RESCINDING OF RESOLUTIONS – a time travel???

 

"Ever wished you could hit the 'undo' button on life's missteps? Many of us harbor the desire to rewrite the past, whether it involves actions we regret or words we wish we hadn't uttered. Unfortunately, in the realm of life, such revisions remain but a wistful dream.

 However, in the world of business, behold the marvels of the Companies Act, bestowing upon the artificial entity known as the company, the ability to rescind resolutions. While we can't rewrite history like a cosmic eraser, behold the magical wand of company law! Enter stage left: rescinding resolutions.

It's the chance for companies to turn back the clock, undoing decisions that no longer serve their interests or were made in haste. It's like giving the corporate world its very own time machine!”

First of all understand what is rescinding, the oxford dictionary meaning of “rescinding” is to go or move back or further away from a previous position.

So what are the provisions in Companies act or SEBI Regulations or any other act which talks about rescinding?

The answer is …………..none.

Then where is it?

It’s available at only one place, its Secretarial Standard 2.

What does it say?

There are only 2 points those talks about rescinding in SS-2 they are:-

Para 11 in SS-2	A Resolution passed at a Meeting shall not be rescinded otherwise than by a Resolution passed at a subsequent Meeting.
Para 16 in SS-2	A Resolution passed by postal ballot shall not be rescinded otherwise than by a Resolution passed subsequently through postal ballot or passed at a General Meeting by a company which is required to provide e-voting facility to its Members.

Let us understand these in detail…

Para 11. Rescinding of Resolutions

A Resolution rescinding an earlier Resolution should be passed in the same manner in which the Resolution in question was passed, e.g. a Resolution passed as a Special Resolution should be rescinded only by a Special Resolution and a Resolution passed by voting through postal ballot should be rescinded only by a Resolution passed by voting through postal ballot.

Notice of such subsequent Meeting where the rescinding of a Resolution passed earlier is proposed should specify the intention detailing on reasons/ circumstances requiring rescinding of such Resolution. Similarly, the Board should recommend to the General Meeting, rescinding of the Resolution prior to such subsequent Meeting.

Para 16.8 Rescinding the Resolution

A Resolution passed by postal ballot shall not be rescinded otherwise than by a Resolution passed subsequently through postal ballot. However, the Companies (Amendment) Act, 2017 has inserted a proviso to Section 110(1) to the effect that any item of business required to be transacted by means of postal ballot may be transacted at a General Meeting by a company which is required to provide the facility to members to vote by electronic means under Section 108, in the manner provided in that section.

Hence, a Resolution passed by postal ballot can be rescinded subsequently either by a Resolution passed through postal ballot or Resolution passed at a General Meeting by a company which is required to provide e-voting facility to its Members.

But one question might arise; does the act allow doing it?

 The answer is absolutely yes.

According to Section 118 (10) of the Companies Act, 2013

Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government.

Therefore, we can revise history and alter the past using these means.

But wait…..You might think whether, we can do an instant action instead doing the whole process again. For that also my answer is yes.

Para 12. Of SS-2

Modifications to Resolutions

Modifications to any Resolution which do not change the purpose of the Resolution materially may be proposed, seconded and adopted by the requisite majority at the Meeting and, thereafter, the modified Resolution shall be duly proposed, seconded and put to vote.

No modification to any proposed text of the Resolution shall be made if it in any way alters the substance of the Resolution as set out in the Notice. Grammatical, clerical, factual and typographical errors, if any, may be corrected as deemed fit by the Chairman. Members present at a Meeting have a right to make modifications to a Resolution provided that the modification is within the scope of the Notice and the explanatory statement.

However, the proposed modification should not be so fundamental so as to modify the intent of the original Resolution or to alter its effect to a major degree, qualitatively or quantitatively. Similarly, a modification which adds onerous conditions to a Resolution would not be admissible.

The Chairman has no right to refuse to put before the Meeting an amendment arising on an Ordinary Resolution which is contained in the Notice. If the Chairman improperly refuses to submit an amendment to the Meeting, the Ordinary Resolution actually carried will be invalidated [Henderson v. Bank of Australasia (1890) 45 Ch D 330 (CA)]. 

No modification shall be made to any Resolution which has already been put to vote by Remote e-voting before the Meeting. Subject to the limitations mentioned above, Resolutions other than those proposed through postal ballot or Remote e-voting may be modified by the majority of the Members present at the Meeting. However, shareholders do not have power to increase the rate of the proposed dividend at the Meeting.

Procedure:

The modification to a Resolution may be moved at any time after discussion on the original Resolution has been called up, or during such discussion, but before the original Resolution is voted upon. In case two or more amendments are moved to a Resolution, the amendments should be put to vote in the same order in which they were moved. Where the amendments are accepted, they should be incorporated in the substantive or main Resolution which then should be put to vote.

However as per para 16.9 of SS-2, No amendment or modification shall be made to any Resolution circulated to the Members for passing by means of postal ballot.

Conclusion:

As we saw in the beginning, we can't rewrite history like a cosmic eraser; behold the magical wand of company law! It's the chance for companies to turn back the clock, undoing decisions that no longer serve their interests or were made in haste. It's like giving the corporate world its very own time machine!”

Rescind or modify and perceive your business.!!!

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Article Compiled by:-

~From the desk of CS Sharath

(LegalMantra.net Team)

Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc.

 

 

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