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According to the provisions of section 2(65) of the Companies Act, 2013 "Postal ballot" means voting by post or through electronic mode.

The concept of the postal ballot is to bring voting at the doorstep of the members.

Mostly the Companies conduct their Annual General Meetings at their registered office situated in some remote places, which makes it inconvenient for its members to attend such meeting. This resulted in a large group of members remain absent from voting and this is when the concept of Postal ballot comes into the picture.

Thus, the postal ballot is a facility through which the shareholders can cast votes remotely by recording their preference on the ballot paper without actually attending the meeting.

Postal Ballot - Section 110 of the Companies Act, 2013

APPLICABILITY

Postal ballot is applicable to all Companies whether listed or unlisted except One Person Company (OPC) and other Companies having members upto 200

 

MANDATORY MATTERS TO BE TRANSACTED BY MEANS OF POSTAL BALLOT

Pursuant to the provisions of section 110(1) of the Companies Act, 2013 read with Rule 22(16) of The Companies (Management and Administration) Rules, 2014, following items of business shall be transacted only by means of voting through a Postal ballot:

  • alteration of the object clause of the memorandum;
  • alteration of articles of association in relation to insertion or removal of provisions which, under sub-section (68) of section 2, are required to be included in the articles of a company in order to constitute it a private company;
  • change in place of registered office outside the local limits of any city, town or village as specified in sub-section (5) of section 12;
  • change in objects for which a company has raised money from public through prospectus and still has any unutilized amount out of the money so raised under sub-section (8) of section 13;
  • issue of shares with differential rights as to voting or dividend or otherwise under sub-clause (ii) of clause (a) of section 43;
  • variation in the rights attached to a class of shares or debentures or other securities as specified under section 48;
  • buy-back of shares by a company under sub-section (1) of section 68;
  • election of a director under section 151 of the Act;
  • sale of the whole or substantially the whole of an undertaking of a company as specified under sub-clause (a) of sub-section (1) of section 180;
  • giving loans or extending guarantee or providing security in excess of the limit specified under sub-section (3) of section 186

MATTERS NOT TO BE TRANSACTED BY MEANS OF POSTAL BALLOT

Following type of business are not to be transacted by way of Postal ballot:

(1) Ordinary business (As per section 102(2) of the Act:

The following business transacted at annual general meeting are to be treated as ordinary business:

  • The consideration of financial statements and board’s and auditor’s report;
  • The declaration of dividend;
  • The appointment of directors in place of those retiring;
  • The appointment and fixing of the remuneration of auditors
 

(2) Any business in respect of which directors or auditors has a right to be heard at any meeting (Directors right under section 169(3) and Auditors under section 140(1) and 146)

However, the ordinary business as stated can also be transacted through the e-voting process.

PROCEDURE FOR PASSING RESOLUTION BY POSTAL BALLOT

1. Hold a board meeting and get the resolution passed for the following matters:

  • Identifying the business to be transacted through postal ballot.
  • Approving the notice of postal ballot along with explanatory statements.
  • Authorising Company Secretary or where there is no Company Secretary than any director to conduct postal ballot process and sign and send the notice and other relevant documents.
  • Appointing scrutinizers for postal ballot.
  • Appointing agents for e-voting facility for postal ballot.

2. The notice along with all draft resolutions and explanatory statements to be passed shall be sent to all the shareholders and requesting them to send their assent or dissent in writing on the postal ballot or through email within 30 days from the dispatch of the notice.

3. The notice shall be sent through either:

  • By Registered Post or Speed Post
  • By Registered Email Id
  • By Courier

4. Publish advertisement in at least one vernacular newspaper and one in English newspaper having a wide circulation in that district where the registered office of the company is situated, stating about having dispatched the ballot papers and specifying the following matters, namely:

  • a statement to the effect that the business is to be transacted by postal ballot which includes voting by electronic means;
  • the date of completion of dispatch of notices;
  • the date of commencement of voting;
  • the date of end of voting;
  • 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;
  • a statement to the effect that members, who have not received postal ballot forms may apply to the company and obtain a duplicate thereof; and
  • contact details of the person responsible to address the grievances connected with the voting by postal ballot including voting by electronic means.

5. The notice of the postal ballot shall also be placed on the website of the company after the notice is sent to the members.

6. The Board of directors shall appoint one scrutinizer, who is not in employment of the company and who, in the opinion of the Board can conduct the postal ballot voting process in a fair and transparent manner.

7. Postal ballot received back from the shareholders shall be kept in the safe custody of the scrutinizer and after the receipt of assent or dissent of the shareholder in writing on a postal ballot, no person shall deface or destroy the ballot paper or declare the identity of the shareholder.

8. The scrutinizer shall submit his report within 7 days from the last date of receipt of postal ballots.

9. The scrutinizer shall maintain a register either manually or electronically to record their assent or dissent received, mentioning the particulars of name, address, folio number or client ID of the shareholder, number of shares held by them, nominal value of such shares, whether the shares have differential voting rights if any, details of postal ballots which are received in defaced or mutilated form and postal ballot forms which are invalid.

10. The postal ballot and all other papers relating to postal ballot including voting by electronic means, shall be under the safe custody of the scrutinizer till the chairman considers, approves and signs the minutes and thereafter, the scrutinizer shall return the ballot papers and other related papers or register to the company who shall preserve such ballot papers and other related papers or register safely.

11. The assent or dissent received after 30 days from the date of issue of notice shall be treated as if a reply from the member has not been received.

12. The results shall be declared by placing it, along with the scrutinizer’s report, on the website of the company.

PENALTY FOR CONTRAVENTION

Penalty under Section

Since no specific penalty is provided in Section 110, therefore Section 450 will be applicable. Thus, the Company and every officer in default shall be liable to a penalty of Rs. 10,000/- and in case of continuing contravention, with a further penalty of Rs. 1,000/- for each day after the first during which the contravention continues, subject to a maximum of Rs. 2,00,000/- in case of a company and Rs. 50,000/- in case of an officer in default.

Penalty under Rules

If any default is made in compliance with any of the provisions of this rule, the company and every officer or such other person who is in default shall be punishable with fine which may extend to Rs. 5,000/- and where the contravention is a continuing one, with a further fine which may extend to Rs. 500/- for every day after the first during which such contravention continues.

 

The author can also be reached at csneharedekar@gmail.com

Disclaimer: Please note that the above article is based on the interpretation of related laws, which may differ from person to person and is not legal advice.

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