Indian Electoral System
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This article is written by Akshita Gupta, from Symbiosis Law School, Noida. This article discusses the procedure of passing resolutions of the postal ballot in a company and e-voting.

Introduction

The Companies (Amendment) Act, 2000, introduced the postal ballot concept by inserting Section 192A into the Companies Act, 1956. Despite anything in the preceding provisions of this Act, a listed public company may, and in the case of resolutions relating to such business as the central government may, by notification, declare to be conducted only by postal ballot, shall, get any resolution passed by postal ballot, rather than transacting the business in general meeting.

The Companies Act, 2013 allows corporate transactions to be conducted via postal ballot, although there are certain differences in the regulations relating to the postal ballot as provided under the Companies Act, 1956. Furthermore, there are various provisions in the listing agreement that addresses this.

In this article, the regulations related to the postal ballot as mentioned in the Companies Act, 2013 and the rules issued thereto, and the listing agreement.

Meaning of postal ballot

The definition of the postal ballot has been mentioned under Section 2(65) of the Companies Act, 2013 as per which postal ballot means voting by post or through any electric mode. In layman’s terms, a postal ballot is a voting system in which people vote by post when they are unable to vote in person. It allows for the participation of as many voters as possible. It may be useful for those who are unable to attend the general meeting.

Relevance of postal ballot

The relevant provisions with respect to the postal ballot are mentioned under Section 110 of the Companies Act, 2013 read along with Rule 22 of Companies (Management and Administration) Rules, 2014. The company can transact any other business by postal ballot rather than transacting at a general meeting except for :

  • Regular business
  • Any business on which directors or auditors have a right to be heard at any meeting.

If the required majority of shareholders agree to a resolution by postal ballot, it is regarded to have been duly passed at a general meeting summoned for that purpose.

Mandatory items to pass a resolution by postal ballot

  • Any item of business that is required to be transacted by postal ballot may be transacted in the manner provided in Section 108 at a general meeting by a company that is required to provide the facility for members to vote by electronic means. [Section 110(1)].
  • If the company is publicly traded, it must first notify the stock exchange(s) (where shares are listed) about the postal ballot as soon as reasonably possible, but no later than twenty – four hours after the ballot closes, and update the information on the company’s website within two working days. [SEBI (LODR) Regulations, 2015, Regulations 30 and 46(3)]
  • A notification should be delivered to all shareholders, together with a draft resolution outlining the grounds for the vote and requesting that they vote in writing through a postal ballot. [Companies (Management and Administration) Rules, 2014, Rule 22(1)]
  • For simplifying communication of the shareholder’s consent or dissent to the resolution within the thirty-day term, the notice shall be transmitted either:

A. By registered post or speed post, 

B.  Using electronic means such as registered e-mail id, or 

C. Through courier service. [Companies (Management and Administration) Rules, 2014, Rule 22(2)].

The day, date, time, and location where the results of the postal ballot voting will be revealed, as well as the link to the website where such results will be presented, will be specified in the notice. [Secretarial Standard – 2 Clause 16.4.3]

The notice of the postal ballot shall inform members of the availability of an e-voting facility, if one is available, and offer relevant information to enable them to use it. [Secretarial Standard – 2 Clause 16.4.4]

In the case of a publicly-traded company, notify the stock exchange at least two working days in advance of the postal ballot. Regulation 29 of SEBI (LODR) Regulation, 2015].

A postal ballot shall not be used to conduct an ordinary business. [Secretarial Standard, Clause 16.1 – 2]

To obtain board approval for the following items, the Board shall:

  1. Identify the businesses to be transacted by postal ballot.
  2. Approve the Notice of postal ballot incorporating proposed resolution(s) and an explanatory statement thereto authorize the Company Secretary, or in the absence of a Company Secretary, and any director of the company, to conduct the postal ballot process, sign and send the Notice, along with other documents.
  3. Appoint one scrutinizer for the postal ballot.
  4. Appoint an agency for e-voting for the postal ballot. 
  5. Determine the cut-off date for calculating voting rights and determining which Members will receive the notice and postal ballot forms [Section 16.3 of Secretarial Standard-2].

Passing of resolution by postal ballot – procedure

  1. Shareholders should be notified, along with a draft resolution. [Companies (Management and Administration) Rules, 2014, Rules 22(1) and 22(2)]:

When a company is required or chooses to pass a resolution by way of postal ballot, it must send a notice to all shareholders, along with a draught resolution explaining the reasons for doing so and requesting that they send their assent or dissent in writing on a postal ballot, because postal ballot refers to voting by post or through electronic means within thirty days of the date of notice being sent. The notice shall be sent by

  1. Registered Post or Speed Post, or
  2. Electronic methods such as registered e-mail id, or
  3. By courier service, in order to facilitate the communication of the shareholder’s assent or dissent to the resolution within the thirty-day term,
  4. Publish a notice about the Ballot Papers that have been dispatched [Rule 22 (3) of the Companies (Management and Administration) Rules, 2014, and Clause 16.4.4 of the Secretarial Standard – 2].

