Sections 104, 105 and 106 of the Companies Act, 2013: Chairman of Meetings, Proxies and Restriction on Voting Rights
Sections 104, 105 and 106 form part of Chapter VII of the Companies Act, 2013 and regulate three important aspects of general meetings: election of the chairman, appointment and use of proxies, and the limited circumstances in which a member's voting rights may be restricted.
| Provision | Subject | Key point |
|---|---|---|
| Section 104 | Chairman of meetings | Unless the articles provide otherwise, members personally present elect one of themselves as chairman on a show of hands. |
| Section 105 | Proxies | An eligible member may appoint another person as proxy, subject to the Act and the Companies (Management and Administration) Rules, 2014. |
| Section 106 | Restriction on voting rights | The articles may restrict voting for unpaid calls or other sums presently payable, or where the company has exercised a lien; voting cannot be prohibited on other grounds under this section. |
Section 104 - Chairman of Meetings
Meaning: Section 104 determines who presides over a meeting of members where the company's articles do not make a different arrangement.
Sub-section (1): Unless the articles of the company otherwise provide, the members personally present at the meeting elect one of themselves as chairman on a show of hands.
Sub-section (2): If a poll is demanded on the election of the chairman, the poll must be taken forthwith in accordance with the Act. The chairman elected on a show of hands continues until another person is elected through the poll. The person elected on the poll then acts as chairman for the remainder of the meeting.
Practical effect of Section 104
The company's articles should be checked first. If they contain a valid provision dealing with the chairman, that provision applies. In the absence of such a provision, the statutory method in Section 104 governs the election of the chairman.
Section 105 - Proxies
Meaning of proxy: A proxy is a person appointed by a member to attend and vote on the member's behalf at a meeting, subject to Section 105, the applicable rules and the company's articles. A proxy need not ordinarily be a member of the company, subject to special rules such as those applicable to a company registered under Section 8.
Right to appoint: A member entitled to attend and vote at a meeting may appoint another person as proxy to attend and vote on the member's behalf. Under Section 105, a proxy does not have a right to speak at the meeting and is entitled to vote only on a poll, subject to applicable law.
Company without share capital: Unless the articles otherwise provide, the proxy entitlement in Section 105(1) does not apply to a company not having share capital.
Meeting notice: Where Section 105(2) applies, the notice calling the meeting must prominently state the member's right to appoint a proxy and that the proxy need not be a member.
Penalty for notice default: If Section 105(2) is not complied with, every officer in default is liable to a penalty of five thousand rupees under the presently amended text.
Deposit of proxy: The articles cannot require the proxy instrument or supporting document to be deposited more than forty-eight hours before the meeting. A longer period in the articles operates as forty-eight hours.
Company-funded proxy solicitation: Section 105(5) regulates invitations issued at the company's expense to appoint specified persons as proxies. The amended provision imposes a penalty of fifty thousand rupees on the officer who issues, authorises or permits such invitations, subject to the statutory exception.
Form and signature: The instrument appointing a proxy must be in writing and signed by the appointer or a duly authorised attorney. Where the appointer is a body corporate, it must be executed in the manner permitted by Section 105(6).
Inspection: A member entitled to vote may inspect proxies lodged with the company during the statutory period beginning twenty-four hours before commencement of the meeting and ending with its conclusion, during business hours, after giving not less than three days' written notice of the intention to inspect.
Rule 19 of the Companies (Management and Administration) Rules, 2014
Section 105 should be read with Rule 19. The rule provides important limits and the prescribed proxy form:
- For a company registered under Section 8, a member cannot appoint a person as proxy unless that person is also a member of the company.
- A person may act as proxy for not more than fifty members who, in aggregate, hold not more than ten percent of the total share capital of the company carrying voting rights.
- A member holding more than ten percent of the total share capital carrying voting rights may appoint a single person as proxy, and that proxy cannot act for any other person or shareholder.
- The prescribed appointment is made in Form MGT-11.
For filings, forms, notifications and the latest MCA services, refer to the Ministry of Corporate Affairs portal.
Section 106 - Restriction on Voting Rights
Meaning: Section 106 identifies the specific grounds on which a company's articles may restrict a member from exercising voting rights in respect of shares.
Sub-section (1): Notwithstanding anything contained in the Act, the articles may provide that a member cannot exercise voting rights in respect of shares registered in the member's name where calls or other sums presently payable on those shares remain unpaid, or where the company has exercised a right of lien.
Sub-section (2): Except for the grounds specified in sub-section (1), the company cannot prohibit a member from exercising voting rights on any other ground under Section 106.
Sub-section (3): On a poll, a member having more than one vote, or a proxy or other person entitled to vote for that member, need not use all available votes and need not cast all votes in the same way.
Key Compliance Points
- Check the articles of association before applying the default rule for election of the chairman.
- Ensure that the notice of meeting contains the proxy statement required by Section 105 where applicable.
- Use Form MGT-11 and comply with Rule 19 limits when appointing a proxy.
- Do not impose a proxy deposit requirement exceeding forty-eight hours before the meeting.
- Do not restrict a member's voting rights under Section 106 except on the statutory grounds relating to unpaid calls or sums presently payable, or exercise of lien.
Note: This page is a general guide to Sections 104, 105 and 106. The Act should be read with current rules, notifications, exemptions, the company's articles of association and other applicable law.