Voting at the general meetings of companies is the most valuable and fundamental mechanism by which the shareholders accept or reject the proposals of the board of directors as regards the structure, the strategy, the ownership and the management of the corporation. Voting is the only mechanism available with the shareholders for exercising an external check on the board and the management.
Under the present framework of the Companies Act, 1956, a company is required to obtain the approval of its shareholders for various important decisions such as increase in its authorised capital, shifting of registered office, change in the name, amalgamation and reconstitution, buy-back of shares, further issue of shares, etc. Since the shareholders of any large public listed company are scattered throughout the length and breadth of the country, they are unable to physically attend the general meetings of the company to exercise their right to vote on matters of vital importance. The system of voting by proxy has also not proved very effective.
a view to strengthening shareholder democracy, it is felt that all the shareholders of a company should be given the right to vote on certain critical matters through a postal ballot system, which has also been envisaged in the Companies Bill, 1997.
Items requiring voting by postal ballot
Some of the critical matters which should be decided by this system are -
matters relating to alteration in the memorandum of association of the company like changes in name, objects, address of registered office etc;
sale of whole or substantially the whole of the undertaking;
sale of investments in the companies, where the shareholding or the voting rights of the company exceeds 25%;
Making a further issue of shares through preferential allotment or private placement basis;
Corporate restructuring;
Entering a new business area not germane to the existing business of the company;
Variation in the rights attached to class of securities.
Procedure for the postal ballot
Where a resolution is to be passed in relation to any of the aforesaid items through postal ballot,
The board of directors shall appoint a Designated-Person to conduct, supervise and control the exercise of postal ballot. This person may be the Company Secretary, a retired judge or any person of repute who, in the opinion of the board, can conduct the voting process in a fair & transparent manner.
All communications in this regard shall be made by and addressed directly to the said Designated-Person.
A notice containing a draft of the resolutions and the necessary explanatory statement shall be sent to all members entitled to vote requesting them to send their assent or dissent within a period of thirty days from the date of posting of the letter.
The notice shall be sent under certificate of posting and shall include with the notice, a pre-paid postage envelope for facilitating the communication of the assent or the dissent of the shareholders to the resolutions within the said period.
The envelope by post will be received directly by the Post Office through Box No, which will be obtained by the Designated-Person in advance and will be indicated on each pre-paid envelope to be used by the members for sending the resolution.
The Designated-Person shall ascertain the will of the shareholders based on the response received and the resolution shall be deemed to have been duly passed if approved by members not less in number, as prescribed by law.
The Designated-Person shall thereafter give a report to the Chairman and on the basis of such report the Chairman shall declare the results of the poll
