Passing of Ordinary & Special Resolution clarified by MCA amid COVID-19 outbreak

Soumya Bajpai

18 Aug, 2020

The issues are examined considering the overall situation of the present situation. As a result, the (MCA) Ministry of Corporate Affairs has issued the Circular No.14/ 2020 dated 8^th Apr 2020 that provides the clarifications in relation to the passing of Ordinary Resolution and Special Resolution by companies under the Companies Act, 2013 rules. The Ministry has come up with the relaxations for the provisions under the Companies Act 2013 to allow respective companies to pass ordinary and special resolutions regarding the urgent matters in lieu of the difficulties faced by the stakeholders due to amid COVID-19 outbreak.

With the circular, MCA has encouraged all the companies to take necessary decisions of urgent nature which require the approval of members, other than items of ordinary business. The companies required the mechanism of e-voting in accordance with the provisions of the Companies Act, 2013 without holding a general meeting, as it required a physical presence of members at a common venue. The circular also provides the procedure which shall be followed up by the companies in case holding of an extraordinary general meeting (EGM) which in the case is unavoidable. It shall be further noted that such a procedure needs to be adopted by the company for conducting an extraordinary general meeting (EGM) on or before 30th June 2020.

Companies which required to provide the facility of e-voting under the Companies Act, 2013  

1. By way of Video Conferencing (VC) or Other Audio-Visual Means (OAVM), unavoidable EGM may be held. The meeting must be scheduled according to the convenience of various persons positioned in different zones. The entire proceedings of the meeting have to be recorded. The recorded transcript shall be kept in the safe custody by the company. However, the public company shall upload the recorded transcript on the website of the company.
2. Through VC or OAVM such meeting must allow two-way teleconferencing or webex for easing the participation of the members. The participants are allowed to pose questions or may submit questions in advance on the e-mail address of the company. This facility can allow at least 1000 members to participate on a first-come-first served basis.
3. The restriction on first-come-first served basis may not apply to
   • Shareholders holding 2% or more shareholding
   • Institutional Investors
   • Promoters
   •  Auditors
   • Directors
   • Key Managerial Personnel
   •  The chairpersons of the Audit Committee, Stakeholder Relationship Committee, Nomination and Remuneration Committee
4. The facility for joining the meeting must be open before 15 minutes at least from the scheduled time from starting the meeting and must be closed after the 15 minutes after the closing of the meeting. Attendance of members shall be counted via VC or OAVM for the purpose of reckoning the quorum under Section 103 of Companies Act, 2013. Companies shall provide the facility of remote e-voting in accordance with the Companies Act, 2013, before the actual date of the meeting.
5. Members who are present in the meeting shall be allowed to vote through e-voting system or by a show of hands via VC or OAVM in the meeting except the following
   • The member who has casted vote on resolution through remote e-voting
   • Members who have been barred from the voting
6. Chairman for the meeting has to be appointed unless the AOA of the company require any specific person has to be appointed as a Chairman in the following manner for the meeting
   • Less than 50 members present: The Chairman has to be appointed according to the provisions of Section 104 of the Companies Act, 2013
   • In all other cases: The Chairman has to be appointed by a poll conducted during the meeting through the e-voting system.
7. It is a duty of the Chairman to ensure that the facility of e-voting system is available present in the meeting for the purpose of conducting a poll held via VC or OAVM. The voting must be conducted in the following ways
   1. Less than 50 members present: The voting can be conducted through the e-voting system or by a show of hands, unless it is demanded for poll made according to the provisions of Section 109 of Companies Act, 2013 in such a case, the voting is conducted through the e-voting system
   2. In all other cases: The voting must be conducted through the e-voting system.
8. The facility of appointment of proxies will not be available to members in the meetings held via VC or OAVM, where physical attendance of members has been dispensed. However, it must be noted that the appointment of representatives in accordance with Section 112 and Section 113 of the Companies Act, 2013. It is allowed for the purpose of remote e-voting or for participation and voting in the meeting held via VC or OAVM.
9. At least one independent director is required by the company to appoint, and the auditor or his authorized representative who is qualified for the auditor has to attend such meeting via VC or OAVM. The company shall encourage the institutional investors to attend and vote in the meeting who are members of the company via VC or OAVM.
10. Notice of the meeting contains a clear disclosure with respect to how to access and participate in the meeting, and the manner in which meeting shall be conducted is useful for the members. The company must also provide the helpline numbers through the Registrar & Transfer Agent, Technology Provider or any other person for those members who required assistance in using the technology before or during the meeting. A notice copy of meeting must be published on the website of the company, and all the required intimation must be made to the stock exchanges in case of the listed company.
11. Notice for meeting served before the date of circular, i.e. 8th April 2020, may adopt the framework required here in above after complying the following terms
    • Consent of member shall be obtained according to the provisions of Section 101(1) of the Companies Act, 2013
    • A fresh notice for shorter duration with due disclosures in consonance with the said circular is issued.
12. All resolutions passed according to the mechanism which has to be filed within 60 days of the meeting to the Registrar of Companies (ROC). There must be clearly mention the terms of the circular along with other provisions of the Companies Act, 2013 which were duly complied during the meeting.

