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Overall Voting by Show of Hands: 2020 COVID-19 Regimes

calendar03 Jun, 2020
timeReading Time: 8 Minutes
Voting by Show of Hands

Voting by show of hands shows the gestures of voting that is a cast for any resolution where the members put on their hands to vote ‘for’ or in ‘contradiction’ of the resolution. However, proxies may not vote in those cases whereas voting by poll mention to a system where polling paper is circulated among the members existent at the meeting, in individual or by proxy. It is to necessitate the voting right in the poll in the quantity of the number of shares alleged by each of them. 

Yes, we understand that these issues are quite complex and conditional by nature. No worries, this blog will ensure you know all the parameters associated with Voting by show of hands including the overall provisions and additional implications around the COVID-19 scenario.

What is voting by show of hands under Sec 107?

A resolution place to the vote of the meeting at any general meeting will be decided on a show of hands, except the voting is carried out electronically OR a poll is required under section 109.

voting by show of hands under Sec 107

Legislative Experiences

Following Companies Bill, 2011, the notes on clauses are as follows:-

Clause 107:- This clause seeks to offer that a general meeting, a resolution place to vote shall and agrees to sections 177 and 178 of the Companies Act, 1956 (now 2013), except the voting is approved if electronically or a poll is demanded. An access in the minute’s book is conclusive evidence when an announcement by the Chairman is a resolution is accepted.” 

Judicial Experiences

Case Law: – Re. Horbury Bridge Coal Co. [(1897) 11 Ch. D 109 as mentioned in Mahaliram Santhalia vs Fort Gloster Jute Manufacturing Company Ltd. AIR 1955 Cal 132]

  1. First of all, it will get contemplate what may be labelled by the common law of the country as to voting at meetings. It was held in this case for the first time relating to the nature of voting by show of hands. 
  2. It was acknowledged undoubtedly that, according to such common law, votes at all meetings are engaged by show of hands.” 
  • Case Law: – M/s Amarjit Singh vs Chanjiti Singh and Ors [(2004) (1) SCR 397]

The Supreme Court of India made these following explanations on voting by show of hands while discharging the case.

Those are as follows:- 

  1. Voting at all meetings is portrayed by a show of hands in common law countries. Voting by show of hands suggests counting the persons present who indicate to vote by holding up (rising) their hand and who are permitted to vote. 
  2. People having legal right to be existent at the meeting-may demand a poll during the assumption of the voting.
  3. The chairperson is the proper person to allow or refuse a poll which, which is in the landscape of an appeal by one of the parties discontented with the conclusion of the Chairperson upon the voting by show of hands. 
  4. A signal of their vote or choice by holding up their hands normally is asked by the Chairman of the Presiding officer persons who are present. Furthermore, modern parliamentary practices a motion which is approved by applause or by show of hands
  5. It is convincing, and can be challenged only by a demand for poll, once the governing officer records the votes and announces the result after counting the votes.
  6. If the demand is not made, the Chairman’s declaration will standpoint. It becomes a concluding resolution of the meeting once a motion has been nominated or voted upon.
  • Case Law: – Dhakeswari Cotton Mills Ltd vs. Nil Kamal Chakravorty and others [AIR 1937 Cal 645 173 Ind Cas 622]
  1. The Calcutta High Court in case of perceived that “no difficulty arises if there is no disagreement about the Chairman’s declaration”.
  2. On the other hand, the court has to regulate on evidence what the declaration was, if there is any dispute

Case Law: – Re. Indian Zoedone Co [(1884) 26 Ch D 70 (CA)

  1. It was held in this case that the resolution can collide down and turns out to be invalid by a court of law, if there is a fraud or unsuitable exclusion of votes.

General Meetings Experiences 

  • Following the “circular no. 20/2014 dated 17.06.2014”, there are few positions that have been illuminated. This provision applies to all general meetings comprising of meeting called on requisition of shareholders. 

No Proxy on show of hands for vote

  • A proxy can demand poll or connect a demand for poll, however, it cannot vote on a show of hands in any general meeting. The senior owner/holder in case of joint holders and committee or legal guardian in case of a member of ‘unsound mind’ may vote on a show of hands, as delivered conditions in article 52 and 53 of Table F of Schedule I of the Act

Chairman Casted vote

  • In the occasion of an equality of votes, the Chairman of the meeting has a casting vote. Unless otherwise delivered in the articles, the casting vote can be obtainable on voting by show of hands as well. 

Private companies

  • According to the exemption given by notification no-G.S.R. 464 (E) dated 05.06.2015, this section applies to a private company unless its articles provide otherwise. Therefore, the articles of the private company make its regulations as in respect of the method of voting and may eliminate the applicability of this section. 

Convincing signal or Evidences

  • When the two situations of a declaration by Chairman– (a) whether entry of same at minutes are delighted and (b) resolution has been passed or not, it shall be a decisive evidence of the fact that said resolution was either passed or not passed by voting by show of hands, as delivered in sub-section (2) of section 107

Action Points of Secretary

  • By way of a show of hands at the first illustration on any resolution, the Chairman of the meeting should take the voting on it with his consideration. After that, he must select the members of the meeting present ‘against’ and ‘for’, then the resolution should be finalized.
  • The chairman should note the counted number of associates voting for either side. This can be done by the company secretary as per the direction of the Chairman.
  • The Chairman should declare the outcome of the resolution after ensuring that there is no demand for the poll left.
  • Along with including process of proceedings of the meeting, announcement of results of the resolution is obligatory to be entered in the minutes of the general meetings. The results will be meant to be decisive evidence of the fact the resolution was approved or if not. 

