Section 378D Companies Act 2013: Membership and Voting Rights of Producer Company Members
Section 378D of the Companies Act, 2013 forms part of Chapter XXIA dealing with Producer Companies. It regulates voting rights according to the composition of membership, permits the articles to govern continuing membership and voting procedure, allows voting to be restricted to active Members where authorised, and addresses conflicts of business interest.
Meaning and scope of Section 378D
The section distinguishes between three membership structures: individual Members only, Producer Institutions only, and a combination of individuals and Producer Institutions. The voting rule changes according to that structure. The articles of association also have an important role because they may prescribe membership conditions and the manner in which voting rights are exercised.
| Membership structure | Voting principle |
|---|---|
| Only individual Members | One vote for every Member, irrespective of shareholding or patronage. |
| Only Producer Institutions | Voting is based on participation in the business of the Producer Company in the previous year, as specified by the articles. In the first year, voting is based on shareholding. |
| Individuals and Producer Institutions | One vote for every Member. |
Text of Section 378D
378D. Membership and voting rights of Members of Producer Company.
(1)(a) In a case where the membership consists solely of individual Members, the voting rights shall be based on a single vote for every Member, irrespective of his shareholding or patronage of the Producer Company.
(b) In a case where the membership consists of Producer Institutions only, the voting rights of such Producer Institutions shall be determined on the basis of their participation in the business of the Producer Company in the previous year, as may be specified by articles:
Provided that during the first year of registration of a Producer Company, the voting rights shall be determined on the basis of the shareholding by such Producer Institutions.
(c) In a case where the membership consists of individuals and Producer Institutions, the voting rights shall be computed on the basis of a single vote for every Member.
(2) The articles of any Producer Company may provide for the conditions, subject to which a Member may continue to retain his membership, and the manner in which voting rights shall be exercised by the Members.
(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), any Producer Company may, if so authorised by its articles, restrict the voting rights to active Members, in any special or general meeting.
(4) No person, who has any business interest which is in conflict with business of the Producer Company, shall become a Member of that Company.
(5) A Member, who acquires any business interest which is in conflict with the business of the Producer Company, shall cease to be a Member of that Company and be removed as a Member in accordance with the articles.
Key legal points under Section 378D
One Member, one vote for individual membership
Where all Members are individuals, voting power does not increase merely because a Member holds more shares or has greater patronage. Each Member has a single vote.
Voting by Producer Institutions
Where membership consists only of Producer Institutions, voting rights ordinarily depend on each institution's participation in the business of the Producer Company during the previous year, subject to the articles. A special rule applies during the first year of registration, when voting is determined by shareholding.
Mixed membership
Where both individuals and Producer Institutions are Members, section 378D applies the single-vote principle to every Member.
Role of the articles of association
Sub-section (2) allows the articles to specify conditions for continuing membership and the manner of exercising voting rights. Sub-section (3) further permits a Producer Company, if authorised by its articles, to restrict voting rights to active Members at a special or general meeting.
Conflict of business interest
A person having a business interest that conflicts with the business of the Producer Company cannot become a Member. If an existing Member later acquires such a conflicting business interest, the Member ceases to be a Member and is to be removed in accordance with the articles.
Related voting provision: Section 378Z
Section 378Z supplements section 378D. Except where section 378D(1) and 378D(3) provide otherwise, every Member has one vote. In the event of equality of votes, the Chairman or presiding person has a casting vote, except in an election of the Chairman.
Official legal resources
For the latest consolidated statutory text and notifications, readers should verify the provision on the official India Code and Ministry of Corporate Affairs portals. These official resources are especially useful when checking later amendments, commencement notifications and filing requirements.
Reviewed for statutory structure and official sources: 17 September 2026.