Voting and its Types, and Types of Resolutions

Section 106(2). A company shall not, except on the grounds specified in sub-section (1), prohibit any member from exercising his voting right on any other ground.

Read the two together. There are exactly two permitted grounds for disenfranchising a member, and both must be in the articles: unpaid calls or sums presently payable, and shares subject to a lien the company has exercised. Any other restriction is forbidden.

Section 106(3): splitting votes. On a poll, a member entitled to more than one vote, or his proxy or other person entitled to vote for him, need not, if he votes, use all his votes or cast in the same way all the votes he uses.

So a nominee holding for several beneficiaries can vote some shares for and some against. This is only possible on a poll, because a show of hands counts people.

Show of hands: section 107

Section 107(1). At any general meeting, a resolution put to the vote shall, unless a poll is demanded under section 109 or the voting is carried out electronically, be decided on a show of hands.

So a show of hands is the default, displaced by a poll or by electronic voting.

Section 107(2): the chairman's declaration. A declaration by the Chairman of the passing of a resolution or otherwise by show of hands, and an entry to that effect in the minutes book, shall be conclusive evidence of the fact of passing of such resolution or otherwise.

"Conclusive", not prima facie. Once the chairman declares and the minute is made, the fact that the resolution passed cannot be disputed by counting hands afterwards. That is why the right to demand a poll must be exercised before or on the declaration of the result, which is exactly what section 109(1) says.

Electronic voting: section 108

The Central Government may prescribe the class or classes of companies and manner in which a member may exercise his right to vote by the electronic means.

Short, and entirely delegated. The section itself creates no right; it empowers the rules. Its practical importance is that a company required to provide electronic voting is taken out of the show-of-hands default by section 107(1), and can use the proviso to section 110(1) to transact postal ballot business at a general meeting instead.

Poll: section 109

Section 109(1): who may demand. Before or on the declaration of the result of the voting on any resolution on show of hands, a poll may be ordered by the Chairman on his own motion, and shall be ordered by him on a demand made:

• (a) in a company having a share capital, by the members present in person or by proxy, where allowed, having not less than one-tenth of the total voting power, or holding shares on which an aggregate sum of not less than five lakh rupees, or such higher amount as may be prescribed, has been paid up; and
• (b) in any other company, by any member or members present in person or by proxy, where allowed, having not less than one-tenth of the total voting power.

Three things. The demand must be made before or on the declaration of the show-of-hands result. The chairman may order a poll himself but shall order one on a valid demand. And in a company with share capital the test is either one-tenth of the voting power or five lakh rupees paid up, so a small holder of expensive shares qualifies.

Section 109(2). The demand may be withdrawn at any time by the persons who made it.

Section 109(3): the two urgent polls. A poll demanded on adjournment of the meeting or on appointment of the Chairman shall be taken forthwith.

Section 109(4): everything else. A poll on any other question shall be taken at such time, not being later than forty-eight hours from the time when the demand was made, as the Chairman may direct.

Section 109(5): scrutinisers. The Chairman shall appoint such number of persons as he deems necessary to scrutinise the poll process and the votes and to report to him in the prescribed manner.

Section 109(6). Subject to the section, the Chairman has power to regulate the manner in which the poll shall be taken.

Section 109(7). The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken. So the poll displaces the show of hands entirely, even though the hands were counted first.

Postal ballot: section 110

Section 110(1). Notwithstanding anything in this Act, a company:

• (a) shall, in respect of such items of business as the Central Government may by notification declare to be transacted only by means of postal ballot; and
• (b) may, in respect of any item of business other than ordinary business and any business in respect of which directors or auditors have a right to be heard at any meeting, transact by means of postal ballot,

in the prescribed manner, instead of transacting such business at a general meeting.

Read (b) carefully: two exclusions. Ordinary business cannot go to a postal ballot, and neither can business on which directors or auditors have a right to be heard. The reason for the second is obvious: a postal ballot has no meeting, so a person entitled to speak would be silenced.

The proviso runs the other way: an item that must be done by postal ballot under clause (a) may instead be transacted at a general meeting by a company required to provide electronic voting under section 108, in the manner provided in that section. Electronic voting at a meeting achieves the same reach as a postal ballot.

Section 110(2). If a resolution is assented to by the requisite majority by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf.

Types of resolutions: section 114

Section 114(1): ordinary resolution. A resolution is an ordinary resolution if:

• the notice required under this Act has been duly given; and
• it is required to be passed by the votes cast in favour, whether on a show of hands, or electronically or on a poll, including the casting vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy or by postal ballot, exceeding the votes, if any, cast against by members so entitled and voting.

The test is "exceed", so a simple majority of votes actually cast. Abstentions and absentees are irrelevant, and the chairman's casting vote counts.

Section 114(2): special resolution. A resolution is a special resolution when:

• (a) the intention to propose it as a special resolution has been duly specified in the notice calling the general meeting or other intimation to the members;
• (b) the notice required under this Act has been duly given; and
• (c) the votes cast in favour, on a show of hands, electronically or on a poll, by members entitled and voting in person or by proxy or by postal ballot, are not less than three times the number of the votes, if any, cast against.

Two things students get wrong. The majority is three to one of votes cast, which is often loosely called "three fourths", and it is not three fourths of the members or of the capital. And the notice must say the resolution is intended as a special resolution; a resolution passed by a large majority is not a special resolution if the notice did not say so.

Note also what section 114(2) does not mention: the chairman's casting vote. It appears in sub-section (1) and not in sub-section (2).

Resolutions requiring special notice: section 115

Where, by any provision of this Act or in the articles, special notice is required of any resolution, notice of the intention to move it shall be given to the company by such number of members holding not less than one per cent of total voting power, or holding shares on which an aggregate sum not exceeding five lakh rupees, as may be prescribed, has been paid up, and the company shall give its members notice of the resolution in the prescribed manner.

Distinguish special notice from a special resolution. They are unrelated. Special notice is a notice to the company by members that they intend to move a resolution; the resolution itself may be an ordinary one. It is required, for example, for a resolution to remove a director or to appoint an auditor other than the retiring auditor.

Resolutions at an adjourned meeting: section 116

Where a resolution is passed at an adjourned meeting of (a) a company, (b) the holders of any class of shares, or (c) the Board of Directors, the resolution shall for all purposes be treated as having been passed on the date on which it was in fact passed, and shall not be deemed to have been passed on any earlier date.

Short, and it settles a question of dates. The resolution does not relate back to the date of the original meeting. That matters wherever a period runs from the date of a resolution, such as the thirty days for filing under section 117 or the one year for completing a buy-back under section 68(4).

A worked example

Pandharpur Sugars Limited holds a general meeting. A resolution to sell a division is put to the vote.

Show of hands. By section 107(1) it is decided on a show of hands, twenty-two hands for and eighteen against. The Chairman declares it carried. Once he declares it and the minute is made, that declaration is conclusive evidence of the passing under section 107(2).

A poll is demanded. Before the declaration, members present holding twelve per cent of the total voting power demand a poll. That is not less than one-tenth, so under section 109(1)(a) the Chairman shall order it. He would equally have been bound had they held shares with five lakh rupees paid up, whatever the percentage.

When it is taken. The question is not adjournment or the appointment of the Chairman, so under section 109(4) the poll is taken at such time as the Chairman directs, not later than forty-eight hours from the demand. He appoints scrutinisers under section 109(5) and regulates the manner under section 109(6).

The result. On a poll the votes are counted by shareholding under section 47, and the resolution is lost. By section 109(7) the poll result is the decision of the meeting, and the earlier show of hands counts for nothing.

Splitting. A bank holding shares as nominee for several clients votes six lakh shares in favour and two lakh against. That is permitted on a poll by section 106(3).

A disenfranchised member. Mr Ghorpade has not paid a call. The company's articles provide that a member may not vote on shares with calls unpaid, so under section 106(1) his votes are not counted. The company also wanted to bar a member for criticising the Board in the press; section 106(2) forbids it, because that is not one of the two permitted grounds.

A special resolution. The company later proposes to alter its articles, which needs a special resolution. The notice states the intention to propose it as a special resolution, as section 114(2)(a) requires. On a poll, 9,00,000 votes are cast in favour and 2,80,000 against. Three times 2,80,000 is 8,40,000, and 9,00,000 exceeds it, so the resolution is carried. Had the notice failed to say it was intended as a special resolution, it would not have been one however large the majority.

An ordinary resolution. On another item, 4,00,000 votes are cast for and 3,90,000 against. Votes in favour exceed votes against, so it is carried as an ordinary resolution under section 114(1), and the Chairman's casting vote, if the articles give him one, is counted in that total.

A postal ballot. The company wishes to pass a resolution that the Central Government has notified as transactable only by postal ballot. Under section 110(1)(a) it must use the postal ballot. But because it is required to provide electronic voting under section 108, the proviso lets it transact the item at a general meeting using electronic voting instead.

What cannot go to a postal ballot. It could not put the adoption of the accounts to a postal ballot, that being ordinary business, nor any item on which the auditors have a right to be heard: section 110(1)(b).

Removing a director. Members holding one and a half per cent of the total voting power give the company special notice under section 115 of their intention to move a resolution to remove a director. The resolution itself is an ordinary resolution; the special notice is simply the advance warning, and the company must then give its members notice of the resolution in the prescribed manner.

An adjourned meeting. The meeting is adjourned and the resolution is finally passed on 12 September. By section 116 it is treated as passed on 12 September, not on the date of the original meeting, so the thirty days for filing under section 117 run from then.

Distinctions that carry marks

What this does NOT mean

It does not mean a poll needs a majority to demand. One-tenth of the voting power, or shares with five lakh rupees paid up, is enough, and the Chairman may order one himself.

It does not mean the chairman's declaration can be challenged by recounting hands. Section 107(2) makes it conclusive, which is why the poll must be demanded before or on the declaration.

It does not mean a three fourths majority makes a special resolution. The notice must also have specified the intention to propose it as one.

It does not mean any business can go to a postal ballot. Ordinary business, and business on which directors or auditors have a right to be heard, are excluded.

Quick revision

• 106(1) and (2): the articles may bar voting only on unpaid calls or sums presently payable and on shares over which the company has exercised a lien; no other ground is permitted. 106(3): on a poll, votes may be split.
• 107(1): show of hands is the default, unless a poll is demanded or voting is electronic. 107(2): the Chairman's declaration plus the minute is conclusive evidence.
• 108: the Central Government may prescribe electronic voting.
• 109(1): poll before or on the declaration; Chairman may order it himself and shall on a demand by one-tenth of the total voting power or holders of shares with five lakh rupees paid up; one-tenth of voting power where there is no share capital. (2) withdrawable. (3) poll on adjournment or appointment of the Chairman, taken forthwith. (4) any other poll, not later than forty-eight hours. (5) scrutinisers. (6) Chairman regulates. (7) the poll result is the decision.
• 110(1): postal ballot compulsory for notified items; optional for any item other than ordinary business and business on which directors or auditors have a right to be heard. Proviso: a company with electronic voting may do a clause (a) item at a general meeting instead. (2) deemed duly passed at a general meeting.
• 114(1) ordinary: notice duly given, and votes in favour exceed votes against, including the Chairman's casting vote.
• 114(2) special: the notice specifies the intention, notice duly given, and votes in favour not less than three times the votes against.
• 115 special notice: by members holding one per cent of total voting power or shares with the prescribed sum paid up; the company then notifies its members.
• 116: a resolution at an adjourned meeting is passed on the day it is in fact passed, not earlier.

Test yourself

1. On what grounds may a company restrict a member's voting rights? Only on the two grounds in section 106(1), and only if the articles so provide: that calls or other sums presently payable on the shares have not been paid, or that the company has exercised a right of lien over them. Section 106(2) forbids any other ground.

2. Who may demand a poll, and by when? The Chairman on his own motion, or, on demand, members present in person or by proxy having not less than one-tenth of the total voting power or holding shares on which not less than five lakh rupees has been paid up. The demand must be made before or on the declaration of the result of the show of hands: section 109(1).

3. When must a poll be taken? A poll on adjournment of the meeting or on the appointment of the Chairman must be taken forthwith; any other poll at such time as the Chairman directs, not later than forty-eight hours from the demand: section 109(3) and (4).

4. Define an ordinary and a special resolution. An ordinary resolution is one where, notice having been duly given, the votes cast in favour, including the Chairman's casting vote if any, exceed the votes cast against. A special resolution requires the notice to specify the intention to propose it as such, notice duly given, and votes in favour not less than three times the votes cast against: section 114.

5. What business cannot be transacted by postal ballot? Ordinary business, and any business in respect of which directors or auditors have a right to be heard at a meeting: section 110(1)(b).

6. Distinguish special notice from a special resolution. Special notice under section 115 is notice given by members to the company of their intention to move a resolution, requiring holders of not less than one per cent of the total voting power or of shares with the prescribed sum paid up; the resolution moved is often an ordinary one. A special resolution under section 114(2) is a kind of resolution, needing the intention specified in the notice and a majority of not less than three to one of the votes cast.