POWER OF ATTORNEY BY SHAREHOLDERS


I first time wrote on the matter of the power of Attorney in the year 2015 here. Later, I pointed out the option of power of attorney while discussing on draft guidance note on General Meeting on Secretarial Standard on General Meetings (SS-2). I refereed a 92-year-old case law namely Tata Iron & Steel Co. Ltd., In Re., AIR 1928 Bom. 80, which is still considered as a valid reference law for proxies. Nowadays due to Covid-19 related travel restrictions, the requirement of Attorney is being felt in cases where proxies may not be used like in two-person companies. There is a temporary law made through MCA Circulars which allows for a limited period to conduct a general meeting through video conferencing. As the abovementioned post was brief and received many queries.

“Where a Power of Attorney contains the following words “… to appear and to represent me at any meeting of any joint-stock company in which I am interested as a shareholder or debenture holder or preference shareholder, or as a member or otherwise and to vote there, and also to grant proxies to any other person …” These words are sufficient for an attorney to exercise powers of the member in a general meeting. [Tata Iron & Steel Co. Ltd., In Re., AIR 1928 Bom. 80].”

This is pointed out that the applicable law at that point was the Companies Act, 1913. There was the provision of the Proxy not only in the Companies Act, 1913 but also in the Companies Act, 1882 if not in the Companies Act, 1866 (I do not have a copy of 1866 or any earlier Act). Yes, there was not an elaborate provision in these laws but none of these laws including the Companies Act, 2013 has anything to prevent the appointment of an attorney. Hence, the abovementioned case law is still valid.

In absence of anything contrary, for the purpose of appointment of an attorney by a member, Section 2 of the Power of Attorney Act, 1882.

“The donee of a power-of-attorney may, if he thinks fit, execute or do any instrument or thing in and with his own name and signature, and his own seal, where sealing is required, by the authority of the donor of the power; and every instrument and thing so executed and done, shall be as effectual in law as if it had been executed or done by the donee of the power in the name, and with the signature and seal, of the donor thereof. This section applies to powers-of-attorney created by instruments executed either before or after this Act comes into force.”

It is also mentioned that for the purpose of quorum the Companies Act, 2013 require person presently present. I am of the view that where the powers given to the attorney are clearly indicated to exercise all power of the shareholder and to represent him in person, the attorney so constituted shall be counted as member personally present.

Assume in the year 2018, in a two-member company one member is unable as she was admitted in the hospital for a serious medical procedure will the general meeting will be forced to be adjourned beyond the statutory period. No. this provision of attorney rescues this company from the unwarranted situation.

We may appreciate that provision of the proxy is an additional advantage given and come without any clause denying appointment of an attorney. The Power of Attorney Act, 1882 is very clear and valid. As the Companies Act does not enter into the scope of personal laws of shareholders, it also does not enter into the law of appointment of attorneys. We need to have harmonious and practical construction of all laws at a point of time.

Para 3.2 of the GUIDANCE NOTE ON GENERAL MEETINGS effective from 1st October 2017 on page 49 read as under:

If any member of a company has given a general power-of-attorney in favour of some other person to make investments on his behalf and to attend to all matters incidental and consequential thereto including attending General Meetings of companies in which investments are so made and if at General Meetings of such companies, the donee is present, then it would be deemed, by virtue of the provisions of Section 3 of the Powers-of-Attorney Act, 1882, that the donor is personally present and the donee will not be deemed to be a Proxy of the donor [Cf. Tata Iron & Steel Co. Ltd., In Re., AIR 1928 Bom. 80]

Accordingly, a holder of a Power of Attorney may exercise all powers of the done shareholders and shall be treated as member personally present not as a proxy. Accordingly, he will be counted for the purpose of quorum.

Additional Suggestion

Every company may amend its articles to explicitly allow the appointment of power of attorney to be executed by a member and provided a copy to the company well before the time of a General Meeting. This will help the company to know the person appointed as an attorney as in case of incapacity of registered members, the attorney shall be the point of contact for all-purpose.

This is also advisable to mention whether the attorney shall be entitled to receive a dividend or original members shall still receive the dividend. Section 123(5) permits payment of dividend to the registered shareholder of such share or to his order or to his banker and shall not be payable except in cash. Similarly, there may be specific clarity that in case of death, legal heir of deceased members shall have right as per the personal law applicable unless it is specifically mentioned.

Aishwarya Mohan Gahrana

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One response to “POWER OF ATTORNEY BY SHAREHOLDERS

  1. Thank You. this was very useful. it was very difficult to find consolidated information on this topic

    Like

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