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Postal Ballot under Companies Act and Listing Agreement

CS DHANAPAL 
on 09 August 2014

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"In the Indian scenario, postal ballot is a relatively a new concept which was introduced in the Companies Act, 1956 by insertion of a new Section, namely Section 192A through an amendment made to the said Act in year 2001. The Companies Act, 1956 contained no definition of postal ballot. However, the explanation given in Section 192A states that “for the purpose of this section, “postal ballot” includes voting by electronic mode”.

Companies Act, 2013 also provides for transaction of business by means of postal ballot but there are some changes in the provisions relating to postal ballot as compared to what was provided in the Companies Act, 1956. Further, the listing agreement also contains some stipulation regarding this.

In this article, an attempt has been made to highlight the provisions relating to postal ballot as contained in the Companies Act, 2013, the rules made there under and the Listing Agreement.

DEFINITION OF POSTAL BALLOT

The Companies Act, 1956 did not define the term postal ballot. However, it is defined under the Companies Act, 2013.

Section 2(65) of the Companies Act, 2013 defines postal ballot as below:

“postal ballot” means voting by post or through any electronic mode;

Even though the above definition is not very cleared, it gives a fair idea about the meaning of postal ballot and also provides clarity that the Companies Act, 2013 has recognized the medium of e-voting for the purpose of postal ballot

APPLICABILITY OF POSTAL BALLOT

Provisions regarding postal ballot are primarily contained in Section 110 of the Act read with Rule 22 of Companies (Management and Administration) Rules, 2014.

In respect of certain items of business to be transacted by certain companies, the Act mandates that the approval of members has to be sought only by means of a postal ballot. Thus the mandatory applicability needs to be understood from two angles; one from the angle of nature of item of business to be transacted and secondly from the point of view of class of the company. We list below both the dimensions as under:

Class of Companies for whom postal ballot is mandatory:

Except a One Person Company and other companies having upto 200 members, all other companies shall transact the items of business listed below only by means of voting through a postal ballot.

Items of business which need to be mandatorily transacted through postal ballot:

(a) alteration of the objects clause of the memorandum and in the case of a company in existence immediately before the commencement of the Act, alteration of the main objects of the memorandum;

(b) 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;

(c) change in the place of registered office outside the local limits of any city, town or village as specified in sub-section (5) of section 12;

(d) change in the 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;

(e) issue of shares with differential rights as to voting or dividend or otherwise under sub-clause (ii) of clause (a) of section 43;

(f) variation in the rights attached to a class of shares or debentures or other securities as specified under section 48;

(g) buy-back of shares by a company under sub-section (1) of section 68;

(h) election of a director under section 151 of the Act;

(i) sale of the whole or substantially the whole of an undertaking of a company as specified under sub-clause (a) of subsection (1) of section 180;

(j) giving loans or extending guarantee or providing security in excess of the limit specified under sub-section (3) of section 186

The mandatory applicability of postal ballot can be illustrated as under:

List of items of business which cannot be transacted through postal ballot

The Act also specifies certain items of business which cannot be transacted by means of postal ballot, i.e. which should be transacted only in a duly convened meeting of the members. These are –

- All items of business which are deemed as Ordinary Business at an Annual General Meeting, i.e.

(i) the consideration of financial statements and the reports of the Board of Directors and auditors;

(ii) the declaration of any dividend;

(iii) the appointment of directors in place of those retiring;

(iv) the appointment of, and the fixing of the remuneration of, the auditors;

- Any business in respect of which directors or auditors have a right to be heard at any meeting, like removal of a director or auditor etc.

All other items of business other than the aforementioned businesses can be transacted through postal ballot, instead of  transacting such business at a general meeting.

If a resolution is assented to by the requisite majority of the shareholders by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf.

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