CS S. Dhanapal
Rise Of The Era Of Shareholder Primacy
(Covering Evoting – Poll – Postal Ballot under the Companies Act, 2013 and Listing Agreement)
Companies Act, 2013 for the first time had mandated electronic voting for all listed companies and other unlisted public companies having not less than 1000 shareholders and the AGMs held for the financial year ended 31.03.2014 witnessed the application of these provisions. However, for the AGM to be held for financial year ended 31.03.2015, the requirements of e-voting have undergone complete change by virtue of the Companies (Management and Administration) Amendment Rules, 2015 issued by MCA on 19th March, 2015.
Given below is a detailed analysis of the concept of e-voting mandated by the Companies Act, 2013 read with Companies (Management and Administration Rules), 2014 and the Listing Agreement as applicable on date.
MEANING OF SOME IMPORTANT TERMS
Voting by Electronic Means
“Voting by electronic means” includes remote e-voting and voting at the general meeting through an electronic voting system which may be the same as used for remote e-voting.
Electronic voting system
‘‘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, in such a manner 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.
”remote e-voting” means the facility of casting votes by a member using an electronic voting system from a place other than venue of a general meeting;
“cut-off date” means a date not earlier than seven days before the date of general meeting for determining the eligibility to vote by electronic means or in the general meeting;
WHEN AND FOR WHOM E-VOTING IS MANDATORY?
This means that in case of companies whose equity shares are listed on a recognized stock exchange, e-voting facility needs to be necessarily provided both in case of convening a general meeting physically as well as resolutions being passed through postal ballot process.
REQUIREMENTS AND PROCEDURE TO BE FOLLOWED FOR PROVIDING
E-VOTING FACILITY IN RELATION TO ANNUAL GENERAL MEETINGS
1. Appointment of scrutinizer to scrutinize the e-voting process
2. Finalisation of notice of general meetings
Additional requirements relating to notice:
3. Publication of newspaper advertisement
Company has to publish a newspaper advertisement immediately on completion of despatch of notices for the meeting but at least 21 days before the date of general meeting, at least once in a vernacular newspaper in the principle vernacular language and at least once in an English newspaper in English Language about having sent the notice of the meeting and the advertisement should also contain the following details:
The public notice as above has to be placed on the website of the company and of the e-voting agency.
4. Period for which e-voting has to be remain open
5. Procedure on closure of remote e-voting period
6. Declaration of result
VOTING BY POLL
ON WHOSE REQUEST/DEMAND POLL WILL BE TAKEN?
The demand for a poll may be withdrawn at any time by the persons who made the demand.
WHEN CAN POLL BE DEMANDED?
WITHIN WHAT TIME POLL HAS TO BE TAKEN?
BRIEF PROCEDURE FOR TAKING POLL
VOTING BY POSTAL BALLOT
DEFINITION OF POSTAL BALLOT
Section 2(65) of the Companies Act, 2013 defines postal ballot as below:
“postal ballot” means voting by post or through any electronic mode;
Even though the above definition is not very clear, it gives a fair idea about the meaning of postal ballot and also provides clarity that the Companies Act, 2013 has recognized the medium of e-voting for the purpose of postal ballot.
APPLICABILITY OF POSTAL BALLOT
Provisions regarding postal ballot are primarily contained in Section 110 of the Act read with Rule 22 of Companies (Management and Administration) Rules, 2014.
In respect of certain items of business to be transacted by certain companies, the Act mandates that the approval of members has to be sought only by means of a postal ballot. Thus the mandatory applicability needs to be understood from two angles; one from the angle of nature of item of business to be transacted and secondly from the point of view of class of the company. We list below both the dimensions as under:
CLASS OF COMPANIES FOR WHOM POSTAL BALLOT IS MANDATORY:
Except a One Person Company and other companies having upto 200 members, all other companies shall transact the items of business listed below only by means of voting through a postal ballot.
ITEMS OF BUSINESS WHICH NEED TO BE MANDATORILY TRANSACTED THROUGH POSTAL BALLOT:
The mandatory applicability of postal ballot can be summarized as under:
The Act specifies certain items of business which cannot be transacted by means of postal ballot, i.e. which should be transacted only in a duly convened meeting of the members. These are –
(i) the consideration of financial statements and the reports of the Board of Directors and auditors;
(ii) the declaration of any dividend;
(iii) the appointment of directors in place of those retiring;
(iv) the appointment of, and the fixing of the remuneration of, the auditors;
All other items of business other than the aforementioned businesses can be transacted through postal ballot, instead of transacting such business at a general meeting.
If a resolution is assented to by the requisite majority of the shareholders by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf.
The position with regards to transaction of business through postal ballot/general meeting can be summarized as under:
METHOD OF VOTING FOR POSTAL BALLOT
The definition of postal ballot states that postal ballot means voting by post or through any electronic means. This means that a postal ballot exercise recognizes both methods of voting i.e. physical voting through post and e-voting through electronic means.
Section 108 of the Act read with Rule 20 of Companies (Management and Administration) Rules, 2014 which provides for voting by electronic means states that certain companies have to mandatorily provide e-voting facility in case of voting at a general meeting.
