What is proxy Under Section 105 Of company Act. With Secretarial Standards and Case Laws.

Who is proxy ?(What do you mean by proxy?)

A person who is appointed by a member to attend and vote at a meeting in the absence of the member at the meeting is termed as proxy. Thus, proxy is an agent of the member appointing him. The term ‘proxy’ is also used to refer to the instrument by which a person is appointed as proxy.

Section 105 of the Companies Act, 2013 provides that a member, who is entitled to attend and to vote, can appoint another person as a proxy to attend and vote at the meeting on his behalf. This section also provides the manner of appointing proxy.

Who can appoint Proxy ?

(1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person as a proxy to attend and vote at the meeting on his behalf (member)

a proxy shall not have the right to speak at such meeting and shall not be entitled to vote except on a poll.

unless the articles of a company otherwise provide, this sub-section shall not apply in the case of a company not having a share capital.

Central Government may prescribe a class or classes of companies whose members shall not be entitled to appoint another person as a proxy

A Proxy can act on behalf of Members not exceeding fifty and holding in the aggregate not more than ten percent of the total share capital of the company carrying Voting Rights.

Example:

ABC Ltd. is a company with 1,000 shares, each carrying voting rights. This means the total share capital of the company is 1,000 shares.

Let’s assume the following:

• John holds 40 shares (4% of the total share capital).
• Jane holds 30 shares (3% of the total share capital).
• Robert holds 20 shares (2% of the total share capital).
• Sophia holds 10 shares (1% of the total share capital).

Now, suppose David is appointed as a proxy to attend the Annual General Meeting (AGM) on behalf of the shareholders.

• David can represent John, Jane, Robert, and Sophia, as long as their total shareholding doesn’t exceed 50 members and the aggregate shares don’t exceed 10% of the total share capital.
• In this case:
  • John (40 shares) + Jane (30 shares) + Robert (20 shares) + Sophia (10 shares) = 100 shares in total.
  • 100 shares out of 1,000 shares = 10% of the total share capital.

This is within the limit of 10% of the total share capital and no more than 50 members. Therefore, David can legally act as the proxy for these four shareholders.

David can cast votes on behalf of these members as per their instructions at the AGM.

a member holding more than ten percent, of the total share capital of the Company carrying voting rights may appoint a single person as proxy and such person (who is appointed as proxy) shall not act as proxy for any other person or shareholder.

(2) In every notice calling a meeting of a company which has a share capital, or the articles of which provide for voting by proxy at the meeting, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one or more proxies, to attend and vote instead of himself, and that a proxy need not be a member. If default is made in complying such provision every officer of the company who is in default shall be liable to penalty of five thousand rupess.

(Interpition:- a company sends a notice for a meeting, it must clearly mention that members who have the right to attend and vote can choose someone else (a proxy) to attend and vote on their behalf. This applies to companies with share capital or if their rules allow voting by proxy. The proxy can be either: A non-member (any individual outside the company) or A member of the company)

Any provision contained in the articles of a company which specifies or requires a longer period than forty-eight hours before a meeting of the company, for depositing with the company or any other person any instrument appointing a proxy or any other document necessary to show the validity or otherwise relating to the appointment of a proxy in order that the appointment may be effective at such meeting, shall have effect as if a period of forty-eight hours had been specified in or required by such provision for such deposit.

(Interpition:- The law states that a company cannot require proxy forms or related documents to be submitted more than 48 hours before a meeting. Even if the company’s Articles of Association mention a longer deadline, it will automatically be considered as 48 hours. This ensures that all companies follow the same rule and members have enough time to appoint a proxy without unnecessary restrictions. A company may specify a shorter period than 48 hours for submitting proxy forms (i.e. Form No. MGT-11))

As per SS-2 :- In case of a private company, the Proxy shall be appointed in accordance with this paragraph, unless otherwise provided in the Articles.

What are the legal implications if a company, on its own initiative (suo moto), provides a list of proxies to its members?

 If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one of a number of persons specified in the invitations are issued at the company’s expense to any member entitled to have a notice of the meeting sent to him and to vote thereat by proxy, every officer of the company who issues the invitation as aforesaid or authorises or permits their issue, shall be liable to a penalty of fifty thousand rupees]:

Provided that an officer shall not be liable  under this sub-section by reason only of the issue to a member at his request in writing of a form of appointment naming the proxy, or of a list of persons willing to act as proxies, if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy.

