e-voting under Companies Act, 2013 & Rules,2014

CS M. Kurthalanathan

Electronic Voting (e-voting)

Introduction:

Electronic voting (e-voting) is a term encircling several different types of voting, implementing both electronic means of casting a vote and electronic means of counting votes.

Electronic voting technology can include punched cards, optical scan voting systems and specialized voting kiosks (including self-contained direct-recording electronic voting systems, or DRE). It can also involve transmission of ballots and votes via telephones, private computer networks, or the Internet.

In general, two main types of e-Voting can be identified:

• e-voting which is physically supervised by representatives of governmental or independent electoral authorities (e.g. electronic voting machines located at polling stations);
• remote e-Voting where voting is performed within the voter’s sole influence, and is not physically supervised by representatives of governmental authorities (e.g. voting from one’s personal computer, mobile phone, television via the internet)

Shareholders of a Company have been expressing their assent or dissent for the resolutions requiring their approval by way of voting.  It is impossible for the shareholders of the company to be present physically for every general meeting, so “Passing of Resolutions by Postal Ballot” under section 192A was introduced in the Companies Act, 1956 along with The Companies (Passing of the Resolution by Postal Ballot) Rules, 2001.

 Now the Companies Act,2013 has introduced new provision, voting through electronic means under Section 108 read with  Companies (Management and Administration) Rules, 2014 .

Voting through electronic means.-

(1) Every listed company or a company having not less than one thousand shareholders, shall provide to its members facility to exercise their right to vote at general meetings by electronic means.

(2) A member may exercise his right to vote at any general meeting by electronic means and company may pass any resolution by electronic voting system in accordance with the provisions of this rule.

“voting by electronic means’’ or ‘‘electronic voting system’’ means a ‘secured system’ based process of display of electronic ballots, recording of votes of the members and the number of votes polled in favour or against, such that the entire voting exercised by way of electronic means gets registered and counted in an electronic registry in a centralized server with adequate ‘cyber security’;

 ‘‘secured system’’ means computer hardware, software, and procedure that –

(a) are reasonably secure from unauthorized access and misuse;

(b) provide a reasonable level of reliability and correct operation;

(c) are reasonably suited to performing the intended functions; and

(d) adhere to generally accepted security procedures.

 “Cyber security” means protecting information, equipment, devices, computer, computer resource, communication device and information stored therein from unauthorised access, use, disclosures, disruption, modification or destruction.

Procedure to be followed by the Company:

A company which opts to provide the facility to its members to exercise their votes at any general meeting by electronic voting system shall follow the following procedure, namely;

(i) the notices of the meeting shall be sent to all the members, auditors of the company, or directors either –

(a) by registered post or speed post ; or

(b) through electronic means like registered e-mail id;

(c) through courier service;

(ii) the notice shall also be placed on the website of the company, if any and of the agency forthwith after it is sent to the members;

(iii) the notice of the meeting shall clearly mention that the business may be transacted through electronic voting system and the company is providing facility for voting by electronic means;

(iv) the notice shall clearly indicate the process and manner for voting by electronic means and the time schedule including the time period during which the votes may be cast and shall also provide the login ID and create a facility for generating password and for keeping security and casting of vote in a secure manner;

(v) the company shall cause an advertisement to be published, not less than five days before the date of beginning of the voting period, at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district, about having sent the notice of the meeting and specifying therein, inter alia, the following matters, namely:-

(a) statement that the business may be transacted by e- voting;

(b) the date of completion of sending of notices;

(c) the date and time of commencement of voting through electronic means;

(d) the date and time of end of voting through electronic means;

(e) the statement that voting shall not be allowed beyond the said date and time;

(f) website address of the company and agency, if any, where notice of the meeting is displayed

(g) contact details of the person responsible to address the grievances connected with the electronic voting;

(vi) the e-voting shall remain open for not less than one day and not more than three days.

In all such cases, such voting period shall be completed three days prior to the date of the general meeting.

(vii) during the e-voting period, shareholders of the company, holding shares either in physical form or in dematerialized form, as on the record date, may cast their vote electronically.

Once the vote on a resolution is cast by the shareholder, he shall not be allowed to change it subsequently.

(viii) at the end of the voting period, the portal where votes are cast shall forthwith be blocked.

(ix) the Board of directors shall appoint one scrutinizer, who may be chartered Accountant in practice, Cost Accountant in practice, or Company Secretary in practice or an advocate, but not in employment of the company and is a person of repute who, in the opinion of the Board can scrutinize the e-voting process in a fair and transparent manner.

