Section 378P Companies Act 2013 - Appointment of Directors
Section 378P of the Companies Act, 2013 governs the appointment, election, tenure and re-appointment of directors of a Producer Company. It also permits the Board to co-opt expert directors and appoint additional directors subject to the statutory conditions and the articles of the Producer Company.
- Initial directors may be designated in the memorandum and articles.
- The initial Board must consist of at least five directors.
- Election of directors is ordinarily required within 90 days of registration.
- A director's term must be at least one year and cannot exceed five years.
- A retiring director may be re-appointed.
- Members generally elect or appoint directors at the annual general meeting.
- The Board may co-opt expert directors or appoint additional directors subject to the statutory limit and the articles.
Meaning and scope of Section 378P
Section 378P forms part of Chapter XXIA of the Companies Act, 2013 dealing with Producer Companies. The provision establishes the basic statutory framework for constituting the Board of a Producer Company after incorporation and for determining the tenure and method of appointment of its directors.
A Producer Company is a company registered under the Companies Act for carrying on the objects specified for Producer Companies, including activities connected with the primary produce of its members. The special provisions governing Producer Companies are contained in Chapter XXIA of the Act.
Section 378P - Appointment of Directors
Statutory provision
(1) Save as otherwise provided in section 378N, the Members who sign the memorandum and the articles may designate therein the Board of Directors, not less than five, who shall govern the affairs of the Producer Company until the directors are elected in accordance with the provisions of this section.
(2) The election of directors shall be conducted within a period of ninety days of the registration of the Producer Company:
Provided that in the case of an inter-State co-operative society which has been registered as a Producer Company under sub-section (4) of section 378J in which at least five directors [including the directors continuing in office under sub-section (1) of section 378N] hold office as such on the date of registration of such company, the provisions of this sub-section shall have effect as if for the words "ninety days", the words "three hundred and sixty-five days" had been substituted.
(3) Every person shall hold office of a director for a period not less than one year but not exceeding five years as may be specified in the articles.
(4) Every director, who retires in accordance with the articles, shall be eligible for re-appointment as a director.
(5) Save as otherwise provided in sub-section (2), the directors of the Board shall be elected or appointed by the Members in the annual general meeting.
(6) The Board may co-opt one or more expert directors or an additional director not exceeding one-fifth of the total number of directors or appoint any other person as additional director for such period as the Board may deem fit:
Provided that the expert directors shall not have the right to vote in the election of the Chairman but shall be eligible to be elected as Chairman, if so provided by its articles:
Provided further that the maximum period, for which the expert director or the additional director holds office, shall not exceed such period as may be specified in the articles.
Chapter XXIA containing the Producer Company provisions was inserted by section 52 of the Companies (Amendment) Act, 2020 with effect from 11 February 2021.
Initial Board of a Producer Company
Under Section 378P(1), the members signing the memorandum and articles may designate the first Board of Directors. The initial Board must consist of not less than five directors. These directors manage the affairs of the Producer Company until the directors are elected in accordance with Section 378P.
This provision should be read with Section 378O, which prescribes the statutory framework for the number of directors of a Producer Company.
Election of directors within 90 days
Section 378P(2) requires the election of directors to be conducted within 90 days from registration of the Producer Company. This enables the initial Board designated at the time of incorporation to be replaced or constituted through the statutory election process.
A special rule applies where an inter-State co-operative society is registered as a Producer Company under Section 378J(4) and the conditions specified in the proviso to Section 378P(2) are satisfied. In such a case, the statutory period is 365 days instead of 90 days.
Term of office of a director
Section 378P(3) provides a statutory range for the tenure of a director. The period of office cannot be less than one year and cannot exceed five years. The precise tenure within this range is to be specified in the articles of the Producer Company.
Re-appointment of retiring directors
Under Section 378P(4), a director retiring in accordance with the articles is eligible for re-appointment. The provision therefore does not impose an automatic bar on a retiring director serving another term, subject to the Act and the company's articles.
Appointment at the annual general meeting
Except for the special situation addressed by Section 378P(2), Section 378P(5) provides that directors of the Board are elected or appointed by the members at the annual general meeting.
Expert directors and additional directors
Section 378P(6) gives the Board power to co-opt expert directors and appoint additional directors. The number and tenure of such appointments remain subject to the statutory provision and the articles of the Producer Company.
An expert director does not have a right to vote in the election of the Chairman. However, an expert director may be eligible to be elected as Chairman where the articles of the Producer Company so provide.
Related provisions
Official legal resources
For the current official text of the Companies Act, 2013 and notifications relating to company law, refer to the India Code and Ministry of Corporate Affairs portals.