Proxy battles take place when the agenda items at the meeting are likely to be opposed by dissident equity shareholders. Management of the company collect proxies to face these opponents in the meetings of the Board of Directors as well as shareholders.
Meaning of Proxy
Proxy is defined as a vote in deciding corporate issues in meetings and determining elections.
Section 176 of the Companies Act, 1956 deals with the meaning, use and disposition of proxy, Section 176 is reproduced below:
“176. Proxies – (1) Any members of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another and vote instead of himself; but a proxy so appointed shall not any right to speak at the meeting:
Provided that, unless the articles otherwise provide:
(a) this subsection shall not apply in the case of a company not having a share capital;
(b) a member of private company shall not be entitled to appoint more than one proxy to attend on the same occasion; and
(c) a proxy shall not be entitled to vote except on a poll.
(2) In every notice calling a meeting of a company which has a share capital, or the articles of which provide for voting by proxy at the meeting, there shall appear with reasonable prominence a statement that a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one or more proxies, to attend and vote instead of himself, and that a proxy need not be a member.
If default is made in complying with this sub-section as respects any meeting, every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees.
(3) Any provision contained in the articles of a public company or of a private company which is a subsidiary of a public company which specifies or requires a longer period than forty eight hours before a meeting of the company, for depositing with the company or any other person any instrument appointing a proxy or any other document necessary to show the validity or otherwise relating to the appointment of a proxy in order that the appointment may be effective at such meeting, shall have effect as if a period of forty eight hours had been specified in or required by such provision for such deposit.
(4) If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one of a number of persons specified in the invitations are issued at the company’s expense to any member entitled to have a notice of the meeting sent to him and to vote thereat by proxy, every officer of the company who knowingly issues the invitations as aforesaid or willfully authorizes or permits their issue shall be punishable with fine which may extend to ten thousand rupees:
Provided that an officer shall not be punishable under this sub-section by reason only of the issue to a member at his request in writing of a form of appointment naming the proxy, or of a list of persons willing to act as proxies, if the form or list is available on request in writing to every member entitled to vote at the meeting by proxy.
(5) The instrument appointing a proxy shall:
(a) be in writing ; and
(b) be signed by the appointer or his attorney duly authorized in writing or, if the appointer is a body corporate, be under its seal or be signed by an officer of an attorney duly authorized by it.
(6) An instrument appointing a proxy, if in any of the forms set out in Schedule IX, shall not be questioned on the ground that it fails to comply with any special requirements specified for such instrument by the articles.
(7) Every member entitled to vote at a meeting of the company, or on any resolution to be moved thereat, shall be entitled during the period beginning twenty four hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting, to inspect the proxies lodged, at any time during the business hours of the company, provided not less than three days notice in writing of the intension so to inspect is given to the company.
The provisions in the above section have been adopted on the lines of UK’s Companies Act, 1948 by the Company Law Committee.
The legal position of a shareholder and his proxy is that of a principal and agent. A shareholder can revoke his proxy at any time. A proxy is revoked if the shareholder after giving proxy himself attends the meeting. Proxy must be filled in and be stamped.
Proxy battles have a history over the years in developed nations as well as in India. In UK and USA, proxy wars are engineered to make the takeover bids successful. In India also such wars have been repeated time and again in corporate world. In UK and USA, the “proxy wars” have become professionalized. Professional experts like “proxy-lawyers” are available to guide corporate units facing problems of dissidents in corporate meetings and corporate matters.
Equity holders who are not in a position to attend personally the meetings of the company, mail their votes in the form proxy. Each proxy equals the number of votes which a shareholder is entitled as per share ownership. Opponents and dissidents solicit proxy from equity holders to win over the battle. Institutional share holders play an important role in proxy wars as they emerge as instruments to tilt the balance in proxy wards to win the battle.