Why e-voting is important for shareholders

Shriram Subramanian
InGovern Research Services

In a circular dated July 13, 2012, SEBI ushered in a quiet revolution by making it mandatory for the top 500 companies to adopt eVoting for postal ballots. It has to be noted that eVoting is not yet suggested for AGMs, EGMs and CCMs. This is a step in the right direction as eVoting:
a) Allows any investor based in remote areas of our country like Kalimpong or Kutch and even large institutional investors based outside of India like Boston or Tokyo to exercise their votes without much hassle. eVoting provides equal opportunity for all investors to participate in shareholder decisions as investors don’t need to be physically present at the place of the meeting.
b) Results in less paperwork and reduces cost for all market participants.
c) Improves accuracy as it results in less errors or invalid votes.
d) Reduces lead time for investors to exercise votes; currently custodians need greater lead time of 7 to 10 days.
On 30th May 2011, the Ministry of Corporate Affairs passed guidelines called Companies (passing of resolutions by postal ballot) Rules, 2011, the following businesses have to be conducted through postal ballots:
a) Alteration in the Object Clause of Memorandum;
b) Alteration of Articles of Associations in relation to insertion of provisions defining private company;
c) Buy-back of own shares by the company under sub-section (1) of section 77A
d) Issue of shares with differential voting rights as to voting or dividend or otherwise under sub-clause (ii) of clause (a) of section 86;
e) Change in place of Registered Office outside local limits of any city, town or village as specified in sub-section (2) of section 146;
f) Sale of whole or substantially whole of undertaking of a company as specified under sub-clause (a) of sub-section (1) of section 293;
g) Giving loans or extending guarantee or providing security in excess of the limit prescribed under sub-section (1) of section 372A;
h) Election of a director under proviso to sub-section (1) of section 252 of the Act;
i) Variation in the rights attached to a class of shares or debentures or other securities as specified under section 106.
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These guidelines also specify that a company may issue notice for Postal Ballot through electronic mail. If the voting can be done through electronic mode, then the notice has to clearly state the process and manner for voting to be provided by an agency. As per MCA circular dated December 27, 2011, any agency providing e-voting platform is required to obtain a certificate  from Standardization Testing and Quality Certification (STQC) Directorate, Department of Information Technology, Ministry of Communication and IT, Government of India, New Delhi
The eVoting infrastructure is provided by NSDL and CDSL – India’s two leading depositories. Companies need to just sign up for availing the facilities. India has good technology infrastructure and the rapid spread of Internet should be leveraged for greater shareholder involvement.
The Companies Bill 2011, pending in Parliament, has provision for eVoting for all types of meetings. Clause 108 of the bill is a new clause and proposes to empower the Central Government to prescribe class or classes of companies and manner in which a member may exercise his right to vote at a meeting by electronic means. The biggest benefit of eVoting will be realized once it is adopted for AGMs, EGMs and CCMs. Apart from the above listed benefits, eVoting will make One Share = One Vote. The current practice at AGMs, EGMs, and CCMs of voting by “Show of hands” is not truly representative of investor votes.
In the coming years, SEBI should propose guidelines:

• eVoting for AGMs, EGMs, CCMs – make it a non-mandatory so that leading companies will adopt it.
• Make eVoting mandatory for top 500 companies.
• Make eVoting mandatory for all listed companies.

It may interest readers that Infosys has been conducting non-mandatory eVoting at its AGMs for the past 9 years, but, not taking count of the votes polled by eVoting. Also, many companies have already started adopting eVoting for Postal Ballots.
eVoting will truly empower investors to exercise their votes and is a step in the right direction for greater shareholder participation. The author is Founder & MD of InGovern Research Services