Section 110 of the Act read with Rule 22 of Companies (Management and Administration) Rules, 2014, which contains provisions dealing with postal ballot, do not contain any clear stipulation regarding mandatory requirement of voting through electronic means in case of a postal ballot except that it is stated in Rule 22 that “The provisions of rule 20 regarding voting by electronic means shall apply, as far as applicable, mutatis mutandis to this rule in respect of the voting by electronic means.”
Clause 35B of the listing agreement as amended vide SEBI Circular No. CFD/POLICY CELL/2/2014, dated 17-4-2014 provides that e-voting is mandatory in respect of all shareholders’ resolutions, to be passed at General Meetings or through postal ballot. This means that in case of listed companies, e-voting facility needs to be necessarily provided both in case of convening a general meeting physically as well as resolutions passed through postal ballot process.
A snapshot of the mandatory requirement of e-voting for general meetings and for voting through postal ballot considering the provisions of both Companies Act, 2013 and listing agreement are given below:
1. Passing of Board resolution for the purpose of approval of draft notice of postal ballot and other related documents and appointment of scrutinizer and appointment of agency to provide e-voting platform in case e-voting facility is being provided.
2. Printing of Postal ballot notice and postal ballot form and other related documents for despatch to those shareholders to whom documents have to be sent by physical means.
3. Completion of despatch of postal ballot notice and related documents to all shareholders. As per Rule 20(2), the notice shall be sent either (a) by Registered Post or speed post, or (b) through electronic means like registered e-mail id or (c) through courier service for facilitating the communication of the assent or dissent of the shareholder to the resolution.
4. The Share holders are required to given their assent or dissent in writing within a period of 30 days from the date of dispatch of the notice. The assent or dissent received after 30 days from the date of issue of notice shall be treated as if reply from the member has not been received.
5. Posting of the notice of postal ballot on the website of the company forthwith after the notice is sent to the members and such notice shall remain on such website till the last date for receipt of the postal ballots from the members.
6. Intimating the stock exchanges where the securities of the company are listed regarding completion of despatch of postal ballot notices.
7. Publication of an advertisement 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 dispatched the ballot papers and specifying therein, inter alia, the following matters, namely:-
a. statement to the effect that the business is to be transacted by postal ballot which includes voting by electronic means;
b. the date of completion of dispatch of notices;
c. the date of commencement of voting;
d. the date of end of voting;
e. the statement that any postal ballot received from the member beyond the said date will not be valid and voting whether by post or by electronic means shall not be allowed beyond the said date;
f. a statement to the effect that members, who have not received postal ballot forms may apply to the company and obtain a duplicate thereof; and
g. contact details of the person responsible to address the grievances connected with the voting by postal ballot including voting by electronic means.
8. Postal ballot received back from the shareholders shall be kept in the safe custody of the scrutinizer and after the receipt of assent or dissent of the shareholder in writing on a postal ballot, no person shall deface or destroy the ballot paper or declare the identity of the shareholder.
9. On closure of the voting period, the scrutinizer shall assess the result of the voting, both through physical ballot papers and through e-voting and 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 shareholder, number of shares held by them, nominal value of such shares, whether the shares have differential voting rights, if any, details of postal ballots which are received in defaced or mutilated form and postal ballot forms which are invalid.
10. The scrutinizer shall submit his report as soon as possible after the last date of receipt of postal ballots but not later than 7 days thereof.
11. The results shall be declared by placing it, along with the scrutinizer’s report, on the website of the company.
12. Intimating stock exchange where the securities of the company are listed regarding result of postal ballot.
13. If a resolution is assented to by the requisite majority of the shareholders by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf.
14. The postal ballot and all other papers relating to postal ballot including voting by electronic means, shall be under the safe custody of the scrutinizer till the chairman considers, approves and signs the minutes and thereafter, the scrutinizer shall return the ballot papers and other related papers or register to the company who shall preserve such ballot papers and other related papers or register safely.
15. The minutes of resolutions passed through postal ballot have to be recorded and maintained as per the requirements specified in Section 118 and 119 of the Act read with the Rules made thereunder
16. Relevant forms need to be filed with the Registrar of Companies for intimating passing of resolutions by the members as applicable.
The Companies (management and Administration) Amendment Rules, 2015 have brought enormous changes in the provisions and procedure relating to e-voting. For Equity Listed Companies, the Listing Agreement clearly specifies that e-voting is mandatory for all shareholders’ resolutions be it through a general meeting or through postal ballot. However, this type of clarity seems to be missing in the Companies Act, 2013 due to the reason that the Act states that e-voting has to be necessarily provided in relation to general meetings of equity listed companies and those companies having more than 1000 shareholders but for postal ballot it merely states that postal ballot means voting by post or any electronic means. This creates a grey area regarding the mandatory applicability of e-voting in case of postal ballot for Companies whose only debt securities are listed or unlisted companies having more than 1000 shareholders.
(Written by S.Dhanapal, Senior Partner, S Dhanapal & Associates, A firm of Practising Company Secretaries, Chennai.)