Companies (Appointment of Small Shareholders' Director) Rules, 2001
(1) A company may act suo-moto to elect a small shareholders' director from amongst small shareholders or upon the notice of small shareholders, who are not less than 1/10th of total small shareholders and have proposed name of a person who shall also be a small shareholder of the company
(2) Small shareholders intending to propose a person shall leave a notice of their intention with the company at least 14 days before the meeting under the signature of at least 100 small shareholders specifying name, address, shares held and folio number and particulars of share with differential rights as to dividend and voting, if any, of the person whose name is being proposed for the post of director and of other small shareholders proposing such person as a candidate for the post of director or small shareholders.
(3) A person whose name has been proposed for the post of small shareholders' director shall sign, and file with the company, his consent in writing to act as a director.
(4) The listed public company shall elect small shareholders' nominee subject to sub-rules (1), (2) and (3) above through the postal ballot.
(5) The unlisted company may appoint such small shareholders' nominee subject to above conditions if majority of small shareholders recommend his candidature for the post of director in their meeting.
(6) Tenure of such small shareholder' director shall be for a maximum period of 3 years subject to meeting the requirement of provisions of Companies Act except that he need not have to retire by rotation.
(7) On expiry of his tenure, the same person if so desired by small shareholders, may be elected for an another period of 3 years.
(8) Such director shall be treated as director for all other purposes except for appointment as whole time director or managing director.