Appointment of proxies - Changes in the Companies Act, 2013 - Dr S. Chandrasekaran - Article published in Business Advisor, dated - December 25, 2014 http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/

1. Volume IX Part 6 December 25, 2014 15 Business Advisor
Appointment of proxies: Changes in the
Companies Act, 2013
Dr S. Chandrasekaran
A member of a company has a right to appoint a proxy
to attend the annual general meeting or extra-ordinary
general meeting and any adjournment of such
meetings. Interestingly, such proxies are not having a
right to speak or seek any clarification or explanation
from the management. Proxies are also not entitled to
vote at such meetings on show of hands and are
entitled to vote only on poll. Proxies can only say “yes”
or “no” at poll in general meetings and beyond that
proxies do not have any more rights.
Changes in the Act
The provisions relating to proxies in Companies Act, 2013, (the Act) are
similar to that of the Companies Act, 1956, except the following changes.
1. A person appointed as proxy shall not act for not exceeding fifty members
of a company.
2. The cumulative holding of all such members shall not be more than 10%
voting rights on the total share capital of such company.
3. A member holding more than 10% of voting rights in a company may
appoint a single person as his proxy, but such proxy in that case cannot
act as proxy for any other member.
4. The proxy is also required to sign the proxy form before it is lodged with
the company.
5. Unless otherwise provide in an Article, provisions related to proxy shall
not apply in the case of a company not having a share capital.
6. Central Government may prescribe a class or classes of companies
whose members shall not be entitled to appoint another person as a
proxy.
Prominence statement in notice of general meetings
It is the responsibility of the company having a share capital to provide an
opportunity to its members to appoint proxy on their behalf and to attend
and vote on a poll at general meetings. Notice convening general meetings

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shall show with reasonable prominence a statement that a member entitled
to attend and vote is entitled to appoint a proxy. Further, such appointed
proxy need not be a member of such company and has a right to vote at the
meetings on behalf of the member on a poll. The proxy is further entitled to
attend and vote at any adjourned meetings. A member of a company
registered under the Act as a non-profit organisation shall not be entitled to
appoint any other person as his proxy unless such other person is also a
member of such company. In a private company having only two
shareholders, giving an opportunity to appoint a proxy would be a futile
exercise; however, such companies are also required to comply with the
prominence statement in the notice convening general meetings. A private
company having only two shareholders requires both the shareholders to
attend in person to form a quorum, and such disclosure is not necessary.
Deposit of proxies
The proxy has to be in writing. The Act has substituted the form of proxy
with Form-MGT 11. The proxy form has to be signed by the member and
also by the proxy. The proxy form has to be stamped with revenue stamp.
The proxy form has to be deposited with the company forty-eight hours
before the commencement of the meeting. It is the duty and responsibility of
the company to make arrangements to collect the proxies if such time falls
on holiday of the company. An instrument appointing a proxy, if in the form
as prescribed, shall not be questioned on the ground that it fails to comply
with any special requirements specified for such instrument by the articles
of a company.
Restriction on voting rights
The articles of association of a company may provide that no member shall
exercise any voting right in respect of any share registered in his name on
which any calls or other sums presently payable by him have not been paid,
or in regard to which the company has exercised any right of lien. In such
case, a member can appoint any person as his proxy but the proxy though
entitled to attend a meeting but having no right to speak or vote on poll,
An instrument appointing a proxy, if in the form as
prescribed, shall not be questioned on the ground that it fails
to comply with any special requirements specified for such
instrument by the articles of a company.

3. Volume IX Part 6 December 25, 2014 17 Business Advisor
such appointment of proxy would be futile exercise. A proxy is allowed to
exercise all his votes differently.
Rights of proxies to demand poll
Proxies appointed in companies having share capital have a right to demand
poll. However, to demand a poll there shall be a minimum of one-tenth of
voting powers or members holding not less than five lakh rupees face value
of shares of such company.
Inspection of proxy register
Every member entitled to vote at a meeting of the company, or on any
resolution to be moved thereat, shall be entitled during the period beginning
twenty-four hours before the time fixed for the commencement of the
meeting and ending with the conclusion of the meeting, to inspect the
proxies lodged, at any time during the business hours of the company. Such
notice shall be given not less than three days before the commencement of
meeting in writing of the intention so to inspect. The right to inspection of
proxies lodged is restricted to members and not to the proxies.
Conclusion
It would have been better had the Act extended the changes made to include
a right to speak for shareholders at general meetings. Practically, in most of
the general meetings, there is no separate enclosure for proxies to identify
from members of a company. On a show of hands, it would be difficult to
identify when the person raises his hand, if he is a member or a proxy. Good
governance needs to extend a right to proxies to seek clarifications,
explanations from the management on behalf of a member.
The concept of proxy firms which is prevalent in the US is now developing in
India and a move to allow proxies to voice at general meetings would be
good governance and would enhance shareholders‟ democracy.
(Dr S. Chandrasekaran is Senior Partner, Chandrasekaran Associates, Delhi)
Good governance needs to extend a right to proxies to seek
clarifications, explanations from the management on behalf
of a member.