The scrutinizer so appointed may take assistance of a person who is not in employment of the company and who is well-versed with the e-voting system.

(x) the scrutinizer shall be willing to be appointed and be available for the purpose of ascertaining the requisite majority;

(xi) the scrutinizer shall, within a period of not exceeding three working days from the date of conclusion of e-voting period, unblock the votes in the presence of at least two witnesses not in the employment of the company and make a scrutinizer’s report of the votes cast in favour or against, if any, forthwith to the Chairman;

(xii) the scrutinizer shall maintain a register either manually or electronically to record the assent or dissent, received, mentioning the particulars of name, address, folio number or client ID of the shareholders, number of shares held by them, nominal value of such shares and whether the shares have differential voting rights;

(xiii) the register and all other papers relating to electronic voting shall remain in the safe custody of the scrutinizer until the chairman considers, approves and signs the minutes and thereafter, the scrutinizer shall return the register and other related papers to the company.

(xiv) the results declared along with the scrutinizer’s report shall be placed on the website of the company and on the website of the agency within two days of passing of the resolution at the relevant general meeting of members;

(xv) subject to receipt of sufficient votes, the resolution shall be deemed to be passed on the date of the relevant general meeting of members

e-voting Platform Service Agencies:

In order to hinder the problems faced with the postal ballot, NSDL and CDSL ventures ltd (CVL) has developed an internet based e-voting platform which enables the shareholders to vote electronically in a convenient manner.

Particulars	Agency-1	Agency-2
Name of the agency	NSDL	CDSL ventures ltd (CVL)
Website Id	www.evoting.nsdl.com	http://www.evotingindia.com/
E-mail Id	[email protected] ; [email protected]	[email protected].

 Features:

• For providing e-voting service platform, a certificate is required to be obtained by any agency from Standardization Testing and Quality Certification (STQC) Directorate, Department of Information Technology, Ministry of Communication and IT, Government of India, New Delhi. At Present NSDL and CDSL are providing e-voting platform, after obtaining necessary certifications.
• Data of all the Shareholders will be provided to the agency providing e-voting platform company
• Agencies providing such e-voting platform shall ensure that the process for e-voting is explained in the e-voting platform along with necessary “FAQs” and shall also ensure that the draft resolutions, explanatory statement and other annexures, if any, sent to the shareholders are displayed prominently in the concerned page of the e- voting platform.
• User ID and Password will be provided to the shareholders by the agency providing e-voting platform.
• In case of Joint Shareholding e-voting option will be available only to the First Shareholder.
• Time limit available for e-voting and postal ballot method will be the same.
• Voting on selective resolution will be permitted.
• E-Voting facility will be available to shareholders holding shares in physical form as well as in Demat Form.
• Presently there is no charge for e-voting.

Process of e-voting-For the company:

• Every  listed company or a company having not less than one thousand shareholders  shall choose any one of the agencies, which is currently providing e-voting platform for this purpose.
• The company   through its Register and Transfer Agent (RTA) will set up the e-voting schedule on the website and upload the resolutions on which voting is required and generate the Electronic Voting Sequence Number (EVSN) / Electronic Voting Even Number.(EVEN)
• The Company will then upload the Register of Members in the specified file format.
• CDSL/NSDL will generate the password for each shareholder and print the same in a secured manner, which is to be sent to all the shareholders.
• The company wi
• ll then communicate the password, EVSN /EVEN and the procedure for e-voting along with the notice of resolution to all the shareholders.
• After the voting period is over, the e-voting system will provide to the scrutinizer, a report containing the shareholder wise details of vote done, for the records of the company.
  

Process of e-voting -For the Shareholders:

•  The shareholders can login to the e-voting system using their user –id (i.e,demat account number/folio number),PAN and password.
• After logging in, demat shareholders will have to confirm their personal details and compulsorily change their password. This password can be used by demat shareholders for voting on resolutions of any other company in which they are eligible to vote.
• During the voting period, the shareholders can visit the e-voting website and select the relevant   EVSN/EVEN/company for voting.
• Shareholders can view the detailed resolutions on the website and cast their vote available for voting.

Advantages of e-Voting:

To the Company/Registrar and Share Transfer Agents:

• Reduction in cost and paperwork.
• No need to store physical ballot papers.
• Accurate counting of votes.
• Declaration of results in a very short time.
• No need to verify the signatures.

