Introduction:
Shareholders can vote on corporate resolutions without being physically present at a meeting by using a postal ballot. Postal ballots are a part of modern corporate governance and enhance shareholder participation. The Companies Act and related regulations govern this system, which is crucial for major shareholder decisions, such as altering a firm's constitution or approving significant transactions. Postal ballots contribute to more democratic and inclusive corporate decision-making processes by facilitating remote voting.
Legislative background:
Section 192A of the Companies Act, 1956 is similar to Similar current section 110 of companies act 2013. The Central Government should be able to specify which items of business must be conducted solely through postal ballot. Postal ballot can also be used to handle matters where directors or auditors have the right to be heard at a meeting.
This is intended to encourage greater shareholder participation in the companies decision-making process, allowing them to engage in decisions at general meetings more effectively.
Meaning of postal ballot:
Clause (65) of section 2 defines a "Postal Ballot" as the process through which a shareholder casts their vote either through postal or electronic means. The Secretarial Standard-2 states that "voting by postal ballot" includes voting via ballot, postal mail, or electronic means. A postal ballot is an alternative method of voting on proposed business matters.
Certain matters to be transacted by means of postal ballot:
Sub-section (1) of section 110, along with rule 22 (16), outlines the matters that must be conducted exclusively via postal ballot for companies with over 200 members. These matters include:
- Altering the objects clause of the memorandum or the main objects of the memorandum for companies existing before the Act's commencement.
- Modifying the articles of association to insert or remove provisions necessary for constituting a private company.
- Changing the registered office location outside the local limits of any city, town, or village.
- Altering the objects for which public funds were raised through a prospectus if any unutilized funds remain.
- Issuing shares with differential rights regarding voting, dividends, or otherwise.
- Varying the rights attached to a class of shares, debentures, or other securities.
- Buying back shares by the company.
- Appointing a director elected by small shareholders.
- Selling the whole or substantially the whole of a company's undertaking, or if the company has multiple undertakings, substantially the whole of any of them.
- Providing loans, extending guarantees, or offering security beyond the limit specified in sub-section (3) of section 186.
One-person companies (OPCs) and other companies with up to 200 members are exempt from conducting these matters via postal ballot. For determining the number of members, the definition in clause (55) of section 2 should be considered.
Certain matters not to be transacted by means of postal ballot:
Sub-section (1) of section 110 authorizes a company to conduct any business, except for prescribed businesses, through a postal ballot. However, the following businesses are excluded from postal ballot transactions:
- Ordinary business
- Any business where directors or auditors have the right to be heard at a meeting.
According to sub-section (2) of section 102, the following businesses conducted at the annual general meeting are considered ordinary businesses:
- Consideration of financial statements and the board's and auditors' reports
- Declaration of any dividend
- Appointment of directors in place of those retiring
- Appointment and remuneration of auditors
- These ordinary businesses can still be conducted through e-voting.
- Auditors have the right to be heard under sub-section (1) of section 140 regarding their removal and under section 146 on any matter concerning them as auditors. Directors have the right to be heard under sub-section (3) of section 169 before their removal from office.
Procedure of postal ballot:
Paragraph 16.3 of Secretarial Standard-2 outlines the procedure for passing resolutions via postal ballot. It's up to the board to pick the businesses that will get a postal ballot and approve the notice.
Any company secretary or director may be authorized to oversee the postal ballot process, including signing and sending the notice. After obtaining their consent, the board selects a scrutinizer, who could be a working company secretary, chartered accountant, cost accountant, advocate, or any reputable individual not employed by the firm. The establishment of an electronic voting body is possible.
The record date for determining voting rights and identifying members will be set by the board. Within 30 days of the notice issuance date, members must respond. Seven days after the last receipt date of postal ballot forms, the scrutinizer's report must be submitted. The chairman or an authorized director will declare the results on the specified date, time, and venue, detailing the number of votes for and against the resolution, invalid votes, and the final outcome, based on this report. Voting results will be displayed at the companies registered office, head office, corporate office and website.
The company secretary or another authorized person designated by the board will be responsible for safeguarding the postal ballot forms, related paperwork, a register, and the examiner's report.
Notice and Forms:
Paragraph 16.4 of Secretarial Standard-2 specifies the requirements for sending notice in the case of a postal ballot. The notice must include the postal ballot form and instructions for filling it out, signing it, and returning it. It can be sent via registered post, speed post, courier, e-mail, or any other electronic means to the address registered with the company. The notice should also be available on the company’s website, if one exists. Each item to be decided through postal ballot must be presented as a resolution and include an explanatory statement.
Additionally, an advertisement with the prescribed details must be published at least once in a vernacular newspaper in the principal vernacular language of the district where the company's registered office is located, as well as once in an English newspaper with wide circulation in that district. This advertisement should inform the public about the dispatch of the notice and ballot papers.
Paragraph 16.5 of Secretarial Standard-2 outlines the requirements for postal ballot forms. These forms must include instructions on how to complete them, record assent or dissent, and return them to the scrutinizer. The forms may cover multiple items of business to be transacted.
Application of Provisions for Electronic Voting:
Rule 22 (15) stipulates that the provisions of rule 20 shall be applicable to this rule, subject to any necessary modifications. Paragraph 16.2 of Secretarial Standard-2 requires that every company with equity shares listed on a recognized stock exchange, except for those listed on the SME Exchange or the Institutional Trading Platform, and other companies required to provide e-voting facilities, must offer such facilities to their members for items transacted through postal ballot. Therefore, these companies must conduct postal ballot voting electronically.
Effect of Assent by Requisite Majority:
When a resolution is passed by the requisite majority, it is considered approved on the final date specified by the company for receiving completed postal ballot forms or e-votes, as outlined in paragraph 16.6.3 of Secretarial Standard-2.
Punishment and Compound ability:
Contravention of Section
This section does not specify penal provisions for non-compliance. Therefore, section 450 of the Act applies. Under this section, the company and every responsible officer can be fined up to Rs. 10,000, with an additional Rs. 1,000 for each day the contravention continues.
Contravention of Rules
According to rule 30 of the Companies (Management and Administration) Rules, 2014, non-compliance with rules under this section can result in fines of up to Rs. 5,000 for the company and each responsible officer. For ongoing contraventions, an additional fine of Rs. 500 per day applies. Offenses under this section and its rules are compoundable under section 441 of the Act.
