Section 108 of the Companies Act, 2013 (‘Act, 2013’) read with Rule 20 of the Companies (Management and Administration) Rules, 2014 (‘MGT Rules’) had made it mandatory for every listed company and company having not less than 1000 shareholders to provide e-voting facility at general meetings.
To bring the provisions of the Listing Agreement in line with the Act, 2013, SEBI vide its Circular CIR/CFD/POLICY CELL/2/2014 dated 17th April, 2014 amended Clause 35B to mandate listed entities to provide e-voting facility to its shareholders at General Meetings and postal ballot. If further provides that the modalities would be governed by the provisions of the Rules. The date of implementation of this Circular was with immediate effect.
Uptil now things were going fine. Then MCA entered with its Circular No. 20/2014 dated 17th June, 2014 making it non mandatory for companies to provide e-voting facility to its shareholders till 31st December, 2014. This was with a view to buy more time for compliance with procedural requirements with regard to e-voting, engagement of depository agencies and providing more clarity on matters like demand for poll/postal ballot etc.
And then the confusion arose.
What was the confusion?
Many listed companies took a view that since MCA itself has deferred the applicability of providing e-voting facility at general meetings till 31st December of this year, it becomes implied that the revised Clause 35B of Listing Agreement stands deferred accordingly. They referred to Clauses 2 and 4.4 the SEBI Circular which states that:
“It has been decided to review the provisions of the Listing Agreement in this regard with the objectives to align with the provisions of the Companies Act, 2013, adopt best practices on corporate governance and to make the corporate governance framework more effective.
The revised Clause 35B would be applicable to all listed companies and the modalities would be governed by the provisions of Companies (Management and Administration) Rules, 2014. Circular No. CIR/CFD/DIL/6/2012 dated July 13, 2012 stands amended to that extent.”
The prevailing interpretation is that since Clause 35B was inserted to align the provisions of Listing Agreement with those of the Act, 2013, therefore any extension granted by Act, 2013 would mutatis mutandis apply to the revised Clause 35B as well.
The concept and requirement of e-voting with regard to postal ballot was there in the Listing Agreement even before it was introduced by the Act, 2013. Thus the requirement of e-voting under Listing Agreement was independent of the provisions of the Act, 2013.
The amendment to Clause 35B was brought about to merely imbibe the provisions of the Act, 2013 viz. extending it to general meetings and the modalities in which such e-voting was to be carried out.
There has been a BSE clarification on in this regard which states that for listed companies, the provision of e-voting will be as per the SEBI Circular on 17th April, 2014.
Further the SEBI Chairman, Mr. U. K. Sinha, in his statement to Business Line on 22nd June, 2014, clarified that providing of e-voting facility is mandatory for listed companies even if the same has been made non-mandatory by the MCA. His contentions were that ‘listed companies cannot take shelter under the Corporate Affairs Ministry stance and not provide e-voting facility to its shareholders till end-December. He was quoted saying that “If there are two sets of requirements, it is settled principle as higher as the level of Supreme Court of India that the provisions of SEBI regulations will prevail so far as listed companies are concerned”.
From the above, it becomes clear that the requirement of providing of e-voting facility is still mandatory for listed companies and the manner of conducting e-voting will be governed by the Companies (Management and Administration) Rules, 2014.
[The above post is contributed by Shampita Das at Vinod Kothari & Co. She can be contacted at firstname.lastname@example.org ]