Postal Ballot is defined under section 2(65) means “voting by post or through any electronic mode”. Postal Ballot definition was never given in the Companies Act, 1956 because the concept of Postal Ballot was introduced into the Companies Act, 1956 by the 2001 Amendment and postal ballot under the 1956 Act included only voting by postal ballot not by electronic mode.
Section 110 of the Companies Act, 2013 refers to Postal Ballot. Section 110(a) refers to the mandatory items which has to be transacted only by postal ballot as per Rules laid down by Central government. Rule 7.20(16) specifies the list of items which has to be mandatorily transacted only by postal ballot. These are:
(a) Alteration of the objects clause of the memorandum and in the case of the company in existence immediately before the commencement of the Act, alteration of the main objects of the memorandum;
(b) Alteration of articles of association in relation to insertion or removal of provisions which, under sub-section (68) of section 2, are required to be included in the articles of a company in order to constitute it a private company;
(c) Change in place of registered office outside the local limits of any city, town or village as specified in sub-section (5) of section 12;
(d) Change in objects for which a company has raised money from public through prospectus and still has any unutilized amount out of the money so raised under sub-section (8) of section 13;
(e) Issue of shares with differential rights as to voting or dividend or otherwise under sub-clause (ii) of clause (a) of section 43;
(f) Variation in the rights attached to a class of shares or debentures or other securities as specified under section 48;
(g) Buy-back of shares by a company under sub-section (1) of section 68;
(h) Election of a director under section 151 of the Act;
(i) Sale of the whole or substantially the whole of an undertaking of a company as specified under sub-clause (a) of sub-section (1) of section 180;
(j) Giving loans or extending guarantee or providing security in excess of the limit prescribed under sub-section (3) of section 186;
Section 110(b) specifies that a company MAY in respect of any items of business other than ordinary business and any business in respect of which the directors and auditors have a right to be heard, transact by postal ballot. So this is a discretion on the part of the company to transact any business which does not fall under the list of mandatory items as per Rule 7.20(16) and which is not ordinary business to have such items transacted by postal ballot. Any business where the directors or auditors have a right to be heard refers to the resolution for the removal of the directors or auditor.
Rule 7.20 lays down the procedures to be followed by companies while transacting business through postal ballot.
7.20. (1) For the purposes of section 110, where a company is required or decides to pass any resolution by way of postal ballot, it shall send a notice to all the shareholders, along with a draft resolution explaining the reasons therefor and requesting them to send their assent or dissent in writing on a postal ballot or by electronic means within a period of thirty days from the date of dispatch of the notice.
(2) The notice shall be sent by speed post or registered post acknowledgement due or by electronic means and shall include with the notice where it is sent by post, a postage pre-paid envelope for facilitating the communication of the assent or dissent of the shareholder to the resolution within the said period of thirty days.
(3) An advertisement shall be published 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 a wide circulation in that district, about having dispatched the ballot papers and specifying therein, inter alia, the following matters: ,
(a) a statement to the effect that the business is to be transacted by postal ballot which includes voting by electronic means;
(b) the date of completion of dispatch of notices;
(c) the date of commencement of voting;
(d) the date of end of voting;
(e) the statement that any postal ballot received from the member beyond the said date will not be valid and voting whether by post or by electronic means shall not be allowed beyond the said date;
(f) a statement to the effect that members, who have not received postal ballot forms may apply to the company and obtain a duplicate thereof; and
(g) contact details of the person responsible to address the grievances connected with the voting by postal ballot including voting by electronic means.
(4) The notice of the postal ballot shall also be placed on the website of the company forthwith after the notice is sent to the members and such notice shall remain on such website till the last date for receipt of the postal ballots from the members.
(5) The Board of directors shall appoint one scrutinizer, who is not in employment of the company and who, in the opinion of the Board can conduct the postal ballot voting process in a fair and transparent manner.
(6) The scrutinizer shall be willing to be appointed and be available for the purpose of ascertaining the requisite majority.
(7) If a resolution is assented to by the requisite majority of the shareholders by means of postal ballot including voting by electronic means, it shall be deemed to have been duly passed at a general meeting convened in that behalf.
(8) Postal ballot received back from the shareholders shall be kept in the safe custody of the scrutinizer. After the receipt of assent or dissent of the shareholder in writing on a postal ballot, no person shall deface or destroy the ballot paper or declare the identity of the shareholder.
(9) The scrutinizer shall submit his report as soon as possible after the last date of receipt of postal ballots but not later than seven days thereof;,
(10) The scrutinizer shall maintain a register either manually or electronically to record their assent or dissent received, mentioning the particulars of name, address, folio number or client ID of the shareholder, number of shares held by them, nominal value of such shares, whether the shares have differential voting rights, if any, details of postal ballots which are received in defaced or mutilated form and postal ballot forms which are invalid.
(11) The postal ballot and all other papers relating to postal ballot including voting by electronic means, shall be under the safe custody of the scrutinizer till the chairman considers, approves and signs the minutes. Thereafter, the scrutinizer shall return the ballot papers and other related papers/register to the company who shall preserve such ballot papers and other related papers/register safely.
(12) The consent or otherwise received after thirty days from the date of issue of notice shall be treated as if reply from the member has not been received.
(13) The results shall be declared by placing it, along with the scrutinizer’s report, on the website of the company.
(14) The resolution shall be deemed to be passed on the date of declaration of its result.
(15) The provisions of Rule 7.18 regarding voting by electronic means shall apply, as far as applicable, mutatis mutandis to this rule in respect of the voting by electronic means.
Provided that One Person Company and other companies having members upto fifty are not required to transact any business through postal ballot.