At least once in a vernacular newspaper published in the principal vernacular language of the district in which the company’s registered office is located and having a wide circulation in that district, and at least once in an English newspaper published in that district, an advertisement about having dispatched the ballot papers and specifying a statement that the business will be conducted by postal ballot, which includes voting by electronic means; the date of completion of notice distribution; the date of voting (postal and e-voting); the date of voting (postal and e-voting); the date of voting (postal and e-voting); the date of voting (postal and e-voting); the date of voting (postal and e-voting); the date of voting (postal and e-voting stated that any postal ballot received from a member after the deadline will be invalid, and voting, whether by mail or electronically, will not be permitted beyond the deadline;

  1. A statement to the effect that the business is to be transacted by postal ballot which includes voting by electronic means.
  2. The date of completion of dispatch of notices.
  3. The date of commencement of voting (postal and e-voting).
  4. The date of the end of the voting (postal and e-voting).
  5. 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.
  6. A statement to the effect that members, who have not received postal ballot forms may apply to the company and obtain a duplicate thereof.
  7. Contact details of the person responsible to address the grievances connected with the voting by postal ballot including voting by electronic means.
  8. Day, date, time, and venue of declaration of results and the link of the website where such results will be displayed.
  9. Post a notice of the postal ballot on the company’s website [Rule 22(4) of the Companies (Management and Administration) Rules, 2014 and Clause 16.4.2 of the Secretarial Standard – 2].

The notice of the postal ballot shall be posted on the company’s website as soon as it is sent to the members, and such notice shall stay on the company’s website until the last day for receipt of postal ballots from the members.

  1. Appointment of a Scrutinizer [Companies (Management and Administration) Rules, 2014, Rules 22(5) and 22(6)]:

The Board of Directors shall choose one scrutinizer who is not a company employee and who, in the Board’s opinion, can conduct the postal ballot voting procedure in a fair and transparent way. The scrutinizer must be willing and available to be appointed for the purpose of determining the required majority.

  1. Receive the scrutinizer’s report [Companies (Management and Administration) Rules, 2014, Rules 22(8), 22(9), and 22(12), and clause 16.6.1of Secretarial Standard–2]:

After receiving the shareholder’s assent or dissent in writing on a postal ballot, no one shall deface, destroy, or reveal the shareholder’s identity. The scrutinizer must submit his report as soon as feasible after the last date for receiving postal ballots, but no later than seven days after that date. If an assent or dissent is received after thirty days from the date of the notice, it is handled as if the member has not responded.

  1. The Scrutinizer must keep a register of assent or dissent [Rule 22(10) of the Companies (Management and Administration) Rules, 2014]:

The scrutinizer shall keep a register, either manually or electronically, to record the shareholder’s assent or dissent, including the shareholder’s name, address, folio number or client ID, number of shares held, the nominal value of such shares, whether the shares have differential voting rights if any, and details of defaced or mutilated postal ballots.

  1. Scrutinizer’s Safe Custody and Ballot Paper Handover to the Company [Rule 22(11) of the Companies (Management and Administration) Rules, 2014]:

The Scrutinizer shall keep the postal ballot and all other connected papers, including voting by electronic means, safe until the Chairman reviews, confirms, and signs the minutes, after which the Scrutinizer shall return the Ballot Documents and other related papers or register to the company.

  1. Ballot Paper and other related paper and registers perseverance [Rule 22(11) of the Companies (Management and Administration) Rules, 2014]:

Every company must save such Ballot Papers and other associated papers, as well as the register of assent or dissent, in a secure location.

  1. Declaration of result on the website[16.6.2 of the Secretarial Standard – 2 and Rule 22(13) of the Companies (Management and Administration) Rules, 2014] 

The results will be made public by posting them on the Company’s website, together with the Scrutinizer’s Report.

Meaning of  E-voting

The term “electronic voting system” refers to a secure system that includes the display of electronic ballots, the recording of members’ votes, and the number of votes cast in favor or against, so that all electronic voting is recorded and counted in a centralized server with adequate cyber security.

Relevance  of e-voting for postal ballot

According to Section 108 of the Act, when combined with Rule 20 of the Companies (Management and Administration) Rules, 2014, which provides for electronic voting, some companies must provide an e-voting facility in the case of voting at a general meeting. The section in question makes no mention of postal ballots.

Section 110 of the Act, read with Rule 20 of the Companies (Management and Administration) Rules, 2014, which contains provisions dealing with postal ballots, contains no clear stipulation regarding the mandatory requirement of voting by electronic means in the case of a postal ballot except as stated in Rule 20.

E-voting is required for all shareholder resolutions to be passed at general meetings or by postal vote, according to Clause 35B of the listing agreement as revised by SEBI. This means that in the case of publicly listed companies and e-voting facilities must be offered both in the case of physically summoning a general meeting and in the case of resolutions passed through the postal ballot method.

Judgment regarding e-voting and postal ballot

In the case of the scheme of amalgamation between Wadala Commodities Limited vs Godrej Industries Limited (2014), the Bombay High Court issued a decision on postal ballot and e-voting. The Court has stated that postal ballots and e-voting are simply additional options that cannot be used to eliminate the need for a general meeting. The issue, in this case, was whether, in light of the provisions of Section 110 of the Companies Act, 2013 and the SEBI circular dated May 21, 2013, a resolution for approval of a scheme of amalgamation could be passed by a majority of equity shareholders voting by postal ballot, including voting by electronic means, incomplete substitution for an actual meeting.

The Bombay High Court ruled in this matter that the shareholders’ ability to vote only on the basis of material supplied to them by post or email appears to them to be antithetical to the legislative meaning and spirit of the SEBI circular and modified listing agreement’s clauses 35B and 49.

Conclusion

The postal ballot provisions of the Companies Act of 2013 appear to be in line with the legislature’s other efforts to increase stakeholder engagement and activism. Certain products of business that require member approval must be sought only through a postal ballot, whereas certain pieces of business that require an opportunity to be heard by either a director or an auditor must be transacted only in a duly convened general meeting, according to the Act.

The listing agreement also requires that an e-voting facility be provided for all shareholder resolutions, whether passed by postal ballot or at a general meeting.

References


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