(Interpitation:- The law says that a company cannot send invitations to its members to appoint a specific person or group of people as proxies at the company’s expense. If a company does this, the officers responsible could face a fine of ₹50,000.

However, an officer can not be penalized if they simply provide a proxy appointment form or a list of people willing to act as proxies when requested by a member in writing. The form or list if be available to all members who are eligible to vote by proxy. )

What is mathodes of appointing Proxy?

The instrument appointing a proxy shall—

(a) be in writing; and

(b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer or an attorney duly authorised by it.

An instrument appointing a proxy, if in the form MGT-11, 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. ( it’s mean MGT-11 has an overriding effect over the provisions of a company’s Articles of Association regarding proxy appointments.)

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, provided not less than three days’ notice in writing of the intention so to inspect is given to the company.

AS Per SS-2

If a proxy is appointed for more than fifty members in a company, what is the procedure the proxy must follow, and what happens if the proxy fails to comply with this procedure?

If a Proxy is appointed for more than fifty Members, he shall choose any fifty Members and confirm the same to the company before the commencement of specified period (means meeting time) for inspection. In case, the Proxy fails to do so, the company shall consider only the first fifty Proxies received as valid.

6.2.2 An instrument of Proxy duly filled, stamped and signed, is valid only for the Meeting to which it relates including any adjournment thereof.

An instrument of Proxy is valid only if it is properly stamped as per the applicable law. Unstamped or inadequately stamped Proxies or Proxies upon which the stamps have not been cancelled are invalid.

6.4.1 The Proxy-holder shall prove his identity at the time of attending the Meeting.

6.4.2 An authorised representative of a body corporate or of the President of India or of the Governor of a State, holding shares in a company, may appoint a Proxy under his signature.

6.5 Proxies in Blank and Incomplete Proxies

6.5.1 A Proxy form which does not state the name of the Proxy shall not be considered valid.

6.5.2 Undated Proxy shall not be considered valid.

6.5.3 If a company receives multiple Proxies for the same holdings of a Member, the Proxy which is dated last shall be considered valid; if they are not dated or bear the same date without specific mention of time, all such multiple Proxies shall be treated as invalid.

6.6 Deposit of Proxies and Authorisations

6.6.1 Proxies shall be deposited with the company either in person or through post not later than forty-eight hours before the commencement of the Meeting in relation to which they are deposited and a Proxy shall be accepted even on a holiday if the last date by which it could be accepted is a holiday.

In case of a private company, the Proxy shall be deposited with the company in accordance with this paragraph, unless otherwise provided in the Articles.

In case of adjourned.

6.6.2 If the Articles so provide, a Member who has not appointed a Proxy to attend and vote on his behalf at a Meeting may appoint a Proxy for any adjourned Meeting, not later than forty-eight hours before the time of such adjourned Meeting.

Revocation of proxy

If after appointment of proxy, the member himself attends the meeting, it amounts to automatic revocation of proxy. But once the proxy has voted, it cannot be revoked.

6.7.1 provides that if a Proxy had been appointed for the original meeting and such meeting is adjourned, any Proxy given for the adjourned Meeting revokes the Proxy given for the original Meeting.

Para 6.7.2 provides that a proxy later in date revokes any Proxy/Proxies dated prior to such Proxy.

Para 6.7.3 provides that a Proxy is valid until written notice of revocation has been received by
the company before the commencement of the Meeting or adjourned Meeting, as the case may
be.

An undated notice of revocation of Proxy shall not be accepted. A notice of revocation shall be signed
by the same Member (s) who had signed the Proxy, in the case of joint Membership. A Proxy need not be informed of the revocation of the Proxy issued by the Member.

Inspection of proxy:

Every member entitled to vote at a meeting of the company, or on any resolution to be moved thereat, is entitled to inspect the proxies lodged with the company, if at least 3 days’ notice in writing is given to the company. Such notice shall be received at least three days before the commencement of the Meeting. Such inspection can be taken during the period beginning 24 hours before the time fixed for the commencement of the meeting, during the business hours of the company, and ending with the conclusion of the meeting. Such inspection should be allowed between 9:00 am and 6:00 pm during such period.
A fresh requisition confirming to the above requirements, shall be given for inspection of Proxies in case
the Original Meeting is adjourned.

