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On Monday, N Ram, the chairman of Kasturi & Sons Ltd, exercised his casting vote to push through changes at Kasturi & Sons, the company that publishes The Hindu newspaper. He had to do this as the board, comprising 12 cousins, was divided with equal number of votes supporting and opposing a resolution to give the editorial control of the newspaper back to the family.
Business Standard looks at the significance of the casting vote:
What is a casting vote?Casting vote is an additional vote given to the chairman of the board to break a deadlock in a matter in which there is equality of votes for and against.
What are the legal provisions?
Section 68 of the companies Act 2013 says the following: “(i) Save as otherwise expressly provided in the Act, questions arising at any meeting of the Board shall be decided by a majority of votes. (ii) In case of an equality of votes, the Chairperson of the Board, if any, shall have a second or casting vote.”
Under what circumstances can a chairman use the casting vote?
The chairman is not obligated to use his casting vote. He can choose not to cast it. He is expected to act in good faith while casting it. Also, the casting vote cannot be used to overturn a decision which is already supported by a majority of directors. For example, if a majority of the Kasturi board had already voted against the decision, Ram could not have used his casting vote to create a stalemate.
Can a company impose restrictions on the casting vote?
Every company can through its Articles of Association, a legal document that lays down the provisions governing the internal affairs of a company, provide for restrictions on the chairman’s casting vote. It can even provide that the chairman would not have a casting vote. If the chairman exercises the vote in violation of these restrictions, then the members could challenge such decision in appropriate legal forums.
What happens if the Articles were silent?
If the company does not contain any express provision on the subject, then the default provisions given in the Companies Act will apply.