To the Shareholders:

• Invalid votes cannot be casted and also votes won’t be lost in transit.
• Voting can be done from anywhere.
• Sufficient time will be available for voting as it can be casted even on the last day.
• Voting can be done for different companies at the same time.
• Increase of transparency
• Increase of participation in the decision making process
  

Disadvantages of e-Voting:

• There may be a chance of misuse of user Id and Password of the shareholders, if it is fallen into wrong hands.
• Lack of awareness among the shareholders about the new process of e-voting
• It has to be ensured that the entire process of e-voting is not subject to any kind of manipulation.
• Correct Data of Shareholders will have to be provided by the Registrar and Share Transfer Agents or the Company to the agency providing e-voting platform otherwise a shareholder may not get his user Id and password and thus may not be able to cast his vote.
• No option is available to the shareholders to modify the casted vote.
  

Mobile Voting under Ambit of e-voting –Outlook:

In some of the foreign countries Mobile Voting are allowed for the parliamentary elections. “Estonia” has become the first country in the world to allow its citizens to cast their votes in the parliamentary elections with their mobile phones.

As the mobile phones are now considered as one of the mandatory gadget and became a “Sixth finger” to everyone, SEBI/MCA may consider to include the Mobile voting under the ambit of Electronic voting. In Mobile voting, the shareholders may find it very easy to cast their vote by just sending a text message from their registered mobile number to the company’s “Toll free number” by mentioning the resolution sequence number and the details of assent or dissent.

The Company has to appoint one scrutinizer as like e-voting, to monitor the entire mobile voting process.

E-voting – Companies Act,1956 Vs Companies Act,2013:

S.No	Companies Act,1956/ SEBI circular/Listing Agreement	Companies Act,2013 & Rules 2014
1`	There  is no provision for e-voting under Companies Act,1956.	Sec.108 of the Companies Act,2013 deals with the voting through electronic means .
2	The  SEBI’s circular dated July 13,2012, Amendment to the Equity Listing Agreement – Platform for E-Voting  by Shareholders of Listed Entities, has mandated Top 500 listed entities at BSE & NSE (chosen based on the market capitalization) to enable e-voting facility to their shareholders in respect of businesses which are transacted through Postal Ballot.	As per  Companies (Management and Administration) Rules, 2014,Every listed company or a company having not less than one thousand shareholders, shall provide to its members facility to exercise their right to vote at general meetings by electronic means.
3.	As per Clause 35B of the listing agreement, The issuer agrees to provide  e-voting facility and it  shall be kept open for a  period of 30 days specified under the Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 for shareholders to send their assent or  dissent.	As per the Rules, the e-voting shall remain open for not less than one day and not more than three days. In all such cases, such voting period shall be completed three days prior to the date of the general meeting.
4	There is no provision for publishing an advertisement in the newspaper for e-voting under Companies Act,1956.	The company shall publish an advertisement , not less than five days before the date of beginning of the voting period, at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated, and having a wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district, about having sent the notice of the meeting and specifying therein related matters.
5.	The Company shall mention the Internet link of such e-voting platform in the notice to their shareholders.	The Company shall place the notice on the website of the company, if any and of the agency forthwith after it is sent to the members.
6.	It is applicable to the top 500 listed entities for the shareholders’ meetings, for which notices are issued on or after October 01, 2012.	The relevant Section 108 is notified on April 01,2014. And after that MCA has issued a clarification circular  for  Commencement of provisions of the Companies Act 2013 with regard to adoption of financial statements ,etc.,. It is clarified  that for adoption of FS for the FY 2013-14 Companies Act,1956 provisions will apply and  for adoption of  FS for the FY 2014-15, Companies Act,2013 will apply. But it is not clear whether e-voting provision will apply to the annual shareholder’s meeting for the financial year 2013-14.

 

Conclusion:

On the whole electronic voting replaces the Postal ballot process and saves time and cost of the company .It also helps the shareholders to cast their vote from anywhere and at anytime. In the e-voting process, role of scrutinizer will go under paradigm shift as there will be no physical collecting and counting of ballot papers, verification of signatures and rejection of invalid votes, if any .The main responsibility is on the part of scrutinizer who should take care of the e-voting process.

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts has made to provide authentic information, it is suggested that to have better understanding kindly  cross-check  the relevant sections, rules under the Companies Act,2013.