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

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


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.


(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.


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.

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Sandhya Aggarwal
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