Critical appraisal of new e-voting norms

The Ministry of Corporate Affairs (MCA) vide its notification dated 19^th March, 2015 substituted E-Voting provisions by amending Companies (Management and Administration) Rules, 2014. The amended Rules shall come into force on the date of publication in the Official Gazette.

This amendment has taken into account majority of hanging issues and confusions in the Corporate World. It mainly re-confirmed the basic right of voting of shareholders, which was not granted in a few cases, earlier under the cover of confusing provisions of Act, rules and even clarifications (?). The amended Rules cleared certain ambiguities in the procedures of e-voting, as well.

Excluded from the Applcability:

Under applicability of the amended Rule, specific exclusion has been granted to the Small and Medium Enterprises covered under the Chapter XB or Chapter XC of the SEBI  (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Elaboration of additional phrases :

The term “Agency” has been defined under the new rule, which was not clear previously. It covers mainly two depositories of the Country i.e. the National Securities Depository Limited and the Central Depository Services (lndia) Limited. Other agencies, provided such services under the provisions of the existing rule, need to obtain the approval from MCA subject to a certificate from the Standardisation Testing and Quality Certification Directorate, Department of lnformation Technology, Ministry of Communications and Information Technology, Government of India and comply with the secured system parameters.

There was misperception among corporates with regard to “cut-off date” for determining the eligibility to vote. Companies have decided randomly - any convenient date as a Cut-off-date, in consultation with the Depository and/or R and T Agents and there was no consistency and voting patterns were not of a date close to the date of General meetings. Under the new Rule, the term has been defined and it means a date not earlier than seven days before the date of general meeting.

The terms “remote e-voting” and ”voting by electronic means” are separately defined for no reason, these could have been clubbed as –‘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 or at the general meeting.

Mode of despatch of Notice under E-voting :

Generally there is a common and convenient practice of sending Notice and Annual Report together to shareholders –in May-June every year. Under the existing Rule, the compulsory dispatch of e-voting notices through registered post or speed post or by courier service has created a lot of hue and cry, especially due to extra cost burden. In many cases, cost of printing is less than that of dispatch cost, due to this provision. In some particular cases, even dividend amount may be less than the dispatch cost. The purpose of ‘timely’ service of notice was almost defeated due to extra burden on all such service agencies, during that particular period for 2014.

There was a good opportunity to address this issue in the new rule. However, the provision in new rule continued to be as it was and no respite has been given to the Corporates. Such provisions under the Rule is nothing but the waste of time, money and energy in common parlance. But Regulatory may be having a broad view of ‘Make [create] an Employment’ and have preferred not to amend the said provision.

Voting – basic right of shareholders:

Under Sub-Rule (4)(iii)(B) of amended Rule – 20, Regulatory categorically put thrust on making available a ballot or  polling paper to facilitate voting at the meeting to members attending the meeting, who have not already cast their vote by remote e-voting. This provision restates a confirmation from Regulatory on the basic right of shareholders i.e. voting on the resolutions, either through e-voting or at the venue of the meeting, which cannot be taken away in any case.

Further to this, in terms of Sub-Rule (4)(v)(f) of the amended Rules, Companies are required to state in the notice the manner in which the company shall provide for voting by members present at the meeting.

In terms of Sub-Rule (4)(xi) of the amended Rules, the Chairman shall allow voting 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 but have not cast their votes by availing the remote e-voting facility.

Intimation of E-voting process:

In order to provide advance intimation about e-voting process of any particular company, a public notice by way of an advertisement is now required to be published at least 21 days before date of general meeting. Under earlier rule, it was just 5 days before the date of beginning of the Voting period. Further, under the new rule - the public notice is required to be placed on the website of the Company and the agency, too.

MCA demonstrated its keenness on resolution of Investor grievances in respect of E-voting and related issues, by making it compulsory for the companies to disclose in detail the name, designation, address, email id and phone number of the person responsible to address the grievances connected with e-voting facility. The public notice shall be placed on the website of the company and agency, under the amended Rules.

E-voting, procedure and result:

The amended Rules brought the period of e-voting more close to the general meeting date as compared to existing rule. The facility for e-voting is now required to 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. In terms of the existing provisions, e-voting was required to be completed three days prior to the date of general meeting.

Provision under the amended rule, specifically allow companies to provide e-voting tools during the general meeting for voting.

In order to have overall voting process in a fair and transparent manner, amended rule provides for appointment of one or more scrutinisers, which was not the case under the earlier rule.

In order to maintain total secrecy in the voting and avoid any knowledge of voting patterns to the Chairman, Scrutiniser or any other person, till the votes are cast in the meeting, new rule provides that the scrutiniser shall, immediately after the conclusion of voting at the general meeting, first count the votes cast at the meeting, thereafter unblock the votes cast through remote e-voting.  However, the existing rule was, in a way, allowing scrutinizer to unblock the e-votes prior to date of general meeting.

Further, a consolidated scrutiniser’s report is now required to be countersigned by the Chairman or a person authorised by him in writing along with the scrutinizer himself.

The voting results and scrutiniser’s report is required to be declared not later than 3 days (Earlier 2 days)  of conclusion of the meeting. The same shall now be required to be uploaded on website of stock exchanges in addition to that of company and the agency.

For the purposes of the requisite number of votes specific explanation has been provided under the new rule giving reference of section 114 of the Companies Act, 2013.

Withdrawal of Resolution:

Prior to the e-voting scenario, there was a possibility of withdrawal or any amendments to the proposed resolution on the date of general meeting. However, under the E-voting process, since the voting takes place prior to the actual date of general meeting, a resolution proposed to be considered through voting by electronic means shall not be withdrawn/amended. A specific provision in respect of withdrawal of resolution has been incorporated at the end in the new rule.