Multifaceted Punishment

  • Section 450 of the Act will be applicable to penal provision for contravention of any sections. As a result, the company and every officer of the company who is in evasion should be punishable with a fine up to Rs. 10,000 as the penalty for such infringement. 
  • Fine for the penalty shall be Rs. 1,000 for every day of breaking rules where the contravention is a continuing one. The offenses committed by officer and company, are compoundable under section 441 of the Act which is punishable only with a fine.

Read our article: MCA issues clarification on the spending of CSR funds for COVID-19

What are the Practical Steps involved while voting at the Annual General Meeting by shareholders by a poll/ show of hands?

  • Company’s articles of association will be deliberated as the first port of call, as these will state how voting is to be curtained at a general meeting. 
  • Activations for a business at their Annual General Meetings to be voted on by a poll are known to be a growing trend for registered companies. It can be said that when a poll is entitled and some listed companies have altered their articles, and abolished voting by a show of hands completely; in that case, the full power of the shareholders can get felt only.
  • The concluding result reflects the voting preferences of all shareholders who have boarded a proxy vote, not just those who attend the AGM. Therefore a poll vote is measured to be more democratic comparatively. Conversely, this process can involve at the AGM and mean in a lengthier way.
  • The UK Shareholders Association has found otherwise, whereas PIRC and other proxy voting agencies contemplated poll voting to be the most suitable way for registered companies to undertake business at general meetings.
  • It appears that one of the few ways that private shareholders attending the AGM can have an influence on the board when the private shareholders wish to preserve voting by a show of hands. 
  • If there is a consensus voting by a show of hands, then it is easier and more open on a practical level at the AGM. Regardless of how many shares they hold, each shareholder existing in person or by proxy has one vote.
  • After AGM, the result of the AGM can be announced straightforwardly. On the other hand, the Chairman must be prepared to call a poll and the Company Secretary should include this procedure within the Chairman’s script if there is opposition to a proposal or a shareholder demands a poll.
  • Based on the company’s circumstances and its shareholder base, each company needs to determine the method to be used.
  • The Notice of AGM should explain the reasons if companies move to vote on a poll and set out that voting will be held by-poll which will also need to be reproduced in the Chairman’s lettering. Counting & checking against proxy forms lodged against the register of members, preparing a report and final certificate of the result of the poll is indispensable. It is because the Liaison with your company’s registrars will be key fundamentals as they will be responsible for issuing poll cards. To ensure the proper equipment is brought to the AGM to conduct the poll, you must highlight this in advance.
  • The consequences of the AGM must be announced via an RNS announcement as soon as possible following the conclusion of the AGM from whichever process is used. It must be showed on the company’s website and uploaded to the National Storage Mechanism.
  • Similarly, remember that the company should enlighten when announcing the results of voting what actions it intends to take to understand the reasons behind the result if there is an important proportion of votes cast against a resolution (measured to be about 20% or more).

What MCS had come up because of the COVID-19 outbreak concerning voting by showing hands?

MCS had come up because of the COVID-19 outbreak concerning voting by showing hands
  • The Ministry of Corporate Affairs (‘MCA’) had derived up with the circular dated April 08, 2020, and delivered certain relaxations from the provisions of Companies Act, 2013 (‘Act’) for the reason of the COVID-19 outburst.
  • The rules are to be furnished till June 30, 2020, which includes leading the extra-ordinary general meeting (‘EGM’ or ‘Meeting’) for passing the resolutions of urgent nature through (‘VC’) video conferencing and (‘OAVM’) other audio-visual resources.
  • In addition to that, voting by show of hands and postal ballot, etc., additional circular dated April 13, 2020 (Jointly mentioned to as ‘EGM Circulars’) was brought in the potency in order to provide more clarity on the modalities, to be followed by the companies for conducting EGM which is a method of issuance of notice[1]
  • Because of the social distancing standards and other restrictions and in determination to the aforesaid circulars thereof, MCA delivered for the companies having the calendar year as the fiscal year- vide it’s circular dated April 21, 2020, for a postponement of 3 months for allotting annual general meeting (‘AGM’).

What are the requirements to be conformed to the e-voting facility by the companies which are not obligatory for it?

  • AGM may be accompanied through the VC/OAVM facility only if the company has the email addresses of 1/2 of its total number of members, in its records.
  1. To be capable of the above said, holding shares of more than 1000 rupees in face value or exceeding 1% of the total paid-up share capital must be adhered to in the case of a Nidhi Company.
  2. Hold at least 75% of the paid-up share capital in case of other companies having a share capital.
  3. The standards will be contingent upon who has the right to exercise not less than 75% of the total voting power applicable at the meeting in case of companies not consuming share capital.
  • The company shall take all essential steps to register the email addresses of all persons who have not listed their email addresses with the company.
  • As an alternative of physical copies, the board’s report, other documents, and financial statements will be distributed through e-mail only.
  • On the subject of the members to give their mandate for receiving dividends directly in their bank accounts through the Electronic Clearing Service (ECS) or any other means, in that case, the companies shall make adequate provisions for permitting the same.
  • If bank accounts are not obtainable to the person/member, in that case, the company shall work upon standardization of the postal services; dispatch the dividend cheque/warrant by post to the shareholders.

Conclusion

The companies shall guarantee that all additional compliances connected with the provisions concerning general meetings or the making of disclosures, or authorizations for voting by bodies corporate, examination of related documents/registers by members, etc. as delivered in the Act and the articles of association of the company are completed through electronic mode.

If you would like advance information or detailed assistance in formulating for your Annual General Meeting, please connect with our CorpBiz experts. Our CorpBiz group will be at your disposal if you want expert advice on any aspect of Entity Compliances and registration. We will help you to ensure complete compliances as per your desired activities, ensuring the fruitful and well-timed completion of your work.

Circular14_08042020

Read our article:COVID-19: MCA Relieved Date of Holding AGM for the Companies

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