The Companies (Passing of Resolution by Postal Ballot) Rules, 2001 stipulated that a company is bound to carry out certain specified business transactions and pass resolutions in general meeting through Postal Ballot. These rules established a base for the postal ballot system for companies in India via both postal and electronic mode. However, these rules did not prescribe the mechanism to be followed in case of voting via electronic mode.
In light of this fact Companies (Passing of Resolution by Postal Ballot) Rules, 2011 has been passed in May this year which has superseded the former 2001 Rules. The new rule clearly outlines the ambit of use of electronic mode for voting under postal ballot system.
Prescribed Mechanism for Electronic Mail system apart from Postal Ballot
The new regulation has first of all given a clear definition of voting by electronic method. It has been defined as a process for recording votes by the members using a computer based machine to display an electronic ballot and to record the vote and also the number of votes polled in favour or against such that the entire voting gets registered and counted in an electronic registry in a centralized server.
The new regulation provides that the procedure for voting by electronic mode depends on the recommendation given by an agency that is approved by Ministry of Corporate Affairs and conferred with the authority to supervise the electronic platform. Hence, the new regulation offers a company ample scope to decide the procedure of voting to be followed supplemented by the recommendation of an agency.
Procedure for sending notices
Notices sent through electronic mail
Under the new rule, in order to carry out postal ballot through electronic mode, companies are required to keep a record of the email IDs of their shareholders, so that they can send notices to them on their respective email IDs.
However, the rule does not say that a company should include both the options of voting via postal system and electronic mode. The rule postulates that recipient can vote by either postal ballot or electronic mode. So, if a company provides for voting by electronic mode, then how will a shareholder who does not have an email address will vote is uncertain.
Modification in the modes of sending notice via postal department
The new rules also allows the notice through postal ballot system to be sent not only through Registered Post Acknowledgment Due but also through any secured mode of posting provided by Department of Post. This provision has thus opened the scope of sending notices via speed post or other mediums provided by postal department.
Business Activities for which Postal Ballot System can be used
The list of business activities that shall be carried out using postal ballot system is still the same in the 2011 rules as well. Business activities that has to be carried out using postal ballot is as follow:-
(a) alteration in the Object Clause of Memorandum;
(b) alteration of Articles of Associations in relation to insertion of provisions defining private company;
(c) buy-back of own shares by the company under sub-section (1) of section 77A;
(d) issue of shares with differential voting rights as to voting or dividend or otherwise;
(e) change in place of Registered Office out side local limits of any city, town or village as specified in sub-section (2) of section 146 of Companies Act;
(f) sale of whole or substantially the whole of undertaking of a company a specified under sub-clause (a) of sub-section (1) of section 293 of Companies Act, 1956;
(g) giving loans or extending guarantee or providing security in excess of the limit prescribed under sub-section (1) of section 372A;
(h) election of a director under proviso to sub-section (1) of section 252 of the Companies Act;
(i) variation in the rights attached to a class of shares or debentures or other securities as specified under section 106 of Companies Act.
The introduction of electronic mail system is a welcome change; coupled with the regulation that allows meeting to be conducted via electronic mode as we discussed here, the new rule issued by Ministry of Corporate Finance is certainly going to make carrying out of business transaction and general meeting by the companies easier.
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