Section 378U Companies Act 2013 - Committee of Directors

Section 378U forms part of Chapter XXIA of the Companies Act, 2013 dealing with Producer Companies. It enables the Board of a Producer Company to create committees to assist in the efficient discharge of Board functions, while preserving the Board's supervisory control and restricting delegation of specified powers.

In brief: The Board may constitute committees, permit co-option with its approval, determine committee fees and allowances, control the manner and duration of committee functioning, and require committee minutes to be placed before the Board at its next meeting.

Meaning and scope of Section 378U

A "Producer Company" is a company governed by Chapter XXIA of the Companies Act, 2013. Section 378U concerns internal committees constituted by its Board. These committees assist the Board; they do not replace the Board or operate independently of it.

The provision should be read with the surrounding management provisions applicable to Producer Companies, particularly Section 378R on powers and functions of the Board, Section 378V on Board meetings and quorum, and Section 378W on the Chief Executive and functions.

Section 378U - Committee of directors

Sub-section (1): The Board may constitute as many committees as it considers appropriate to assist the Board in efficiently discharging its functions.

The proviso limits delegation: the Board cannot delegate its own powers, or assign the powers of the Chief Executive, to a committee.

Sub-section (2): A committee constituted under sub-section (1) may, with the Board's approval, co-opt such number of persons as it considers appropriate as committee members.

The proviso requires the Chief Executive appointed under Section 378W or a director of the Producer Company to be a member of the committee.

Sub-section (3): Every committee functions under the general superintendence, direction and control of the Board, for the duration and in the manner directed by the Board.

Sub-section (4): Fees and allowances payable to committee members are determined by the Board.

Sub-section (5): Minutes of every committee meeting must be placed before the Board at its next meeting.

Key legal requirements

  • The power to constitute a committee belongs to the Board.
  • A committee is intended to assist the Board in the efficient discharge of functions.
  • The statutory restriction on delegation in sub-section (1) must be respected.
  • Co-option of additional persons requires approval of the Board.
  • The committee must include the Chief Executive appointed under Section 378W or a director of the Producer Company.
  • The committee remains subject to the Board's superintendence, direction and control.
  • The Board determines committee fees and allowances.
  • Committee minutes must be placed before the Board at its next meeting.

Practical significance for Producer Companies

Section 378U permits a Producer Company to distribute preparatory, advisory or specialised work among committees while retaining Board-level responsibility and oversight. A Board resolution constituting a committee should clearly record its purpose, composition, duration, reporting process and terms of reference, consistently with the Act and the company's articles.

Because the statute expressly keeps committees under Board control, committee decisions and recommendations should be documented carefully. The requirement to place minutes before the Board creates a direct reporting mechanism and supports proper corporate records and governance.

Legislative background

Chapter XXIA relating to Producer Companies, including Section 378U, was inserted in the Companies Act, 2013 by Section 52 of the Companies (Amendment) Act, 2020 and came into force on 11 February 2021. The provision continues the statutory framework for governance of Producer Companies under the Companies Act, 2013.

Official legal resources

Note: This page is a general explanation of Section 378U. For compliance, filings or a transaction involving a Producer Company, the current text of the Companies Act, applicable rules, notifications, the company's memorandum and articles, and relevant professional advice should be considered.