Meaning and Legal Basis
A Proxy is a person appointed by a member of a company to attend and vote at a meeting on their behalf when the member is unable to be present personally. The concept of proxy is governed by Section 105 of the Companies Act, 2013. According to this provision, every member entitled to attend and vote at a meeting has the right to appoint another person as a proxy. The proxy need not be a member of the company unless the Articles of Association provide otherwise. The appointment of a proxy must be in writing and signed by the appointing member. The purpose of allowing proxies is to ensure shareholder participation in company meetings, even when physical attendance is not possible. This mechanism strengthens corporate democracy by enabling members to exercise their voting rights indirectly and ensures quorum requirements are met without inconvenience to shareholders.
Rights, Restrictions, and Procedure
Under Section 105 of the Companies Act, 2013, a proxy can vote only on a poll and not on a show of hands, unless the Articles state otherwise. The proxy form must be deposited with the company at least 48 hours before the meeting. A member may appoint more than one proxy to represent different shares held by them. However, a proxy does not have the right to speak at the meeting unless permitted by the Articles. The law also restricts a single individual from acting as proxy for more than fifty members or for shares exceeding ten percent of the total share capital carrying voting rights. These restrictions ensure that proxy appointments are not misused to gain undue influence over company decisions. Proper compliance with proxy rules promotes transparency, fairness, and orderly conduct of meetings.
Importance in Corporate Governance
The concept of proxy plays a vital role in modern corporate governance, especially in large companies with widely dispersed shareholders. Many shareholders may not be able to attend meetings due to geographical, professional, or personal constraints. Proxies enable such shareholders to participate in crucial decisions related to dividends, appointment of directors, mergers, or amendments to company documents. By facilitating wider participation, proxies enhance accountability of management and directors. Courts have consistently upheld the validity of voting when statutory requirements are met. Thus, proxy voting ensures inclusiveness in corporate decision-making while balancing control through legal safeguards provided under company law.
Real-Time Example
Consider a shareholder of a listed company who resides abroad and cannot attend the Annual General Meeting held in India. To ensure participation, the shareholder appoints a trusted representative as a proxy by submitting a duly signed proxy form within the prescribed time. During the meeting, a poll is conducted on a resolution for appointment of a new director. The casts the vote on behalf of the shareholder. Even though the shareholder is absent, their voting right is effectively exercised through the proxy. This demonstrates the practical utility of Section 105 of the Companies Act, 2013, ensuring shareholder involvement despite physical absence.
Mnemonic to Remember
A simple mnemonic to remember Proxy rules is “W-48-POLL”:
W – Written appointment
48 – Deposit 48 hours before meeting
POLL – Vote only on poll
This mnemonic helps students recall the essential legal requirements under Section 105 quickly during examinations. Using mnemonics ensures clarity, structure, and accuracy while writing answers in company law.
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