India: Amendment To Rule 20 Of Companies (Management And Administration) Rules, 2014: Voting Through Electronic Means

Last Updated: 21 April 2015
Article by Megha Kapoor

Most Read Contributor in India, September 2016

Ministry of Corporate Affairs vide its notification dated 19th March 2015 had modified Rule 20 of the Companies (Management and Administration) Rules, 2014 ("hereinafter Rules, 2014) and issued the Companies (Management and Administration) Amendment Rules, 2015 ("hereinafter, Amendment Rules, 2015"). The Rules have been made by Central Government under the powers conferred by Section 108 read with Section 469 (1) and (2) of the Companies Act, 2013. The Rules came into force with effect from 19th March, 2015.

Rule 20 of the Rules, 2014 talks about voting through electronic means. The Rule mandates certain class of companies to provide their members facility for voting by electronic means at general meetings.

As per the Sub section (1) of Rule 20 of Rules, 2014, every listed company or a company having not less than 1000 shareholders, shall provide to its members facility to exercise their right to vote at general meetings by electronic means.

The scope of applicability has been modified with the amended Rule 20. Sub Rule (2) of the new Rule 20 provides that every company other than a company referred to in Chapter XB or Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 having its equity shares listed on a recognised stock exchange or a company having not less than 1000 members, shall provide to its members facility to exercise their right to vote on resolutions proposed to be considered at general meetings by electronic means.

Further, new terms have been defined under Rule 20 of the said Rules. These are as follows:

i. Agency: "Agency" means the National Securities Depository Limited, the Central Depository Services (India) Limited or any other entity approved by the Ministry of Corporate Affairs subject to the condition that the National Securities Depository Limited, the Central Depository Services (India) Limited or such other entity has obtained a certificate from the Standardisation Testing and Quality Certification Directorate, Department of Information Technology, Ministry of Communications and Information Technology, Government of India including with regard to compliance with parameters specified under Explanation (vi)

ii. Cut-off Date: "Cut-off Date" means a date not earlier than seven days before the date of general meeting for determining the eligibility to vote by electronic means or in the general meeting;

iii. Remote E-Voting: "Remote E-Voting" means the facility of casting votes by a member using an electronic voting system from a place other than venue of a general meeting.

iv. Voting by Electronic Means: "Voting by Electronic Means" includes "remote e-voting" and voting at the general meeting through an electronic voting system which may be the same as used for remote e-voting.

There is, however, no change in the definitions of terms "Secured system", "Cyber Security" and "Electronic voting system" or "voting by electronic means".

Sub-Rule (3) confer right to member to vote through voting by electronic means on the resolutions referred in sub-rule (2). Further, the Rule requires the Company to pass such resolutions in accordance with the provisions of this rule.

The procedure set out as under Rule (4) requires a company, which provides facility to its members to exercise voting by electronic means to comply with the below mentioned:

i. Notice of the meeting: The notice shall be sent to all the members, directors and auditors of the Company. The mode of sending notice shall be either of the following:

a. By registered post or speed post; or

b. Through electronic means, namely, registered e-mail ID of the recipient; or

c. By courier service.

As per the earlier Rule (3), which provided for the similar provision, specified that the notices shall be sent to "..all the members, auditors of the company, or directors...", there was no obligation to serve notice to director, however, the new Rule clearly mandates the company to serve notice to every director.

ii. After the notice is sent to members, the notice shall be required to be placed on the website, if any, of Company and of the agency.

iii. The notice of the meeting shall state:

a. That the facility being provided by the company with respect to voting by electronic means and that the business may be transacted through such voting.

b. That the facility for voting, either through electronic voting system or ballot or polling paper shall also be made available at the meeting and members who have not already cast their vote by remote e-voting shall be able to exercise their right at the meeting.

c. That in-spite of casting the vote by remote e-voting prior to the meeting, members may also attend the meeting; however they shall not be permitted to cast their vote again.

iv. Clause (iv) of Sub Rule (4) requires that the notice shall:

a. indicate the process and manner for voting by electronic means;

b. indicate the time schedule including the time period during which the votes may be cast by remote e-voting;

c. provide the details about the login ID;

d. specify the process and manner for generating or receiving the password and for casting of vote in a secure manner.

v. Public notice: A public notice by way of an advertisement shall be required to be published upon completion of dispatch of notices of meeting under Sub rule (4)(i) at least 21 days before the date of general meeting in the following:

a. At least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated and having a wide circulation in that district; and

b. At least once in English language in an English newspaper having country-wide circulation.

The advertisement shall disclose the following matter:

a) Statement that the business may be transacted through voting by electronic means;

b) Date and time of commencement and end of remote e-voting;

c) Cut-off date;

d) Manner of obtaining the login ID and password by persons who have acquired shares and become members of the company.

e) Statement clearly stating the below mentioned facts:

  • remote e-voting shall not be allowed beyond the said date and time;
  • the manner for voting by members present at the meeting;
  • a member may participate in the general meeting even after exercising his right to vote through remote e-voting but shall not be allowed to vote again in the meeting; and
  • a person whose name is recorded in the register of members or in the register of beneficial owners maintained by the depositories as on the cut-off date only shall be entitled to avail the facility of remote e-voting as well as voting in the general meeting.

f) website address of the company, if any, and of the agency where notice of the meeting is displayed; and

g) name, designation, address, email id and phone number of the person responsible to address the grievances connected with facility for voting by electronic means.

