Scrutinizer report as per Companies Act 2013

Who is the scrutinizer?

Scrutinizer means a person who is examiner, inspector and/or investigator who observes carefully the whole process of voting on the behalf of the company in an independent manner.

A Scrutinizer is a person who monitors the entire process of E-voting, polling and Postal ballot done in Annual General Meeting or Extra-Ordinary General Meeting.

A scrutinizer is a person who observes any process which requires rigorous oversight, either to prevent the occurrence of corruption or genuine mistakes. It is most commonly known as part of voting in an election, where the scrutinizer observes the counting of ballot papers, in order to check that election rules are followed.

Under the Companies Act, 2013 the concept of scrutinizer is given much more importance as he is directly linked to voting results of General meeting, postal ballot, etc.

As per section of the Companies Act, 2013 following persons can be appointed as scrutinizer

1. Chartered Accountant in practice,
2. Cost Accountant in practice, or
3. Company Secretary in practice or
4. An Advocate, or
5. Any other person who is not in employment of the company and is a person of repute who, in the opinion of the Board can scrutinize the voting and remote e-voting process in a fair and transparent manner.

What is a scrutinizer report?

No definition is provided under The Companies Act, 2013 though it can stated as compiled Report of voting results of all the resolutions proposed in general meeting which gives the fair view of voting signed by scrutinizer and chairman of the general meeting.

What provisions cover the matters related to scrutinizer?

There is no specific section that covers the whole provision of scrutinizer and report but its references is given in many sections under The Companies Act, 2013:-

1. Section 108 read with rule 20 of The Companies (Management and Administration) Rules, 2014
2. Section 109 read with rule 21 of The Companies (Management and Administration) Rules, 2014
3. Section 110 read with rule 22 of The Companies (Management and Administration) Rules, 2014

E-voting

As per Section 108 of Companies Act 2013 , Every company which has listed its equity shares on a recognized stock exchange and every company having not less than one thousand members shall provide to its members facility to exercise their right to vote on resolutions proposed to be considered at a general meeting by electronic means.

After the E-voting period is over the scrutinizer will block the votes casted and prepare a report i.e. scrutinizer report citing all the votes casted, consent, abstain, etc.

Note: A listed company is mandatorily required to submit the scrutinizer report to stock exchange wherever it securities are listed within 48 hours from the conclusion of General meeting.

Poll

As per section 109 to allow the vote, the chairman will start the process of poll for passing the resolutions in the General meeting. The Scrutinizers shall arrange for Polling papers and distribute them to the members and proxies present at the meeting; in case of joint shareholders, the polling paper shall be given to the first named holder or in his absence to the joint holder attending the meeting as appearing in the chronological order in the folio and the Polling paper shall be in Form No. MGT12.

The Scrutinizers’ report shall state total votes cast, valid votes, votes in favour and against the resolution including the details of invalid polling papers and votes comprised therein. The Scrutinizers shall submit the Report to the Chairman who shall counter-sign the same.

Postal Ballot

As per section 110, there are certain items that can only be transacted through postal ballot.

Postal ballot received back from the shareholders shall be kept in the safe custody of the scrutinizer and after the receipt of assent or dissent of the shareholder in writing on a postal ballot, no person shall deface or destroy the ballot paper or declare the identity of the shareholders.

The scrutinizer shall submit his report as soon as possible after the last date of receipt of postal ballots but not later than seven days thereof.

How to appoint a scrutinizer?

The Board of the Company will appoint a scrutinizer for conducting the fair voting process in general meeting as well as submitting scrutinizer report to Board as per The Companies Act, 2013.

The process to appoint is as follows

1. Sending of engagement letter to proposed scrutinizer by the company
2. Obtaining of consent letter to act as scrutinizer from the proposed person.
3. Sending of notice of Board meeting along with agenda to all directors of the company
4. Convening and passing of resolution for appointment of scrutinizer for general meeting.
5. Submitting of Board meeting outcome to stock exchange, only for listed company.
6. There is no E-form or any return prescribed under the Companies Act 2013 for submitting intimation of appointment of scrutinizer though it is recommended as per good corporate governance to file E-form MGT-14 within thirty days from the appointment in the Board Meeting.
7. Noting and making entry in minutes, books, etc.

What are penal provisions if the company fails to comply with its provisions?

If a company or any officer of a company or any other person contravenes any of the provisions the company and every officer of the company who is in default or such other person shall be liable to a penalty of ten thousand rupees, and in case of continuing contravention, with a further penalty of one thousand rupees for each day after the first during which the contravention continues, subject to a maximum of two lakh rupees in case of a company and fifty thousand rupees in case of an officer who is in default or any other persons.