Section 378O Companies Act 2013 - Number of Directors
Section 378O of the Companies Act, 2013 specifies the minimum and maximum number of directors that a Producer Company must have. The provision forms part of Chapter XXIA dealing with Producer Companies and, more specifically, Part III relating to the management of a Producer Company.
What is Section 378O of the Companies Act, 2013?
Section 378O is the statutory provision governing the number of directors on the Board of a Producer Company. It establishes both a minimum Board strength and an ordinary maximum Board strength.
The section therefore ensures that a Producer Company has a sufficiently constituted Board for its management while also fixing the normal upper limit on the number of directors.
Section 378O - Number of Directors
Every Producer Company shall have at least five and not more than fifteen directors:
Provided that in the case of an inter-State co-operative society incorporated as a Producer Company, such company may have more than fifteen directors for a period of one year from the date of its incorporation as a Producer Company.
Legislative note: Chapter XXIA relating to Producer Companies was inserted into the Companies Act, 2013 by section 52 of the Companies (Amendment) Act, 2020 (Act 29 of 2020), with effect from 11 February 2021.
Minimum Number of Directors
Section 378O requires every Producer Company to have a minimum of five directors. Accordingly, the Board strength of a Producer Company should not ordinarily fall below five directors.
Maximum Number of Directors
The ordinary maximum prescribed by Section 378O is fifteen directors. The section itself, however, creates a specific transitional exception for an inter-State co-operative society that is incorporated as a Producer Company.
Exception for an Inter-State Co-operative Society
Where an inter-State co-operative society is incorporated as a Producer Company, Section 378O permits the company to have more than fifteen directors for a period of one year from the date of incorporation as a Producer Company.
This is a transitional statutory exception. The provision does not create a general right for every Producer Company to maintain more than fifteen directors.
Section 378O at a Glance
| Applicable entity | Producer Company |
|---|---|
| Minimum directors | 5 directors |
| Ordinary maximum | 15 directors |
| Special exception | An inter-State co-operative society incorporated as a Producer Company may temporarily have more than 15 directors. |
| Duration of exception | One year from the date of incorporation as a Producer Company. |
| Chapter | Chapter XXIA - Producer Companies |
| Part | Part III - Management of Producer Company |
Meaning and Practical Effect of Section 378O
The provision creates the basic numerical framework for the Board of a Producer Company. In ordinary circumstances, the company must maintain a Board consisting of between five and fifteen directors.
The special proviso recognises that an inter-State co-operative society converting into or being incorporated as a Producer Company may initially have a larger governing structure. It therefore provides a one-year transitional period during which the number of directors may exceed the normal ceiling of fifteen.
Related Producer Company Provisions
Section 378O should be read with the provisions that follow it in Part III of Chapter XXIA. In particular, Section 378P deals with appointment of directors, while Section 378Q deals with vacation of office by directors. The powers and functions of the Board are dealt with under Section 378R.
Official Legal Resources
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