Further, the public notice shall be required to be placed on the website of the company, if any and of the agency

As per the earlier provision (Clause v of Sub Rule 3 of Rule 20), the company was required to make an advertisement to be published not less than 5 days before the date of beginning of the voting period. This period has been changed and the new provision (Clause v of Sub Rule 4 of Rule 20) requires companies to make advertisement to be published immediately on completion of dispatch of notices for meeting as prescribed under clause (i) of sub-rule (4) but at least 21 days before the date of general meeting. Accordingly, the time period has been changed from 5 days before the date of beginning of the voting period to 31 days before the date of general meeting.

vi. the facility for remote e-voting shall remain open for not less than three days and shall close at 5.00 p.m. on the date preceding the date of the general meeting

The old provision provided that the e-voting shall remain open for not less than one day and not more than 3 days. The new provision has extended the minimum time period from 1 day to 3 days and has eliminated the maximum time period for which the voting shall remain open.

vii. During the period when facility for remote e-voting is provided, the members of the company, holding shares either in physical form or in dematerialised form, as on the cutoff date, may opt for remote e-voting:

Provided that once a member casts its vote, he shall not be allowed to change it subsequently or to cast vote again. Also, a member may participate in the general meeting even after remote e-voting subject to the condition that he shall not be allowed to vote again.

viii. The facility shall be blocked at the end of the remote e-voting period.

ix. One or more scrutinizer shall be appointed by the board of directors, who may be practicing professional (Chartered Accountant/ Cost Accountant/ Company Secretary/ an Advocate/ any other person not in employment of the company). While selecting the scrutinizer, board shall consider that such person shall be a person repute who will scrutinise the voting and remote e-voting process in a fair and transparent manner. The scrutinizer may take the assistance of a person but such person shall also not in employment of the company but who shall be well-versed with the electronic voting system

x. the scrutiniser shall be willing to be appointed and be available for the purpose of ascertaining the requisite majority

xi. At a general meeting, once the discussion on the resolution on which voting is to be held is over, the Chairman shall allow voting, as provided under sub-rule (1) of Rule 21 with the assistance of scrutiniser, by use of ballot or polling paper or by using an electronic voting system for all those members who are present at the general meeting except for who who have availed remote e-voting facility.

xii. After the conclusion of voting at the general meeting, the scrutiniser shall, immediately first count the votes cast at the meeting, thereafter unblock the votes cast through remote e-voting in the presence of at least two witnesses (who shall not be in the employment of the company). Thereafter, Scrutiniser shall give a consolidated report specifying the total votes cast in favour or against, if any, not later than three days of conclusion of the meeting, to the Chairman or a person authorised by him in writing who shall countersign the same. The Chairman or a person authorised by him in writing shall declare the result of the voting forthwith.

Explanation to clause (xii) clarifies that the manner in which members have cast their votes, shall remain secret and not available to the Chairman, Scrutiniser or any other person till the votes are cast in the meeting.

xiii. The scrutiniser shall have access, after the closure of period for remote e-voting and before the start of general meeting, to details relating to members, who have cast votes through remote e-voting but not the manner in which they have cast their votes.

xiv. The scrutiniser shall maintain a register either manually or electronically to record the assent or dissent received, mentioning the particulars of the members, number of shares held by them, nominal value and whether the shares have differential voting rights.

xv. The register and all other papers relating to voting by electronic means shall remain in the safe custody of the scrutiniser until the Chairman considers, approves and signs the minutes and thereafter, the scrutiniser shall hand over the register and other related papers to the company.

xvi. The results declared along with the report of the scrutiniser shall be placed on the website of the company, if any and on the website of the agency immediately after the result is declared by the Chairman. However, in case of listed companies, the respective companies shall be required to simultaneously forward the results to the concerned stock exchange(s) where its equity shares are listed and such stock exchange(s) shall place the results on its or their website.

The older provision requires that the results to be placed on the website of the company and on the website of the agency within 2 days of passing of the resolution at the relevant general meeting. However, the new provision is more stringent in a way that it requires the companies to place the results immediately on its website and on website of agency. Further, it also requires companies to intimate the respective stock exchange(s) by forwarding the results to them.

xvii. Subject to receipt of requisite number of votes, the resolution shall be deemed to be passed on the date of the relevant general meeting.

Explanation.- For the purposes of this clause, the requisite number of votes shall be the votes required to pass the resolution as the 'ordinary resolution' or the 'special resolution', as the case may be, under section 114 of the Act.

xviii. resolution proposed to be considered through voting by electronic means shall not be withdrawn.

It has been specified in the Rule 20 that the provisions of the new rule shall be applicable in respect of general meetings for which notices are issued on or after the date of commencement of this Rule i.e. Companies which are issuing notices on or after 19th March, 2015 shall be required to comply with the provisions of new Rule.

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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