E – Voting Rules 2015


Indian E – voting Rules were under criticism from various quarters of corporate world since. Their application has been postponed some point of time. Now, the Rule 20 of the Companies (Management and Administration) Rules 2014 has been substituted by the Companies (Management and administration) amendment Rules, 2015. We have discussed, original Rules related voting through electronic Means earlier here.

These rules will come into force from the date of publication of these rules in official gazette i.e.

Applicability:

The provisions of this rule shall apply in respect of the general meetings for which notices are issued on or after the dale of commencement of this rule. [Rule 20(1)]

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 one thousand 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. [Rule 20(2)]

This rule NOT applicable to:

  1. Companies listed on SME platform, and
  2. Company having less than one thousand members

These are applicable for other company:

  1. Whose equity shares are listed, or have not less than one thousand members
  2. for resolution to be considered at general meetings (not class meetings, court convene meetings, etc), and
  3. where notice is issued on or after the date of commencement of this rule after amendment.

Certain Definitions/explanation of expressions:

(i) “Agency” means the

  1. National Securities Depository Limited,
  2. the Central Depository Services (India) Limited, or
  3. 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 parameter specified under Explanation (vi) i.e. secured system.

The Certificate mentioned in this definition is essential condition. The names of certain companies given are either just information or advertisement.

(ii) “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.

This cut – off date create situation where, members to whom notices for meeting are being send and members to whom voting right are given are different set. This is always a practical issue for listed companies. This certainly defines eligibility to vote in case of electronic voting. This is close enough to serve shareholdings exist on general meeting date.

The observation of Nidhi Bothra and Vinita Nair here is worth noting:

Companies cannot afford to have a cut-off date for despatch of notice, for e-voting, for poll purposes and one for dividend. Also, it is not practicable to have a shifting cut-off date.

(iii) “Cyber security” means protecting information, equipment, devices’ computer’ computer resource, communication device and information stored therein from unauthorised access, use, disclosures, disruption, modification or destruction.

(iv) “Electronic voting system” means a secured system based process of display of electronic ballots, recording of votes of the members and the number of votes polled in favour or against, in such a manner that the entire voting exercised by way of electronic means gets registered and counted in an electronic registry in a centralised server with adequate cyber security;

(v) “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;

(vi) “Secured system” means computer hardware, software, and procedure that:

  1. Are reasonably secure from unauthorised access and misuse;
  2. Provide a reasonable level of reliability and correct operation;
  3. Are reasonably suited to performing the intended functions; and
  4. Adhere to generally accepted security procedures;

(vii) “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.

The term “May” is interesting here. There may be different system for “remote e – voting” and “on – spot e – voting”. This may be a suggestion that during “on – spot e – voting” intranet will be used and internet may be cut down. There is no bar on web based voting system for both; “remote e – voting” and “on – spot e – voting”.

[Explanations (i) to (vii) to Rule 20(2)]

Right to vote and Passing of resolution:

A member may exercise his right to vote through voting by electronic means on resolutions referred to in sub-rule (2) and the company shall pass such resolutions in accordance with the provisions of this rule. [Rule 20(3)]

Notice for electronic Voting:

(i) the notice of the meeting shall be sent to all the members, directors and auditors of the company either –

  1. by registered post or speed post ; or
  2. through electronic means, namely, registered e-mail ID of the recipient; or
  3. by courier service.

This is supposed to be verbatim copy of Section 101(3) of the Act if any case this is required to be here in these rules, but it is not. There is no requirement under this clause for sending notices to legal representative of any deceased member or the assignee of an insolvent member. Hopefully, provision of Section 101(3) shall still prevail and required to be complied with.

These rules also want to ensure registered email ID belongs to the recipient. I do not see any point as whatever email id may be provided by recipient shall be in the record of the company.

(ii) The notice shall also be placed on the website, if any, of the company and of the agency forthwith after it is sent to the members;

This is additional requirement in addition to other requirement prescribed under Section 101(1) of the Act. Notice is required to be placed on website of the agency and on website of company, if any.

