Section 378G Articles of association – Companies Act 2013

Section 378G of Companies Act 2013 as amended by Companies Amendment Act 2020. Discussion on provision and rules for Articles of association.

Amended and updated notes on section 378G of the Companies Act 2013 as amended by the Companies (Amendment) Act, 2020 and Company Rules made there under. Detail discussion on provisions and rules related to Articles of association.

Chapter XXIA PART-II (Sections 378B to 378N) of the Companies Act 2013 (CA 2013) deals with the provisions related to incorporation of producer companies and other matters. Section 378G of CA 2013 provides for Articles of association.

Recently, we have discussed in detail section 378F (Memorandum of Producer Company) of CA 2013. Today, we learn the provisions of section 378G of the Companies Act 2013.

In exercise of the powers conferred by sub-section (2) of section 1 of the Companies (Amendment) Act, 2020 (29 of 2020), the Central Government appoints the 11th February, 2021 as the date on which the provisions of section 52 of the Companies (Amendment) Act, 2020 shall come into force.

Accordingly, the provisions of section 378G are effective from 11th February, 2021. You may refer Notification No. S.O. 644(E) dated 11-02-2021. In this article, you will learn detail of the provisions of section 378G the Companies Act 2013.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.XXIA (PART-II)
Chapter NameIncorporation of Producer Companies and other matters
Section No.378G
Section NameArticles of Association
Monthly Updated EditionCompany Law PDF

Section 378G: Articles of association

Section 378G(1) of Companies Act

There shall be presented, for registration to the Registrar of the State to which the registered office of the Producer Company is, stated by the memorandum of association, to be situate—

  • (a) memorandum of the Producer Company;
  • (b) its articles duly signed by the subscribers to the memorandum.

Section 378G(2) of Companies Act

The articles shall contain the following mutual assistance principles, namely:—

  • (a) the membership shall be voluntary and available, to all eligible persons who, can participate or avail of the facilities or services of the Producer Company, and are willing to accept the duties of membership;
  • (b) each Member shall, save as otherwise provided in this Chapter, have only a single vote irrespective of the shareholding;
  • (c) the Producer Company shall be administered by a Board consisting of persons elected or appointed as directors in the manner consistent with the provisions of this Chapter and the Board shall be accountable to the Members;
  • (d) particulars on limited return on share capital;
  • (e) the surplus arising out of the operations of the Producer Company shall be distributed in an equitable manner by—
    • (i) providing for the development of the business of the Producer Company;
    • (ii) providing for common facilities; and
    • (iii) distributing amongst the Members, as may be admissible in proportion to their respective participation in the business;
  • (f ) provision for the education of Members, employees and others, on the principles of mutuality and techniques of mutual assistance;
  • (g) the Producer Company shall actively co-operate with other Producer Companies (and other organisations following similar principles) at local, national or international level so as to best serve the interest of their Members and the communities it purports to serve.

Section 378G(3) of Companies Act

Without prejudice to the generality of the foregoing provisions of sub-sections (1) and (2), the articles shall contain the following provisions, namely:—

  • (a) the qualifications for membership, the conditions for continuance or cancellation of membership and the terms, conditions and procedure for transfer of shares;
  • (b) the manner of ascertaining the patronage and voting right based on patronage;
  • (c) subject to the provisions contained in sub-section (1) of section 378N, the manner of constitution of the Board, its powers and duties, the minimum and maximum number of directors, manner of election and appointment of directors and retirement by rotation, qualifications for being elected or continuance as such and the terms of office of the said directors, their powers and duties, conditions for election or co-option of directors, method of removal of directors and the filling up of vacancies on the Board, and the manner and the terms of appointment of the Chief Executive;
  • (d) the election of the Chairman, term of office of directors and the Chairman, manner of voting at the general or special meetings of Members, procedure for voting, by directors at meetings of the Board, powers of the Chairman and the circumstances under which the Chairman may exercise a casting vote;
  • (e) the circumstances under which, and the manner in which, the withheld price is to be determined and distributed;
  • (f) the manner of disbursement of patronage bonus in cash or by issue of equity shares, or both;
  • (g) the contribution to be shared and related matters referred to in sub-section (2) of section 378ZI;
  • (h) the matters relating to issue of bonus shares out of general reserves as set out in section 378ZJ;
  • (i) the basis and manner of allotment of equity shares of the Producer Company in lieu of the whole or part of the sale proceeds of produce or products supplied by the Members;
  • (j) the amount of reserves, sources from which funds may be raised, limitation on raising of funds, restriction on the use of such funds and the extent of debt that may be contracted and the conditions thereof;
  • (k) the credit, loans or advances which may be granted to a Member and the conditions for the grant of the same;
  • (l) the right of any Member to obtain information relating to general business of the company;
  • (m) the basis and manner of distribution and disposal of funds available after meeting liabilities in the event of dissolution or liquidation of the Producer Company;
  • (n) the authorisation for division, amalgamation, merger, creation of subsidiaries and the entering into joint ventures and other matters connected therewith;
  • (o) laying of the memorandum and articles of the Producer Company before a special general meeting to be held within ninety days of its registration;
  • (p) any other provision, which the Members may, by special resolution recommend to be included in the articles

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