The Securities and Exchange Board of India (SEBI) on March 5, 2021, has made it compulsory for mutual funds to vote on all company resolutions. from April 1, 2022.
The regulator wants all mutual fund schemes to vote on the resolutions, even if the company’s equity shares are held as passive investments through an index fund or exchange traded fund (ETF).
The fund house can only stay away from voting if it doesn’t have any equity investment in the company on the day of voting.
Voting at scheme-level
While till now the votes were made at the fund house-level, now votes can also be cast at scheme-level if the fund manager of the scheme has a different view than the fund house.
For now, mutual funds will have to ensure that they cast votes on the resolutions related to corporate governance matters, changes in capital structure, stock option plans and other management compensation issues, social and corporate responsibility, appointment and removal of directors and any other issue that may affect interests of shareholders and the interests of the unitholders holding units of the mutual fund schemes.
The mutual fund schemes will have to also compulsorily vote on related party transactions. These are transactions that investee companies enter with parent company, subsidiaries or another company from the same business group.
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