(iii) the notice of the meeting shall clearly state –

  1. (A) that the company is providing facility for voting by electronic means and the business may be transacted through such voting;
  2. (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 attending the meeting who have not already cast their vote by remote e-voting shall be able to exercise their right at the meeting;
  3. (C) that the members who have cast their vote by remote e-voting prior to the meeting may also attend the meeting but shall not be entitled to cast their vote again.

I do not understand “may” in sub – clause (A) here. Further, there is no point of ballot or polling paper in the meeting once e – voting for companies under these rules has been made compulsory.

(iv) the notice shall –

  1. (A) indicate the process and manner for voting by electronic means;
  2. (B) indicate the time schedule including the time period during which the votes may be cast by remote e-voting
  3. (C) provide the details about the login ID;
  4. (D) specify the process and manner for generating or receiving the password and for casting of vote in a secure manner.

[Clause (i) to (iv) of Rule 20(4)]

Public Notice

(v) the company shall cause a public notice by way of an advertisement to be published immediately on completion of despatch of notices for the meeting under clause (i) of sub-rule (4) but at least twenty-one days before the date of general meeting 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 at least once in English language in an English newspaper having country-wide circulation’ and specifying in the said advertisement, inter alia the following matters namely):-

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

(b) the date and time of commencement of remote e-voting;

(c) the date and time of end of remote e-voting;

(d) Cut-off date;

(e) The manner in which persons who have acquired shares and become members of the company after the despatch of notice may obtain the login ID and password;

(f) the statement that –

(A) remote e-voting shall not be allowed beyond the said date and time;

(B) the manner in which the company shall provide for voting by members present at the meeting; and

(C) 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

(D) 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;

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

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

Provided that the public notice shall be placed on the website of the company, if any, and of the agency.

Sole purpose of this public notice is to inform new members who have acquired shares and become members of the company after the despatch of notice about the meeting. What a requirement? When they are acquiring these shares, they must have done all research and got information. The Notice is already on website of the Company and Agency. All additional information required under public notice may be incorporate in notice to members.

Interestingly, this public notice is required to be published before 21 days of general meeting and understandably 14 days before cut – off date. So, new members require reading old newspaper to save them from reading old notice.

Remote Voting:

(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 off the general meeting;

Why members exercising their right through remote e- voting should have lesser time for decision making. Why not members exercising remote voting not allowed to exercising their right up to the close of electronic voting at venue of the meeting? There is no practical problem in synchronizing remote and on site vote. Rather, there may be issues to create different systems for same exercise. 

(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 dematerialized form, as on the cut-off date may opt for remote e-voting:

Provided that once the vote on a resolution is cast by the member, he shall not be allowed to change it subsequently or cast the vote again,

Provided further that 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;

The term “opt” create requirement for procedure for exercising option for the “opting”. There may be simple information in notice, that person exercised remote voting may not vote again when he decide to participate in general meeting.

(viii) at the end of the remote e-voting period, the facility shall forthwith be blocked:

Provided that if a company opts to provide the same electronic voting system as used during remote e-voting during the general meeting, the said facility shall be in operation till all the resolutions are considered and voted upon in the meeting and may be used for voting only by the members attending the meeting and who have not exercised their right to vote through remote e – voting

This blocking requires a complex mechanism to stop voting facility at end of remote voting and again limited opening for on spot voting. Whole system seems to challenge software developers only.

Scrutiniser:

(ix) the Board of Directors shall appoint one or more scrutinised, who may be Chartered Accountant in practice, Cost Accountant in practice, or Company Secretary in practice or an Advocate or any other person who is not in employment of the company and is a person of repute who, in the opinion of the Board can scrutinise the voting and remote e-voting process in fair and transparent manner:

Provided that the scrutiniser so appointed may take assistance of a person who is not in employment of the company and who is well-versed with the electronic voting system;

Now, scrutiniser need not be a professional or a person with certain qualification but may be any person of “repute”. He may be a person not well – versed with electronic voting system but his assistant must be well – versed.

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

On spot Voting:

(xi) the Chairman shall, at the general meeting at the end of discussion on the resolutions on which voting is to be held, allow voting as provided in clauses (a) to (h) of sub-rule (1) of rule 21, as applicable, 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 but have not cast their votes by availing the remote e-voting facility,

On spot voting may be paper voting. This clause seems to contradict with provision of sub – rule (2) of this rule, where word “shall” is used. Whole system require two register at venue of general meeting first for members who have already casted their vote and another for member who have not already casted their vote.