Record of Proxies

6.9.1 All Proxies received by the company shall be recorded chronologically in a register kept for that purpose.

6.9.2 In case any Proxy entered in the register is rejected, the reasons therefor shall be entered in the remarks column.

Relevant case laws related to proxy:-

1. ** J. J. S. K. Prakash v. M. R. Krishnan (2010)

Facts:
In this case, the appellant (J. J. S. K. Prakash) appointed a proxy to attend a general meeting of the company. The company’s articles allowed voting by proxy but limited the number of proxies one person could represent to 50. The appellant was representing more than 50 members and was unable to exercise his voting rights.

Issue:
Whether a proxy can represent more than 50 members, and what happens if the proxy fails to comply with the company’s limit.

Judgment:
The court held that the limit of 50 members applies, and proxies representing more than this number were invalid. “The company’s Articles of Association take precedence in such matters.” This case emphasized the importance of compliance with company rules, specifically the number of proxies one person can represent.

2. ** Shyam Sundar Agarwal v. U.P. Co-op. Bank Ltd. (1994)

Facts:
Shyam Sundar Agarwal was a member of the U.P. Co-op. Bank Ltd. and had appointed a proxy to vote on his behalf. However, the proxy was not properly registered with the company. The company rejected the proxy’s vote.

Issue:
Whether the rejection of the proxy’s vote due to failure to comply with registration requirements was valid.

Judgment:
The court ruled in favor of the company, stating that the failure to register the proxy rendered the vote invalid. “A proxy appointment must be registered properly with the company to be valid.” The court also emphasized that failure to meet procedural requirements cannot be excused.

3. ** Indian Oil Corporation Ltd. v. Amrit Lal Jain (1999)

Facts:
In this case, Amrit Lal Jain contested the validity of a proxy appointment for a shareholders’ meeting of Indian Oil Corporation. The issue arose because the proxy was not duly signed and did not meet the documentation requirements specified by the company.

Issue:
Whether the proxy appointment was valid given the lack of compliance with signing and documentation requirements.

Judgment:
The court ruled that the proxy appointment was invalid because it did not meet the procedural requirements. “The proxy form must be duly signed by the appointing member to be valid.” This case highlighted the significance of proper documentation and signatures in proxy appointments.

4. ** B.S. Krishnamurthy v. K. S. K. Murthy (2008)

Facts:
This case involved a dispute over the appointment of a proxy at a general meeting of a private limited company. The appellant argued that the proxy appointment was invalid because it had not been submitted in the prescribed time frame.

Issue:
Whether the appointment of a proxy was valid despite not being submitted within the stipulated 48 hours before the meeting.

Judgment:
The court held that a proxy form must be submitted within the prescribed period (48 hours before the meeting), as stipulated in Section 105 of the Companies Act, 2013. “Failure to comply with the deadline renders the proxy invalid.” The case reinforced the legal importance of timely submission for a valid proxy appointment.

5. ** D. C. G. R. Narayan v. Tamil Nadu State Co-operative Bank Ltd. (2002)

Facts:
D. C. G. R. Narayan appointed a proxy to vote at the Annual General Meeting (AGM) of the Tamil Nadu State Co-operative Bank. The issue arose when the bank claimed that the proxy failed to provide sufficient evidence of authority, and the proxy was not allowed to vote.

Issue:
Whether the proxy had the right to attend and vote in the absence of sufficient documentation.

Judgment:
The court held that insufficient documentation (lack of authority proof) invalidated the proxy appointment. “A proxy must provide clear evidence of authorization, including a duly signed proxy form or document.” This judgment emphasized the necessity of documentary proof when appointing a proxy.

Key Terms and Phrases Explained:

1. Proxy: A person appointed to attend and vote at a meeting on behalf of a member.
2. 50-member Limit: A proxy cannot represent more than 50 members or 10% of the share capital, whichever is less.
3. Procedural Compliance: Refers to the requirement that proxy forms be submitted properly, signed, and within specified time limits.
4. Articles of Association: A company’s internal rules that may govern proxy appointments.
5. Registration of Proxy: The process by which a company officially records a proxy to validate its appointment.
6. 48-hour Rule: Refers to the requirement that proxy forms must be submitted at least 48 hours before a meeting.
7. Proof of Authority: The necessary documentation, such as a signed proxy form, which proves the authority of the proxy to act on behalf of the member.

These cases highlight the importance of procedural compliance and the rights of proxies, as well as the strict legal requirements for the validity of proxy appointments in company meetings.