India: E-Governance In Terms Of Indian Companies Act, 2013

Last Updated: 13 August 2014
Article by Sandhya Aggarwal and Anita Aswal

INTRODUCTION

In this age of well-developed information technology and telecommunications, the Electronic Governance of all business-related activities, administrative activities, and managerial functions of the corporate world, can certainly be very convenient, efficient, transparent, and fully accountable and responsible. Therefore, undoubtedly, e-governance in the corporate sector is an imperative and highly prudent requirement in every country of the world, inevitably including India. As India is one of the major, fast-progressing, and highly influential economies of the world, this e-governance is absolutely essential and beneficial to Indian corporate world, especially in present-day world of cutthroat corporate competition, and ever-increasing need for greater transparency and accountability in the corporate sector. Considering these highly significant facts and business scenarios, the Government of India has rightly promulgated the provisions for e-governance in the corporate sector of the country, in its latest Companies Act of 2013.

E-Governance or Electronic Governance is basically proper and efficient utilization of the technologies of the information technology and telecommunications, for performing various functions and activities by an organization. Such use of Information and Communication Technologies [ICTs] can preferably be made at all levels of a business corporation also, in order to obtain faster and more efficient business activities, greater customer satisfaction, more accountable and transparent corporate administration and management, better profits and satisfaction of the shareholders, and the best possible progress and growth of the corporation.

MAJOR E-GOVERNANCE PROVISIONS UNDER COMPANIES ACT 2013

(A) Maintenance, Security, and Inspection of Books and Records in Electronic Form

Regarding the account keeping and maintenance of records and books related with the business activities of a company, and the well-rounded security and efficient and transparent inspection of these documents, the new Companies Act of India has proper provisions, suggestions, and recommendations. These prudent provisions and recommendations are provided in the Section 120 of the Indian Companies Act of 2013, and the Companies (Management and Administration) Rules of 2014. The Section 120 facilitates that a company must keep a safe account of all business and management related documents, records, registers, minutes, etc., preferably in the electronic forms, in such a manner that these could easily be inspected or reproduced whenever necessary. Again, the Rules ranging from Rule 27 to Rule 29 of the Indian Companies (Management and Administration) Rules of 2014, further clarify things in this context, as follows: ---

  • As per Rule 27, every listed company, or any other company with 1000 or more shareholders and security holders, must maintain its all such secretarial records and documents preferably [but not necessarily or mandatorily] in the electronic form. The Ministry of Corporate Affairs [MCA] vide its Notification dated 24th July, 2014, has substituted the word 'shall' by the word 'may' in Rule 27 of Companies (Management and Administration) Rules of 2014, and thereby, the task of maintaining such records strictly in the electronic form has been made optional, for time being. However, it will be wise to convert these data and records to the electronic form [from the physical form] as quickly as possible.
  • The Rule 28 dictates that the MD, CS, or any other Director or Officer of the company shall be made responsible for proper and safe keeping of all records and documents of the company in electronic or physical form.
  • While the Rule 29 provides provision for inspection of all electronic records and reproduction of these as per requirements, the charge for any such reproduction shall not be more than ten rupees per page.

(B) Service of Documents (Section-20)

This advocates that every presentation, submission, or despatch of company-related documents should preferably be made through electronic means, to the concerned officials, shareholders, or the Registrar.

(C) Notice of Meetings

The notices of the Board Meetings and the General Meetings, are also to be sent by electronic means and in the prescribed manner, as are described in the Section 173(3), and Section 101, respectively. Also, the Rule 18 of the Indian Companies Rules of 2014 recommends that a record of any failed transmissions of such notices and subsequent re-sending of these, must be retained by the company as "Proof of Sending". Notices to shareholders, directors, or auditors regarding electronic voting on a resolution and participation in a general meeting, may also be published on the website of the company. In addition to presenting all details about the concerned meeting, the company has also to clearly mention that the facility of voting through electronic means is available. More information about the sending of notices for general meetings and the electronic voting, is provided in the sections below.

(D) Payment of Dividend

As per Section 123, any dividend payable in cash, can also be remitted in any electronic mode to the entitled shareholders, besides being paid by Cheques or Warrant.

(E) Admissibility of Certain Documents as Evidence

Any document reproduced from returns, or any document related with the administration, management, or business activities of a company formally filed with the Registrar on paper or in electronic form and duly authenticated by the Registrar, shall be admissible to any proceedings of the company, without any further proof or production of the original documents as evidence.

(F) Voting Through Electronic Means [Electronic Voting System]

Voting through electronic means at the general meetings of a company, is one of the highly significant provisions introduced by the new Indian Companies Act of 2013, to support e-management and governance. Section 108, New Revised Clause 35B of the Listing Agreement of SEBI, and the Rule 20 of the Companies (Management and Administration) Rules of 2014, all emphasize that every listed company or a moderately big company with at least 1000 shareholders, should utilize preferably the facility of voting electronically by the shareholders and members at the general meetings of the company, for passing any resolution (Ordinary/Special).