Earlier only listed public company was mandated to transact items via postal ballot. Now this has been extended to all companies except a One Person Company and other companies having members upto fifty in number. So any company, public or private which has 51 shareholders and above are required to transact the business through postal ballot as per this section and the relevant Rules.
Section 108 of the Companies Act, 2013 introduces the concept of voting by electronic means and provides that Central Government may prescribe the class or classes of companies in which a member may exercise his right to vote by electonic means. Rule 7.18 lays down detailed rules in this regard.
7.18.(1) For the purposes of section 108, every listed company or a company having five hundreds or more shareholders may provide to its members facility to exercise their right to vote at general meetings by electronic means. So basically every listed company and every other company which has 500 or more shareholders MAY provide facility of electronic voting to its members. So at the present moment, it is not mandatory for a company to provide the facility of voting by electronic means unlike the postal ballot where certain items have to be mandatorily transacted by postal ballot. Well, voting by electronic means is one method of voting by postal ballot and with the advent of technology, more and more companies will be able to offer this facility to its members.
The other provisions of Rule 7.18 are given below:
(2) For the purposes of section 108, a member may exercise his right to vote at any general meeting by electronic means and company may pass any resolution by electronic voting system in accordance with the provisions of this rule.
Explanation.-I. For the purposes of this rule, ‘voting by electronic means’ or ‘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, such that the entire voting exercised by way of electronic means gets registered and counted in an electronic registry in a centralized server with adequate ‘cyber security’.
II. ‘Secured system’ means computer hardware, software, and procedure that –
(a) are reasonably secure from unauthorized access and misuse;
(b) provide a reasonable level of reliability and correct operation;
(c) are reasonably suited to performing the intended functions; and
(d) adhere to generally accepted security procedures.
III. “Cyber security” means protecting information, equipment, devices, computer, computer resource, communication device and information stored therein from unauthorized access, use, disclosures, disruption, modification or destruction.
(3) A company which opts to provide the facility to its members to exercise their votes at any general meeting by electronic voting system shall follow the following procedure:
Explanation- For the purposes of this rule, ‘agency’ means an agency approved by the Ministry of Corporate Affairs and appointed by a company for providing and supervising electronic platform for voting by electronic means.
Provided that the company may itself get registered with Ministry of Corporate Affairs for providing and supervising electronic platform for voting by electronic means. The Ministry may authorize the agency from the approved list.
(i) The notices of the meeting shall be sent to all the members/ auditors of accompany/directors/key managerial personal either, –
(a) by Registered Post or speed post with AD, or
(b) through electronic means like registered e-mail id etc,
in accordance with the provisions of section 101.
(ii) The notice shall also be placed on the website of the company, if any and of the agency forthwith after it is sent to the members.
(iii) The notice of the meeting shall clearly mention that the business may be transacted through electronic voting system and the company is providing facility for voting by electronic means.
(iv) The notice shall clearly indicate the process and manner for voting by electronic means and time schedule including the time period during which the votes may be cast, address of places for casting votes duly sorted in order of name of states or union territories, where the members can cast their votes electronically.
(v) The company shall cause an advertisement to be published, not less than five days before the date of beginning of the voting period, 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 a wide circulation in that district, about having sent the notice of the meeting and specifying therein, inter alia, the following matters:
(a) statement that the business may be transacted by electronic voting;
(b) the date of completion of sending of notices;
(c) the date and time of commencement of voting through electronic means;
(d) the date and time of end of voting through electronic means;
(e) the statement that voting shall not be allowed beyond the said date and time;
(f) website address of the company and agency, if any, where notice of the meeting is displayed; and
(g) contact details of the person responsible to address the grievances connected with the electronic voting.
(vi) E-voting shall remain open for not less than seven days and not more than ten days.
(vii) During the e-voting period, shareholders of the company, holding shares either in physical form or in dematerialized form, as on the record date, may cast their vote electronically:
Provided that once the vote on a resolution is cast by the shareholder, he shall not be allowed to change it subsequently.
(viii) At the end of the voting period, the portal where votes are cast shall forthwith be blocked.
(ix)The Board of directors shall appoint one scrutinizer, who is not in employment of the company and is a person of repute who, in the opinion of the Board can scrutinize the e-voting process in a fair and transparent manner:
Provided that the scrutinizer so appointed may take assistance of a person who is not in employment of the company and who is well-versed with the e-voting system.
(x)The scrutinizer shall be willing to be appointed and be available for the purpose of ascertaining the requisite majority.
(xi)The scrutinizer shall, within a period of not exceeding three working days from the date of conclusion of e-voting period, unblock the votes in the presence of at least two witnesses and make a scrutinizer’s report of the votes cast in favour or against, if any, forthwith to the Chairman.
(xii) The scrutinizer shall maintain a register either manually or electronically to record the consent or otherwise, received, mentioning the particulars of name, address, folio number or client ID of the shareholders, number of shares held by them, nominal value of such shares and whether the shares have differential voting rights.
(xiii) The register and all other papers relating to electronic voting shall remain in the safe custody of the scrutinizer till the chairman considers, approves and signs the minutes. Thereafter, the scrutinizer shall return the register and other related papers to the company.
(xiv) The results declared along with the scrutinizer’s report shall be placed on the website of the company and on the website of the agency within two days of passing of the resolution at the relevant general meeting of members.
(xv) Subject to receipt of sufficient votes, the resolution shall be deemed to be passed on the date of the relevant general meeting of members.
(xvi) Words and expressions used in this rule but not defined shall, unless the context otherwise requires, bear the meaning, if any, as assigned to them under the Act and Information Technology Act, 2000.
So the scope for Company secretary in Practice has been enhanced with the Scrutinizer’s requirement for postal ballot and also for Electronic Voting process.
The Rules as mentioned above are in the Draft Rules stage and yet to be finalised/ notified by the Central government.