Companies that are not required to provide a facility of e-voting under the Companies Act, 2013

1. By way of Video Conferencing (VC) or Other Audio-Visual Means (OAVM) unavoidable EGM may be held. The meeting must be scheduled according to the convenience of various persons positioned in different zones.
2. The participants are allowed to pose questions or may submit questions in advance on the e-mail address of the company. The facility can allow at least 500 members or members equal to the total number of members of the company on a first-come-first-served basis to participate whichever is lower.
3. Restriction on account of the first-come-first-served basis may not apply to
   • Shareholders holding 2% or more shareholding
   • Institutional Investors
   • Auditors
   • Promoters
   • Key Managerial Personnel
   • Directors
   • The chairpersons of the Audit Committee, Stakeholder Relationship Committee, Nomination and Remuneration Committee
4. The facility for joining the meeting must be open before 15 minutes at least from the scheduled time from starting the meeting. It must be closed after the expiry of 15 minutes after the prescribed scheduled time. Attendance of members via VC or OAVM must be counted for the purpose of reckoning the quorum according to the provisions of Section 103 of the Companies Act, 2013.
5. Chairman for the meeting has to be appointed unless the AOA of the company require a specific person has to be appointed as a Chairman in the following manner for the meeting. Less than 50 members present: The Chairman must be appointed according to the provisions of Section 104 of the Companies Act, 2013. The Chairman must be appointed by a poll conducted with the manner mentioned in the provisions.
6. The one independent director at least is required by the company to appoint, and the auditor or his authorized representative who is qualified has to attend such meeting via VC or OAVM. The company must encourage the institutional investors to attend and can vote in the meeting via VC or OAVM who are members of the company.
7. The facility of appointment of proxies will not be available to members in the meetings held via VC or OAVM, where physical attendance of members has been dispensed. However, it is noted that the appointment of representatives in accordance to the provisions of Section 112 and Section 113 of Companies Act, 2013. It is allowed for the purpose of voting via remote e-voting or for participation and voting in the meeting held via VC or OAVM.
8. At the time of sending notice of meeting the company shall provide a designated email address to all members so that all members can convey their vote, when a poll is required to be taken in the meeting on any resolution. The privacy issues and confidentiality of the password associated with the designated email address shall be strictly maintained by the company all the times. In respect to safeguards and authenticity of email address and rest details of the members must be maintained by the company.
9. During the meeting via VC or OAVM facility, the members shall cast their vote on the resolutions where a poll is required by sending emails through their email address which are registered with a company. Email for casting votes must only be sent at the designated email address in advance circulated by the company.
10. The Chairman can decide to conduct a vote by show of hands if the members present in the meeting are less than 50 in number. The demand for poll is made by a member must be according to the provisions of Section 109 of the Companies Act, 2013. The meeting can be adjourned for the purpose of counting votes and can be called later for declaration of the result.
11.  Notice of the meeting contains a clear disclosure with respect to how to access and participate in the meeting, and the manner in which meeting shall be conducted is useful for the members. The company must also provide the helpline numbers through the Registrar & Transfer Agent, Technology Provider or any other person for those members who required assistance in using the technology before or during the meeting. A notice copy of meeting has to be published on the website of the company.
12.  Notice for meeting served before the date of circular i.e. 8th April, 2020, may adopt the framework required herein above after complying the following terms as consent of member shall be obtained according to the provisions of Section 101(1) of the Companies Act, 2013. A fresh notice for a shorter duration with due disclosures in consonance with the said circular is issued.
13. All resolutions passed according to the mechanism which has to be filed within 60 days of the meeting to the Registrar of Companies (ROC). There must be clearly mention the terms of the circular along with other provisions of the Companies Act, 2013 which were duly complied during the meeting.

Conclusion

It is important to note further that the companies have to ensure all other compliances associated with the provisions relating to general meetings viz. making disclosures, authorization for voting by bodies corporate or inspection of related documents by members etc. as mentioned under the Companies Act, 2013 and the Articles of Associations of the company are made via electronic mode.

Moreover, the current nationwide lockdown scenario and threat posed by COVID-19, the compliance relaxations provided by the circular will definitely ease the difficulties faced by the companies for the passing of an ordinary and special resolution of urgent nature.