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Postal ballot is a procedure for seeking approval from shareholders/members for important decisions of a listed company and any other company having more than two hundred numbers of shareholders/members. Its importance lies in the fact that it gives chance to each and every shareholder/member of the Company to participate in the given resolution.  It’s not only a hassle free procedure in comparison to calling a general meeting  from the management perspective but also  invite participation of all shareholders/members depicting sign of good corporate governance. So a win-win situation for all the stakeholders makes it a most desirable procedure for seeking shareholders/members approval even for the resolutions which are not in the mandatory list and reserved for postal ballot procedure only.  Except six types of resolutions i.e four ordinary resolutions and resolutions requiring personal hearing of directors and auditors which are specifically excluded from this procedure for obvious reasons, all the resolutions can be passed via postal ballot procedures. Given this situation, postal ballot procedure is a firsthand choice for according shareholders/members approvals.

Though it is recommendatory board decision to opt for postal ballot procedures, there is elephant in the room too. In the Companies Act, 2013, Section 110 deals with the postal ballot and the entire procedure is provided in the Rule 22 of The Companies (Management and Administration) Rules, 2014. Rule 22(1) is reproduced here for the sake of ready reference:-

 “Where a company is required or decides to pass any resolution by way of postal ballot, it shall send a notice to all the shareholders, along with a draft resolution explaining the reasons there for and requesting them to send their assent or dissent in writing on a postal ballot because postal ballot means voting by post or through electronic means within a period of thirty days from the date of dispatch of the notice”.

The Rule 22(1) asks for according assent or dissent from shareholders/members in writing within a period of thirty days from the date of dispatch of the notice”.

Now, the Rule 22(12) is reproduced here for the sake of ready reference:-

“The assent or dissent received after thirty days from the date of issue of notice shall be treated as if reply from the member has not been received.”

The Rule 22(12) clearly mandates that if the assent or dissent from shareholders/members receives after thirty days from the date of issue of notice, it shall be treated as the reply from them is not received.

Both rules contradict each other showing the perfunctory manner in which they are drafted. If a company is required to seek approval from shareholders/members within thirty days of dispatch of notice, how it can be obligatory for said shareholders/members to give assent/dissent within thirty days of issue of notice. The date of issue of notice is clearly different and much earlier than from the date of dispatch of notice.    

The date of issue of notice of the postal ballot is the date of board meeting in which the board members decides to seek approval from shareholders/members  for a given resolution. In the same meeting board also decides a cut-off date for ascertain voting rights and number of shareholders/members. Then starts the task of printing and dispatch of notice containing all the relevant annexure and  information.  Lets codify the procedure of sending postal ballot notice in number of days, that too in a very ambitious manner:-

Suppose the date of board meeting, i.e date of postal ballot notice is say, 1st March, 2016. The Cut-off date for ascertaining voting rights and number of members can only be after 4th March, 2016, being earliest Friday. Now will start the task of printing of notice, form along with the pre-paid business reply envelop and for pre-paid business reply envelop, permit from postal authorities is must. Even if the printing, proof-reading and pursuing postal authorities for permit number is done simultaneously, it will take another 15-20 days to get notice with all annexure printed . Dispatch of notice, will require another 5-7 days. Hence, it is clearly apparent that reaching notice of postal ballot with in thirty days of issue of notice to the shareholder is not possible, even in the situation where no holidays are considered, no un-foreseen situations are considered and no force majeure is considered. The above calculation of days  are way far from being practical. It is nearly impossible for the companies where the number of shareholders/members runs in five digits or more. 

Now, the billion dollar question arises that how shareholders/members can give their assent/dissent within thirty days of issue of notice when they themselves are not in the receipt of the same.  As per the provision of  rule which says, “The assent or dissent received after thirty days from the date of issue of notice shall be treated as if reply from the member has not been received” seems lost its implication in a practical situation.

Perfunctory manner of this provision left all the stakeholders perplexed since its advent from 1st April, 2014. Prodigious postal ballot procedures are made till now, however it’s difficult to find anyone of them which could comply with provision of Rule 22(12). A serious revising of this provision is a must.         

The author can also be reached at yoginakochar@yahoo.co.in

Disclaimer: The views expressed in this article is only  for academic purpose for the discussed topic and shall not be construed as any professional advice in any manner. This article is the property  of the writer CS Yogina Kochar and no part of it can be  copied, reproduced or distributed in any manner.  

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