However, the Ministry of Corporate Affairs [MCA, Govt. of India] vide its Circular dated 17th June, 2014, thoughtfully and liberally decided not to treat the specified provisions for voting through electronic means [electronic voting system], as mandatory till December 31, 2014.

Swift Electronic Voting offers certain exclusive advantages to both the company [and its share transfer agents] and the shareholders, provided it is fully secured and unbiased. Some of the most significant and outstanding advantages of electronic voting [e-voting] are the following: ---

  • It is Fast and Cost-Effective
  • Full Authenticity
  • Reduces Paperwork and Eliminates the Need of Storing the Physical Ballot Papers
  • Quick and Accurate Counting of Votes
  • Votes are not Delayed or Lost in Transit
  • Voting from Everywhere in any time
  • Increased Efficiency and Transparency

Processes To Be Followed by the Company for Electronic Voting

A public limited company which opts for providing the electronic voting facility to its shareholders and members, with a view to make the task of voting faster, cost-effective, and transparent, on any resolution, now has to follow the following provisions and processes: ---

  • Such a company is essentially required to send notices to its all shareholders, members, directors, or auditors as per the Section 101, through electronic or postal means, for the purpose of voting on any certain resolution electronically. Notices regarding invitation for such a voting to all the members, should also be published on the website of the company. The provision given in the Rule-18 is also applicable for such notices sent electronically.
  • Any such notice must explicitly inform the procedure and manner for voting electronically, time schedule for voting, logging information [login ID], and measures and techniques for casting one's vote conveniently and fully securely.
  • The company is legally required to publish a self-illustrative advertisement regarding the sent notice of voting and general meeting, in the most popular newspaper in the concerned areas, at least five days before the beginning of the voting period, in order to ensure participation of all members of the company in the voting process. Such an advertisement should include the following matters-objectives of the general meeting; the date of completion of sending of notices by company; the date and time of the commencement and ending of voting through the electronic mode only; any agency for offering information about the meeting; any responsible person or agency for receiving grievances connected with electronic voting; etc.
  • The process of casting votes electronically shall remain open for at least one full working day, and a maximum of three days. The closing date of voting must fall before the date of pertinent general meeting by three clear days. Depending upon the receipt of sufficient votes, any resolution is deemed to be passed on the predetermined date for the general meeting.
  • A shareholder [holding shares in physical or dematerialized form] is entitled to cast a vote on any specific resolution only once, he is not legally permitted to change his opinion subsequently. Again, casting of a vote is not allowed after the end of voting period.
  • To scrutinize the electronic voting process in an unbiased, fair, and transparent manner, the Board of Directors shall appoint an independent, dignified and expert scrutinizer, who is not an employee of the company. Well-versed in the system of e-voting, such a scrutinizer shall present his impartial and judicious report [in favor of or against the resolution] to the Chairman of the company, within a period of three working days counted from the closing date of e-voting period. Any such scrutinizer may avail support of one or more persons or witnesses [who are not in employment of the company], for performing scrutiny blamelessly. This Scrutinizer may be a practicing Chartered Accountant, a Company Secretary, a Costs Accountant, or an Advocate. The final result of the voting, along with the scrutinizer's report is to be necessarily published on the website of the company, within two days of passing of the specified resolution at the relevant general meeting of shareholders and members. The scrutinizer is also responsible for maintaining a register of detailed information about each shareholder, the number of shares held by him, the nominal value of shares, his reaction to the voting, and certain other valuable pieces of information regarding the shareholders, in interest of the company.

CONCLUSION

Thus, the provisions for e-governance stipulated by the new company law of India, the Companies Act of 2013, comprehensively cover all areas of activities of a company, especially the public limited companies, and are really highly elegant for making all vital tasks of a company, such as the proper maintenance and inspection of documents, conduction of efficient business activities, and flawless corporate administration and management, rather easy and cost-effective, amply transparent, and fully accountable and trustworthy. Actually, such ingenious and bright provisions for highly efficient and transparent e-governance were imperative in the thriving corporate world of India, in order to equip it for prospering fast in today's intensely competitive national and international businesses in all economic sectors. Naturally, the listed companies and the big public limited companies will be the very first to adopt these provisions for e-governance; as is mentioned above, the Government of India has given them broad and clear hints for the quickest possible [no time-limit yet fixed] conversion of their statutory books of accounts and records to the electronic mode from the physical mode.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Sandhya Aggarwal
Similar Articles
Relevancy Powered by MondaqAI
Singh & Associates
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Singh & Associates
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions