E-voting stuck in parliament

Infosys among 46 firms that are in advance stage of signing up for the CDSLV platform, as Infosys Technologies kicks off 2010-11’s first annual general meeting (AGM) in Bangalore on Saturday, it would have, albeit reluctantly, missed an excellent opportunity to promote enhanced democracy for about 3,70,644 of its individual shareholders scattered across the country. 

Infosys is among the 46 companies that are in advance stage of signing up for CDSL Ventures' (CDSLV) electronic voting platform, said sources familiar with the development. A senior official at CDSLV, who did not wish to be named, told Financial Chronicle that although it was ready with its e-voting system no company had formally signed the e-voting agreement with it due to the absence of a green signal from the provisions of the Companies Act, 1956, that governs the procedures for AGMs and other shareholder meetings. 

Corporate affairs minister Salman Khurshid had formally inaugurated the CDSLV system in November 2009.However, a provision enabling electronic voting is among the amendments proposed to the Companies Act through the Companies Amendment Bill, 2009, that is yet to be passed by parliament. Since the bill is pending approval, companies have been wary of coming on board the CDSLV platform, the official said. The CDSLV platform is designed to enable shareholders of listed companies to vote on resolutions at any shareholders' meeting through the website www.evotingindia.com. After a company, its registrar and the transfer agent sign up with CDSLV, it will provide a list of the company’s shareholders with their demat account details around the time it sends out the notice for an AGM. 

CDSLV will generate unique passwords for these shareholders, which the company has to communicate forthwith, either in the AGM notice itself, or separately. Before or on the AGM date, the e-voting site will allow shareholders to log in and after authenticating themselves vote 'yes' or 'no' towards the resolutions listed for the AGM. 

What is not clear is how these votes will be counted along with ‘a show of hands’ votes at a company's AGM. This has not been clarified in the pending amendments to the Companies Act. “A shareholders’ meeting is not just for voting. There is also discussion and debate on the resolutions,” said Jayant Thakur, a Mumbai-based chartered accountant specialising in securities law cases.

The 46 companies with which CDSLV has had advance talks include 15 that are part of the 50-stock S&P CNX Nifty Index or the 50-stock CNX Nifty Junior Index. The current aggregate market capitalisation of these 15 companies is about 11 per cent of the aggregate market cap of the 100 companies in Nifty and Nifty Junior. About 23.64 lakh individual shareholders hold shares in these 15 companies.

The remaining 31 companies are Aban Offshore, Apollo Hospitals, Balrampur Chini, BEML, Essel Propack, Kansai Nerolac, 3i Infotech, Akruti City, Alstom Projects India, Areva T&D India, Arihant Superstructures, Bajaj Holdings, Cambridge Technology Enterprises, Facor Steels, First Winner Industries, GNFC, Gujarat Foils, Gujarat State Petronet, Indoco Remedies, Info Edge (India), Jhaveri Flexo, Joindre Capital, Mindteck (India), Mohit Paper, Multibase India, N R Agarwal Industries, Phoenix Mills, Raymond, Sumedha Fiscal Service, Thiru Arooran Sugars and Vishal Retail. Together these 31 companies have 14.46 lakh individual shareholders, 839 foreign institutional investor shareholders and 587 domestic institutional investor shareholders holding, on an aggregate, stakes of 16.77 per cent, 8.90 per cent and 11.02 per cent, respectively.

E-voting will enable thousands of investors to vote from the comforts of their homes and offices. V V Raut, CEO of Central Depository Services, the parent company of CDSLV, said during the November 17, 2009, inauguration of the system, “While it will help many investors to participate in the decision-making process the cost for companies will be low as we are currently charging only out-of-pocket expenses to companies.”

The real power of e-voting will be felt when Mukesh Ambani and Anil Ambani will not have to book large stadiums to accommodate lakhs of shareholders. On March 31, 2010, Mukesh Ambani-controlled Reliance Industries had 35.06 lakh shareholders and Anil Ambani-controlled Reliance Power had 34.95 lakh shareholders. "Even if 10-20 per cent of these shareholders vote through the e-voting platform it will bring tremendous pressure on managements," said Virendra Jain, who heads Midas Touch Investors Association, the New Delhi-based Sebi-registered investor group.

Experts are excited about the potential an internet-based system can have for shareholder democracy. FIIs, based in Singapore, Hong Kong, London, Dubai and New York, find it tedious to attend AGMs in various corners of India where the companies' registered offices are located. 

In the e-voting era, they will find it easier to vote and if they do it will act as a major step towards shareholders exercising their power. Ganesh Ramamurthy, director, KPMG India, said, "The current system of voting by a show of hands is archaic as it does not connect the number of shares held by an individual with a vote." He said, in the new system, companies should also declare the results of e-voting immediately after the AGM. 


Financial Chronicle, New Delhi, 09-06-2010