Clarification on difficulties on passing of Ordinary & Special Resolution

The Ministry of Corporate Affairs (MCA) had issued the Circular No. 14/ 2020 dated 8^th April, 2020 which has provided the clarifications with relation to passing of Ordinary Resolution and Special Resolution by companies under the Companies Act, 2013 and rules made thereunder on account  of the threat posed by COVID-19. Through such Circular, the MCA has encouraged the companies to take all decisions of urgent nature which requires the approval of members, other than items of ordinary business or business where any person has a right to be heard, through the mechanism of postal ballot or e-voting in accordance with the provisions of the Companies Act, 2013 without holding a general meeting, which requires physical presence of members at a common venue.

The said circular had provided the procedure which shall be adopted by the companies in case holding of an Extra Ordinary General Meeting (EGM) which is unavoidable and also the time limit for adopting such procedure by the company for conducting an Extra Ordinary General Meeting (EGM).

After issue of the said circular, the MCA has received representations from stakeholders for clarification on some of the elements in the framework laid down therein. Therefore, the MCA has issued the Circular No.17/ 2020 dated 13th April, 2020 which provides the clarifications on the difficulties in serving and receiving notices/ responses by post in the current circumstances and for other matters also. 

• Manner & mode of issue of notices to the members before convening the general meeting:

 A. For companies which are required to provide the facility of e-voting under the Companies Act, 2013, or any other company which has opted for such facility: 

• In pursuance of Rule 18 of the Companies (Management and Administration) Rules, 2014, the company may give the notice of the meeting only through e-mails registered with the company or with the depository participant/ depository. 
• As per the Rule 20(4)(v) of the Companies (Management and Administration) Rules, 2014, there are certain matters which shall be stated in the public notice. The General Circular No. 17/2020 dated 13^th April, 2020 has provided to include certain additional matters in such public notice. The extract of the Rule 20(4)(v) and such additional matters are as follows;

• It is important to note that the Chairman of the meeting shall satisfy himself and cause to record the same before considering the business in the meeting that all efforts feasible under the circumstances have indeed been made by the company to enable members to participate and vote on the items being considered in the meeting.

B. For companies which are not required to provide the facility of e-voting under the Companies Act, 2013: 

• In pursuance of Rule 18 of the Companies (Management and Administration) Rules, 2014, the company may give the notice of the meeting only through e-mails registered with the company or with the depository participant/ depository. 
• A copy of the notice shall be prominently displayed on the website, if any of the company. 
• The company shall adopt the following procedure in order to enusre that all members of the company are aware that a general meeting is proposed to be conducted in compliance with applicable provisions of the Comapanies Act, 2013 read with General Circular No. 14/2020 dated 8^th April, 2020: 

√ Contact all those members whose email addresses are not registered with the company over telephone or any other mode of communication for registration of their email addresses before sending the notice for meeting to all its members; or 

√ Where the contact details of any of members are not available with the company or could not be obtained through telephone or any other mode of communication, the company shall cause a public notice by way of advertisement to be published immediately 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 atleast once in English language in an English newspaper having a wide circulation in that district, preferably both newspapers having electronic editions, and specifying in the advertisement the following information: 

i. That the company intends to convene a general meeting in compliance with applicable provisions of the Companies Act, 2013 read with the General Ciruclar No. 14/ 2020 dated 8^th April, 2020 and the General Ciruclar No. 17/ 2020 dated 13^th April, 2020 and for the said purpose it proposes to send notices to all its members by email after, at least 3 days from the date of publication of the public notice;

 ii. The details of the email address along with a telephone number on which the members may contact for getting their e-mail address registered for participation and voting in the general meeting. 

• The Chairman of the meeting shall satisfy himself and cause to record the same before considering the business in the meeting that all efforts feasible under the circumstances have indeed been made by the company to enable members to participate and vote on the items being considered in the meeting.                    
• Requirement for voting by show of hands: 
• In earlier circular, the dissimilarities were involved in e-voting and voting by show fo hands. In order to remove such dissimilarities, the MCA has substituted the sub-paragraph A – IX of para 3 of General Circular No. 14/2020 dated 8^th April, 2020 as under: 

“IX. The Chairman present at the meeting shall ensure that the facility of e-voting system is available for the purpose of voting duirng the meeting held through VC or OAVM.”                                          

• Passing of certain items only through postal ballot without convening general meeting: 

• In earlier circular, it was stated that the companies may pass resolutions through potal bellot/ e-voting without holding a general meeting unless it is so required as per section 110(1)(b) of the Companies Act, 2013. However, the main difficulty with the same is of dispatch of notices by companies by post and communication by the members of their assent or dissent on relevant resolutions by post under the current circumstances.
• In order to remove such difficulty, the MCA has clarified that Rule 22(15) of the Companies (Management and Administration) Rules, 2014 which provides that the provisions of the Rule 20 of the Companies (Management and Administration) Rules, 2014 regarding voting by electronic means shall apply, as far as applicable, mutatis mutandis in respect of the voting by electronic means.
• Therefore, the companies which are required to provide the facility of e-voting under the Companies Act, 2013, or any other company which has opted for such facility, while they are transacting any item only by potal ballot upto 30^th June, 2020 or till further orders, whiever is earlier, the requirement provided in Rule 20 of the Comapanies (Management and Administration) Rules, 2014 as well as the framework provided in the General Circular No. 14/2020 dated 8^th April,2020 and the General Circular No.17/2020 dated 13^th April,2020 would be applicable mutatis mutandis.
• The company would send notice by email to all its shareholders who have registered their email address with the company or depository/ depository participant. 
• The company shall also provide a process of registration of e-mail addresses of members and state so in its public notice. 
• It shall be noted that the communication of the assent or dissent of the members would only take place through the remote e-voting system. 

• Sending of e-mails by members, where poll on any item is required: 

• Various representations were made to the MCA to get calrification as to whether the members are required to take part in the poll on items considered during the meeting by sending emails in advance to the company before the meeting is actually held through VC or OAVM facility. 
• The MCA clarified that sub-paragraph B – XII of para 3 of the General Circular No. 14/ 2020, dated 8^th April, 2020 does not provide for polling by members at any time before the general meeting. 
• It shall be noted that the poll will take place during the meeting, and the members may convey their assent or dissent only at such stage on items considered in the meeting by sending emails to the designated email address of the company, which was circulated by the company in the notice sent to the members. 

Thus, the aforementioned clarifications provided by the MCA through the said circular will definitely ease the difficulties faced by the companies for passing of ordinary and special resolution of urgent nature.

Further, below mentioned is the link of my article titled “Clarification on passing of Ordinary & Special Resolution by MCA” which provides the bird’s eye view of the General Circular No.14/2020 dated 8^th April, 2020 issued by the MCA which will help to understand this article which is based on the General Circular No.17/2020 dated   13^th April, 2020, more meritoriously.

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