adopt proportional representation?
No. Section 163 is an option that applies only if the articles provide for it.
Can all directors be appointed this way?
The section requires the scheme to cover not less than two-thirds of the total number of directors, so it can cover more, including all of them, if the articles so provide.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026