Types of Directors: Promoter/Nominee/Shareholder/Independent

19/10/2022 0 By indiafreenotes


“Promoter” means a person:(

(a) Who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92;

(b) Who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise;

(c) In accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act:


Nominee directors could be appointed by a specific class of shareholders, banks or lending financial institutions, third parties through contracts, or by the Union Government in case of oppression or mismanagement.


A small shareholder is a person who is holding shares of nominal value amounting to a maximum of Rs 20,000 in a public company. Small shareholders are entitled to elect a director in a listed company. The directors elected by these shareholders will be known as a ‘Small Shareholders Director’.

  • There is no mandate to appoint a small shareholders director under s.151, left up to the company’s discretion
  • Companies must fulfil two criteria to be eligible to appoint a small shareholders director
  • Must be a public company
  • Must have at least 1000 or more small shareholders.

Tenure of Appointment

Small shareholders director can be appointed for a maximum period of three years. He/she may not necessarily retire by rotation. He/she cannot be reappointed after the cessation of services.

Moreover, small shareholders director cannot be associated with the company in any manner for a period of three years from the cessation of services.


A person becoming the independent director of the company must fulfil certain criteria given under section 149(6) of the Companies Act, 2013, which states that an independent director is a person other than managing director, whole-time director, or nominee director, and:

  • He must have relevant experience and should be a person of integrity as per the board.
  • A person appointed as an independent director shall not be a promoter of the same company or any other company which is the holding, subsidiary, or associate company of the same company in which he has been appointed.
  • The person shall not be related to the promoters or directors of the company or its holding, subsidiary, or associate company.
  • The person must not have any money-related relationship with the company or its holding, subsidiary, or associated company other than his salary.
  • None of his relatives or he himself shall not have any kind of interest in the company. Provided, the relative can hold shares of face value up to Rs. 50 Lakhs or 2% of the paid-up capital.

Section 149(4) of the Companies Act, 2013, states that every listed public company must have 1/3rd of its total directors as independent directors.