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The Concept of E-voting is introduced through the new Companies Act, 2013(Hereinafter referred as the Act).

What is E-Voting?

E-Voting is not defined in the Act. However the explanation has been provided in Rule 20(2) the  expressions ‘‘voting by electronic means’’ or ‘‘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, such 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’;

The definition of Postal Ballot as defined in Section 2(62) of the Act means voting by post or through any electronic mode.

One can say recording of votes in an electronic way where the entire voting is exercised in a centralized server with utmost security.

The provisions under the Companies Act, 2013:

Section 108(the Act):The Central Government may prescribe the class or classes and the manner in which a member may exercise his right to vote by electronic means.

Rule 20 of the Companies (Management and Administration ) Rules, 2014 ( hereinafter referred as CMA Rules) prescribe the manner in which  a member may exercise his right to vote by the electronic means by listed Companies or a company having not less than one thousand shareholders at their General Meetings.

The provisions were made applicable from 1st April, 2014. However, vide General Circular no. 20/2014 dated 17th June, 2014 provided clarification with regard to the said circular, that the provisions relating to E-voting will not be mandatory till 31st December,2014.

Earlier SEBI has issued Circular No. CIR/CFD/DIL/6/2012 dated 13th July, 2012 amending the Equity Listing Agreement by inserting the Clause 35B to provide E-Voting facility for those Companies which transacted the business through postal ballot. However later on SEBI vide its Circular No. CIR/CFD/POLICY CELL/2/2014 dated 17th April,2014 revised clause 35B stating that it would be applicable to all listed Companies and the modalities would be governed by the provisions of CMA Rules. It may be noted that even though the provision of E-Voting of the Act is not mandatory till 31st December, 2014, the listing agreement  vide clause 35B still treats the E-Voting requirements as mandatory as there is no announcement by SEBI in this regard. Hence the same continues to be applicable. As SEBI is a dictator whose decisions will override the decision of Ministry of Corporate affairs.

Who can provide this facility?

The provision of E-voting is applicable to listed Company and any Company having shareholder not less than 1000. It is to be noted that the provision of E-Voting is applicable to public unlisted Company if having shareholders exceeding 1000.

In case of Private Company the maximum number of shareholders is 200 excluding its former or existing employees however if the number including its employees touches or exceeds 1000 than the provision will be applicable to Private Companies also.

Period for E-Voting facility can be made available?

The period for which the E-voting facility will be available shall be minimum 1 day which shall not exceed 3 days.

Other Requirements

The other requirement is that Voting shall be completed 3 days prior to the General Meeting. It should be noted that holding of Shares in physical or in electronic form as on record date will have the facility to vote electronically. But once the vote is casted by the member, he is not allowed to change it. It is also noted that if the member has voted in an electronic form prior to the General Meeting and later on he has attended the General Meetingphysically, in that case he will not be allowed to vote. At the end of the voting period, the portal where the votes are cast will be blocked.

The board of Director will appoint a scrutinizer who will scrutinize the process of voting in fair and transparent manner.

The Scrutinizer within a period not exceeding 3 working days will unblock the votes in the presence of two witnesses who are not in the employment of the Company and will make a scrutinizers report of the votes cast in favour or against, if any forthwith with chairman. The Scrutinizer will maintain the register either electronically or manually to record the assent and dissent. After considering all the votes in favour and against, the scrutinizer will prepare its report. The results declared along with scrutinizer shall be placed on the website of the Company.

However after implementation of the Act there are certain cases that are worth mentioning:

Certain Companies consider that providing E-voting facility is sufficient and they are not required to provide Voting facility at the General Meeting. They provide E-Voting facility and announce the result without providing Voting facility at the meeting. However, this will debar the member from exercising the voting at the General Meeting. It is to be noted that E-Voting is a facility and it whether it should be exercised or not will depend only on the Shareholder of the Company.

Now, my question is whether just providing E-voting facility and not providing voting facility at the General Meeting will not debar the members present at the meeting to vote on any resolution?

However Certain Companies are providing E-Voting facility and also Voting at the General Meeting. One of the Company has provided E-Voting facility and also voting at the General Meeting by providing tablets to members to vote and provided 150 Volunteers who conducted the voting procedure in a proper way.However it is not possible for every company to provide both the facilities as it involve heavy expenses.

There was another case of Godrej Industries and Wadala Commodities:

In this case both the parties made a request to the Bombay High Court for seeking its permission that the shareholder’s nod should be obtained through electronic voting and postal ballot. They requested the High Court to dispense with the requirement of holding the physical meeting of shareholders , and instead let them conduct the meeting by way of an electronic voting and postal ballot, as purportedly mandated under the new provisions of the Companies Act.

The High Court declined the request and reiterated the importance of physical meetings in corporate democracy, and the right of shareholders to discuss and deliberate actions proposed to be undertaken by the company.

Justice G S Patel recommended that until the issues raised by the High Court on the exclusion of physical shareholder meetings are finally settled, no company should insist upon a postal-ballot-only-meeting

The High Court also held that all provisions for compulsory voting by postal ballot and by electronic voting to the exclusion of a physical meeting do not apply to court-convened shareholder meetings. At such meetings, provision must be made for shareholders to allow them to vote through postal ballots or electronic voting, in addition to the voting right at the physical meeting.

Conclusion: Though the main intension of the Act is to provide the facility to the Shareholder of the Company. However whether the facility will be beneficial to the Shareholder will be depend only on the Company and this question will be answered in the years to come.

Disclaimer: Kindly note that the entire content of this Article have been developed on the basis of relevant statutory provisions and as per the information existing at the time of preparation of i.e Act, Rules, notification, clarification, circulars, issued by MCA, SEBI or any other statutory authority. Though we have made upmost efforts to provide authentic information, however, we do not undertake any liability in any way whatsoever, to any person in respect of anything arising by reliance upon the content of this article. It shall not be used as a legal opinion and not to be used for rendering any professional advice.

By CS Vinala Keswani

Company Secretary

Pimpri, Pune

E-mail: csvinala.keswani@gmail.com

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