Ever wondered how a company gets shareholder approval when calling a full general meeting is impractical — say, when thousands of shareholders are spread across India? That's exactly what postal ballot solves. Section 110 lets companies pass resolutions by sending ballot papers (or e-voting links) directly to shareholders, who vote from wherever they are, no travel required.
Section 110 works in two layers. First, the mandatory layer: the Central Government can notify certain items of business that must be transacted only by postal ballot — you cannot hold a regular general meeting for these. Think of sensitive, high-stakes matters like alteration of the object clause of the memorandum, buyback of shares, or issue of shares with differential voting rights. Second, the optional layer: for any item that is not ordinary business (like dividend declaration or adoption of accounts) and for which directors/auditors don't have a statutory right to speak, a company may choose to use postal ballot instead of a general meeting. This gives flexibility to companies with a large, geographically scattered shareholder base.
Now the important exception — and this is a frequent exam twist. If a company is already required to provide e-voting under Section 108 (broadly, listed companies and companies with ≥1,000 shareholders), it does NOT need a separate postal ballot for mandatory items. It can simply conduct that business at a general meeting using the e-voting facility under Section 108. This effectively merges the postal ballot requirement into e-voting for large companies.
Finally, the legal effect under sub-section (2): once the requisite majority of shareholders assents via postal ballot, the resolution is treated as if it was duly passed at a general meeting. So there is no legal inferiority — a resolution passed by postal ballot carries the same force as one passed in a room full of shareholders. This is asked frequently as a 4-mark question in CA Inter: 'What is postal ballot? When is it mandatory?' — nail the two layers and the e-voting exception and you've got full marks.
📊 Worked example
Example 1 — Identifying Mandatory vs Optional Postal Ballot
Question: Rajesh & Co. Pvt. Ltd. wants to (i) alter the objects clause of its memorandum and (ii) approve a contract with a related party worth ₹25,00,000. Can it do both at the AGM?
Working:
- Alteration of objects clause → notified by Central Government as a mandatory postal ballot item → cannot be transacted at a regular general meeting (unless the company is covered under Section 108 e-voting).
- Related party contract approval → this is special business but NOT in the mandatory postal ballot list → company may transact it at the AGM or optionally use postal ballot.
- Rajesh & Co. Pvt. Ltd. is a private company. Assume it has fewer than 1,000 shareholders and is not listed → Section 108 e-voting not applicable → mandatory postal ballot rule applies strictly.
Answer: The alteration of objects clause must go through postal ballot. The related party contract can be approved at the AGM. The company cannot bundle both into the AGM agenda.
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Example 2 — Legal Effect of Postal Ballot Result
Question: XYZ Ltd. conducts a postal ballot for buyback of shares. Out of 10,000 shareholders, ballots representing ₹8,00,00,000 worth of paid-up capital (75%) vote in favour; ₹2,00,00,000 (25%) vote against. The special resolution requires 75% majority. Is the resolution passed?
Working:
- Votes in favour = 75% of total votes cast → exactly meets the three-fourths (75%) threshold for a special resolution.
- Section 110(2) states: if assented to by the requisite majority → deemed duly passed at a general meeting.
Answer: Yes, the resolution is validly passed. It has the same legal standing as a special resolution passed at a physical general meeting. The company can proceed with the buyback.
⚠️ Common exam mistakes
- Confusing 'mandatory' and 'optional' postal ballot: Students write that any business can be put to postal ballot. Wrong — ordinary business (dividend, accounts, auditor appointment) and matters where directors/auditors have a right to be heard cannot be transacted by postal ballot.
- Ignoring the Section 108 exception: Many students say companies must always hold a separate postal ballot for mandatory items. Remember — if the company provides e-voting under Section 108, it can conduct even mandatory postal ballot items at a general meeting via e-voting. Don't miss this proviso.
- Thinking postal ballot resolutions are 'lesser' than GM resolutions: Section 110(2) clearly deems them equivalent. Don't write that a postal ballot resolution needs subsequent ratification at a GM — it does not.
- Mixing up who cannot use postal ballot: Directors and auditors have a right to be heard at a meeting. If the business is one where they exercise this right, postal ballot is not available. Students often forget this carve-out.
- Leaving out 'requisite majority' in exam answers: When explaining Section 110(2), always mention that the majority needed depends on the type of resolution — ordinary (>50%) or special (≥75%). Simply writing 'majority' without qualifying it can cost you half a mark.
📖 Bare Act text — Section 110, Companies Act 2013
(click to expand)
(1) Notwithstanding anything contained in this Act, a company—
(a) shall, in respect of such items of business as the Central Government may, by notification, declare to be transacted only by means of postal ballot; and
(b) may, in respect of any item of business, other than ordinary business and any business in respect of which directors or auditors have a right to be heard at any meeting, transact by means of postal ballot, in such manner as may be prescribed, instead of transacting such business at a general meeting:
Provided that any item of business required to be transacted by means of postal ballot under clause (a), 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.
(2) If a resolution is assented to by the requisite majority of the shareholders by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf.
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