The Securities and Exchange Board of India issued its guidelines, making it mandatory for the country's top 500 companies to offer the e-voting facility to its shareholders, after a large number of votes sent through the postal ballot route were found invalid.
For instance, when Sesa Goa and Sterlite Industries were seeking shareholder approval for the merger of the two entities in January, a large number of votes were found to be invalid on counting. The deal was recently passed at the company's annual general meeting (AGM).
The e-voting process works in the following way. Depositories, such as CDSL and NSDL, will create a database of investors of companies opting for e-voting.
"They communicate user address and password to each investor via post or e-mail. Once an investor receives this login address and password, he can go to the depository website and register for the e-voting facility. He will be asked to change the password the first time and this would be the permanent password for future use. In future, if an investor wants to use the e-voting facility for another company, he just needs to login with his registered password and vote," explained a CDSL official.
"There will be accurate counting of votes, elimination of postal ballots getting lost in-transit and sufficient time for shareholders to vote till the end of the voting cycle," says Prithvi Haldea, chairman and managing director (CMD), Prime Database. Haldea worked closely in deliberating on and implementing the e-voting process.
"Now, even Non-Resident Indians (NRI) can take part in important decisions that have to be taken through the e-voting route," says CJ George, managing director, Geojit BNP Paribas Financial Services.
This could be done away with when voting is done electronically, say market men. "You will have a login ID and password which will be required to cast your vote. The e-voting platforms will have prefilled forms where the shareholder will only have to cast their vote," explained the CDSL official.
Invalid votes are a big issue in postal ballots. A vote is called invalid, for instance, if there are issues with the signature on the ballot, if the shareholder has not ticked the option in a proper way, the details of the shares held by the investor do not match the records with the company and so on.
Though e-voting is not a substitute for an AGM, it will be useful when companies have to pass special resolutions. By taking out the aspect of physical presence, Sebi is ensuring that the process is made easier for investors to participate.
In the past, in order to cast your vote or to have your say in important decisions of a company whose shares you hold, you needed to be physically present at the shareholders' meeting or ask for a postal ballot whereby you would send in your votes.
At the most you can have a "proxy" vote or have someone stand in for you.
This was indeed a tedious process, which meant many investors would skip such meetings or not send in their votes. As a result, they would miss out on opportunities to take part in company matters, such as mergers and acquisitions, fund raising and so on.
A stock exchange official said that currently majority of the votes do not come in, that is, shareholders do not participate.