This system may create a problem when members who have already casted vote may influence decision of members yet to cast vote if a particular group decide to present in majority.

(xii) 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 in the presence of at least two witnesses not in the employment of the company and make, not later than three days of conclusion of the meeting, a consolidated scrutiniser’s report of the total votes cast in favour or against, if any, to the Chairman or a person authorised by him in writing who shall countersign the same:

Provided that the Chairman or a person authorised by him in writing shall declare the result of the voting forthwith;

Explanation.- it is here by clarified that the manner in which member have cast their votes that is affirming or negating the resolution, shall remain secret and not available to the Chairman, Scrutiniser or any other person till the votes are cast in the meeting.

This clause mandates for declaration of result within three days of the conclusion of the meeting. In term of Clause 35A of listing agreement, such result shall be declared within 48 hours from conclusion of general meeting.

(xiii) For the purpose of ensuring that members who have cast their votes through remote e-voting do not vote again at the general meeting, 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’ such as their names, folios, number of shares held and such other information that the scrutiniser may require, 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 name, address, folio number or client ID of the members, number of shares held by them, nominal value of such shares 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:

Provided that in case of companies whose equity shares are listed on a recognised stock exchange, the company shall, simultaneously, forward the results to the concerned stock exchange or exchanges where its equity shares are listed and such stock exchange or exchanges shall place the results on its or their website.

(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) a resolution proposed to be considered through voting by electronic means shall not be withdrawn.

This clause creates possibility of amendment to the resolution after notice or remote voting or at general meeting.

In my post on earlier e – voting rules I proposed an amendment to e – voting rules. I still find it valid and reproduced slightly amended version here:

The notice for electronic voting and for that purpose for general meeting of companies where electronic voting is applicable may be dispatched only electronically seven day before the general meeting to members with cut – off (or record date) earlier than ten day before the general meeting.

Electronic voting should take place just after resolution was moved and debated in a general meeting. The result of the voting may be declared within 24 hours form the conclusion of the general meeting. 

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

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8 responses to “E – Voting Rules 2015

  1. Pingback: Amendment in Management and Administration Rules | AishMGhrana

  2. Pingback: Index of Companies Law Posts | AishMGhrana

  3. Can you please clarify if we have to conduct elections to managing committee as per our AoA or through e-voting? Please note that this is a competitive elections and not one of “Assent/Dissent/Abstain” choices. Also note that the e-voting platforms today don’t have proper checks and balances for any sort of tally.

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    • Act and Rules are to be followed unless company is exempted. Section 8 companies have to follow presently “Assent/Dissent/Abstain” unless exempted. e- voting systems are proper with all check and balances.

      I may join you to demand competitive election process on e – voting platform.

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      • I beg to differ with your view that “proper checks and balances” are available. This is evident from the disclaimers in CDSL & NSDL sites. If proper checks and balances are there, accountability should not be absolved. Please take a look at that as well. Thanks for your quick responses.

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      • No doubt the law is good but should be applied where it makes a difference. A club of 1500 members, in its AoA, has defined a clear democratic process of electing its managing committee where voter secrecy is maintained, absolute transparency, security and ballot control is maintained during elections, candidate representatives allowed during counting so that the ballots and votes polled are completely tallied before announcing results. All of a sudden, a complete end-to-end tied up democratic election process is over turned with a law in the form of e-voting of resolutions that interprets competitive election to managing committee also in its ambit, provides no controls, secrecy is lost, no transparency and the club is forced to operate on trust without proper processes is causing a major confusion. What should be applied to companies to protect shareholder’s right is unnecessarily applied to section 8 companies which are not for profit. Kindly provide more clarity on whether the elections can be held as per AoA.

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  4. Good article. But applying this cumbersome process to a section 8 registered club with around 1500 members is going too much. Also, elections to managing committee of a club is competitive and not one of a resolution which is “assent/dissent/abstain” type. Is it permitted to consider everything as a resolution and conduct elections as per articles of the club? But, the MCA should exempt section 8 clubs from this process.

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