The new Companies Act, 2013, the revised listing agreement and the Companies (Management and Administration) Rules, 2014, have made it compulsory for all listed companies and companies having over 1000 shareholders to pass their shareholders’ resolutions by way of electronic voting. For shareholders who cannot cast their vote electronically, voting is required to be conducted by way of postal ballot system. Further, Rule 20(vi) of the Companies (Management and Administration) Rules, 2014 requires that all voting by electronic means should be concluded 3 days prior to the date of the general meeting. These provisions seem to imply that general meetings of shareholders like AGMs and EGMs have now become a mere procedural drill as no voting exercise needs to be conducted during such meetings.
This issue has also been debated before the Bombay High Court in relation to a scheme of amalgamation involving Godrej Industries. The High Court while recognizing the anomaly of law, emphasized the need for voting during physical meetings of shareholders in AGMs and EGMs. It was of the view that every shareholder has an inalienable right to ask questions, seek clarifications and receive responses before deciding his vote. A physical gathering of shareholders provides such a forum for deliberation, confrontation and face-to-face accountability. While undecided shareholders may make up their minds during a meeting, those shareholders who have strong views may attempt to persuade others. Merely receiving countless pages of information is not sufficient for a shareholder to exercise his right to participate and cast an informed vote.
Taking the view that the elimination of all shareholder participation at an actual meeting is anathema to some of the most vital shareholders’ rights, the High Court directed the Central Government and SEBI to file their replies before it for full consideration of the issues.