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Members voted through e-voting be included in Quorum

Krishan Singla , Last updated: 29 October 2015  
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Clarity required on Quorum to conduct General meetings of Listed Companies as per Companies  Act, 2013

Quorum means the presence of minimum number of members who are entitled to vote for conducting the business of the meeting .

Section 103 (1)of the Companies Act, 2013 consists of the provision of quorum which is as follows:

“Unless the articles of the company provide for a larger number  in case of a public company

(i) five members personally present if the number of members as on the date of meeting is not more than one thousand;

(ii) fifteen members personally present if the number of members as on the date of meeting is more than one thousand but up to five thousand;

(iii) thirty members personally present if the number of members as on the date of the meeting exceeds five thousand;

(b) in the case of a private company, two members personally present, shall be the quorum for a meeting of the company.”

Section 103(2) (a) of the Act  inter alia also provides that

If the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company  the meeting shall stand adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine.

Section 107 of the Act provides that at any general meeting a resolution put to vote of the meeting shall,

unless a poll is demanded under section 109 or the voting is carried out electronically, be decided on a show of hands which is reproduced as under:

Section 107 (1) At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded under section 109 or the voting is carried out electronically, be decided on a show of hands.

(2) A declaration by the Chairman of the meeting of the passing of a resolution or otherwise by show of hands under sub-section (1) and an entry to that effect in the books containing the minutes of the meeting of the company shall be conclusive evidence of the fact of passing of such resolution or otherwise.

Further Section 108 of the Act empowers the Central Government to prescribe the class of Companies in which a member may exercise his right to vote by the electronic means.

The Central Government vide  exercising its powers under Section 108 of the  Act prescribed Companies ( Management and Administration ) Amendment Rules, 2015 .

Rule 20 of the Rules inter alia provides  that every listed Company shall provide facility of e-voting to its members and the company shall also provide the facility of e-voting or polling in the meeting to those members who have attended meeting but not voted electronically . It also provides that e-voting facility  shall remain open atleast for three days and close at 5PM on the date preceding the date of general meeting . Rule further provides that the shareholder  who has voted electronically cannot vote in the meeting . Rule also provides that scrutinizer has to ensure that the shareholder who has voted electronically cannot vote on poll and for that purpose , he will before starting of the meeting has to download the data of shareholders who has already voted electronically .

The Rules also provide that the scrutiniser shall make  not later than three days of conclusion of the meeting, a consolidated scrutiniser's report of the total votes cast in favour or against, if any, to the Chairman or a person authorised by him in writing who shall countersign the same.

As per the provisions above mentioned relating to Quorum and voting , it comes out that in the case of Listed Companies , no resolution can be passed through show of hands , the facility of which is otherwise provided to other companies. Further demand for poll is not applicable to the listed companies , these are required by law to provide the facility of voting by poll also, so the provisions of the Companies Act relating to minimum numbers of shareholders who can demand poll does not apply.

In case of listed companies , while the  Act,  provides for quorum of certain minimum members of members  for general meetings who are required to be personally present to conduct the business , the Act also  requires that listed  company shall provide remote e-voting facility to all the members and e-voting facility or vote through poll be provided to the members present in the meeting who have not voted through remote e-voting and prohibits the voting by show of hands  . The Secrutinizer is required to declare the results within three  days of the conclusion of the meeting.Thus the votes of members present in the meeting and members who have already voted through e-voting will be counted for the purpose of deciding the resolution.

The question arises whether members who voted through remote e-voting will be counted for quorum.

One opinion:

The members who have  voted through remote e-voting  will not be deemed as present in person in the meeting and will not considered for the purpose of  quorum.

Consequences

In this case we presume that members who have  voted through remote e-voting  will not be considered for quorum.

Then  the following situation may arise in case requisite members had not come physically to attend the meeting:

1. The meeting will be adjourned for the next week at the same time and venue unless as otherwise determined  as per the  Act even when more shareholders than  the minimum quorum, might have  voted through remote  e-voting .

2. Remote e-voting required to be extended upto 5PM of preceding date of  adjourned meeting .

It  seems contradictory .

Alternative opinion

But I differ to that. They, members who voted through remote e-voting, should be counted for quorum and provisions relating to the quorum for listed companies required to be changed accordingly. The logic is that as the quorum consists of the minimum members who are entitled to vote that is the minimum number of members who can conduct the proceedings of the meeting, so the members who have already voted will be considered as members present in the meeting for the purpose of quorum as no member can vote unless he is considered part of the meeting and the members who have voted will be considered the persons who have already participated in the proceedings of the meeting .

How  the quorum will be determined

Thus the quorum in the case of meetings of listed companies can be determined by counting the number of e-votes as the Secrutinizer is entitled to have the list of members who have voted through remote e-voting before the commencement of the meeting, to ensure that they cannot vote in the meeting , and the number of members present in person or through proxy.

Whether the proxies be included in the quorum for listed companies .

Previously, as proxies are not entitled to vote on show of hands , so they are not included for the purpose of quorum.

For listed companies now proxy should be considered for counting of quorum as now he is entitled to vote irrespective of demand of poll , differing from the previous  situation  in which he could not vote unless poll is demanded and he was not entitled to vote on show of hands . Moreover now restriction on proxy to vote  on show of hands has become meaningless as listed company cannot get resolutions passed on show of hands.

Now as the voting through show of hands have been dispensed with in the case of listed companies and these companies are required to held voting through e-voting and poll only , so the proxies are entitled to vote on every agenda of the meeting .

As quorum means the minimum number of persons required to be present who are entitled to vote , who can conduct the business of the meeting . So for the same corollary , the members who are entitled to vote should be counted for the purpose of quorum. Thus as the proxies are entitled to vote on every single resolution, be counted in the quorum.

So to avoid the situation which may arise:

that although all the members have voted electronically but  does not consider necessary to attend the meeting , have to adjourn the meeting and e-voting  has to be extended just to comply exiting law  ( which does not seems logically correct).

Suggestions to make the following amendment or clarification :

So necessary modifications in the Companies Act and Rules / clarifications required to be issued to clarify the situation for listed companies and other companies who are mandatory required to provide e-voting to the members - so as to include the members who have voted through remote  e-voting in the quorum and proxies should also be allowed to be counted for the purpose of determining the quorum.


Published by

Krishan Singla
(Corporate Law Advisor )
Category Corporate Law   Report

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