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E-Voting in pursuit of Better Corporate Governance

Introduction

E-Voting is an internet based system through which participation of shareholders in larger numbers in the decision making process of companies is made easy through login and registration of their votes on company resolutions. This is a more efficient, convenient and cost effective method. The system would process, record votes automatically and facilitate declaration of voting results quickly.

The e-Voting system would permit a company or its registrar to set up the schedule on the e-voting website and upload the resolution and register the shareholders. The online voting system is aimed at enhancing corporate governance and increasing shareholder participation in listed companies.

E-Voting facility can be availed by
  • All shareholders i.e., shareholders holding shares in physical or demat mode with either NSDL or CDSL.
  • Companies which are required to obtain approval for resolutions from their shareholders through postal ballot.
  • Conduct voting at the venue of AGM/EGM.
Legal framework

Section 192A of the Companies Act, 1956 read with Companies (Passing of the Resolution by Postal Ballot) rules requires listed companies to conduct certain business only by way of postal ballot, instead of transacting it in their general meetings. Rule 2(c) of the said Rules defines “Postal Ballot” as voting by shareholders by postal or electronic mode instead of voting personally by presenting for transacting business in a general meeting of the company. These provisions enable companies to transact any business through postal ballot/e-voting.

In addition, SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, SEBI (Delisting of Equity Shares) Regulations, 2009 and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 require listed companies to pass certain resolutions through postal ballot.

MCA initiatives

MCA has so far taken various steps for promoting/ facilitating the participation of shareholders through electronic means. After introduction of Section 192A facilitating voting through postal ballot including electronic means, MCA has given recognition to shareholder participation in general meetings via electronic means/ video conferencing. MCA has also authorized NSDL and CDSL to provide and supervise electronic platforms for e-voting and to obtain certificate from Standardization Testing and Quality Certification (STQC) Directorate for the purpose.

General Circular No. 27/2011 [No.17/95/2011/CL.V] issued by Ministry of Corporate Affairs (MCA) on May 20, 2011, clarifies that the shareholders can participate in a general meeting under the Companies Act through electronic mode. MCA has clarified to Ministry of Finance that though e-voting platform is a voluntary requirement for companies, nothing prevents SEBI to amend listing agreement and make e-voting mandate for listing companies.

SEBI initiatives

SEBI vide circular no.CIR/CFD/DIL/6/2012 dated July 13, 2012, made amendments to the Equity Listing Agreement to mandate E-voting by shareholders of Listed companies to enable e-voting facility to their shareholders, in respect of those business which are transacted through postal ballot. Initially, SEBI made it mandatory to top 500 listed entities at BSE and NSE, chosen based on the market capitalization.

Quorum

In a general meeting where shareholders are allowed to participate through electronic mode, the quorum as provided under Section 174 i.e. five members in case of a public company and two members in case of other companies and as well as the Chairman of the meeting shall have to be personally present.

Notice

If the company wishes to provide the video conferencing facility, the notice calling the meeting must inform the shareholders regarding the availability of participation through video conference and provide necessary information to enable shareholders to access the available facility of videoconferencing.

Location

The location of the Annual General Meeting will be either at the registered office of the company or at a place within the city, town or the village in which the registered office of the company is situated.

Video Conference

To provide larger participation and to for curb costs, listed companies may provide video conference connectivity during such meetings at least at five places in India. It should be located preferably in such a manner that it covers top five States/UTs, based on maximum number of members or at least 1000 members, whichever is more, residing as per the address registered with the depositories.

Process
  • Company will sign a bi-partite or tri-partite agreement with its RTA and Central Depository Services (India) Limited (CDSL) or National Security Depository Limited (NSDL).
  • Company will give a letter to CDSL/NSDL for Generation of user ids and passwords on the letterhead of the company.
  • CDSL/NSDL will generate user ids for companies or their RTA and the Scrutinizer.
  • Company (through its Registrar and Transfer Agent [RTA]) will setup the e-Voting schedule on the e-Voting website www.evotingindia.com/www.evoting.nsdl.com, upload the resolutions on which voting is required and generate the Electronic Voting Sequence Number (EVSN). An EVSN will be unique for every postal ballot conducted.
  • While creating an EVSN the company will have to upload the following:
    • Register of Members
    • Resolution(s)
    • Extract of Resolution(s)
  • The Company will then give a letter for Activation of EVSN(s) and issue of passwords on the letterhead of the company.
  • CDSL/NSDL will generate passwords across all shareholders (physical or demat) and provide them to the company and company will communicate the passwords, the EVSN and the procedure for e-voting to its shareholders.
  • During the voting period, the shareholders can visit the e-voting website and select the relevant EVSN/company, enter the login id and passwords and then case their vote. Vote once casted will be considered final and cannot be modified.
  • At the end of the voting period, the scrutinizer can download the entire voting data using the Scrutinizer login and declare the final results for the resolutions placed for voting by the Company.

E-voting towards e-governance is not only a move which will largely support green initiatives but will increase transparency and enhance organizational effectiveness. For many companies whose shareholders and directors are scattered across the globe, the Ministry's green initiative is a welcome move for better Corporate Governance.

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  • By CS P. Surya Prakash  0 Comments   

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