Mandatory E-voting: Listed Companies Feel the Heat of Regulatory Overlap

Listed companies are in a bind over mandatory e-voting despite the Corporate Affairs Ministry giving them a breather by extending the implementation date till December 31 this year. The provision was applicable from April 1.

Need to conform to norm

This is because listed companies would still need to conform to a SEBI-mandated listing agreement norm, which requires that e-voting facility be provided for all shareholder resolutions passed in general meetings, say company law experts.

The Securities and Exchange Board of India had in mid-April amended the listing agreement (clause 35B) to stipulate that e-voting facility be provided for all shareholder resolutions in general meetings. SEBI’s move was intended to align the listing agreement with the new company law.

The new company law had ushered in the concept of e-voting to ensure wider shareholder participation in the decision-making process in companies.

On Tuesday, the Corporate Affairs Ministry said that e-voting provisions in the new company law would not be mandatory till December 31, this year.

New circular

Now that the Ministry has come up with such a move, SEBI should bring in a new circular postponing the revised clause 35B till December 31, Lalit Kumar, Partner, J Sagar Associates, a law firm, told Business Line.

“Until that happens legally, listed companies would have to go with SEBI’s existing requirement of mandatory e-voting on all shareholder resolutions. This could pose problems for them particularly when the Ministry has given time for compliance,” he added.

SN Ananthasubramanian, former president of Company Secretaries Institute, said the latest Ministry clarification would have little impact on the SEBI requirement of mandatory e-voting.

“If one wants listed companies to benefit from the latest Ministry clarification, then SEBI also needs to suitably amend clause 35B of the listing agreement,” he said. Also, to be authentic and relevant, e-voting should commence only after the resolutions are put to vote by the chairman at the general meeting and after conclusion of the discussions, he added.

Currently, e-voting — which is seen as a better form of shareholders’ participation — gets concluded before an annual general meeting. This may not be the right approach for shareholder democracy, say legal experts. 

Business Line, New Delhi, 19-06-2014