Section 378Y Quorum and Section 378Z Voting Rights under Companies Act 2013
Sections 378Y and 378Z form part of Chapter XXIA of the Companies Act, 2013 dealing with Producer Companies. Section 378Y fixes the minimum quorum for a general meeting, while Section 378Z states the general voting rule for Members, subject to the specific voting provisions contained in Section 378D.
Law reference: Companies Act, 2013, Chapter XXIA, inserted by Section 52 of the Companies (Amendment) Act, 2020 with effect from 11 February 2021.
Section 378Y - Quorum
Unless the articles require a larger number, one-fourth of the total membership shall constitute the quorum at a general meeting.
Meaning of Section 378Y
Section 378Y prescribes the default minimum attendance required for a valid general meeting of a Producer Company. The quorum is one-fourth, or 25 per cent, of the total membership. The articles of association may prescribe a larger quorum, but Section 378Y does not permit the articles to reduce the statutory requirement below one-fourth.
For example, if a Producer Company has 100 Members, the statutory quorum is 25 Members unless its articles require a higher number. The articles should therefore be checked before determining whether the quorum requirement for a particular general meeting has been satisfied.
Section 378Z - Voting Rights
Save as otherwise provided in sub-sections (1) and (3) of section 378D, every Member shall have one vote and in the case of equality of votes, the Chairman or the person presiding shall have a casting vote except in the case of election of the Chairman.
Meaning of Section 378Z
The basic rule is one vote for every Member. If the votes are equally divided, the Chairman or other person presiding over the meeting has a casting vote. This additional casting vote is not available when the meeting is deciding the election of the Chairman.
The opening words of Section 378Z make the rule subject to Section 378D(1) and Section 378D(3). Section 378D contains the more specific rules governing membership and voting rights in a Producer Company. In particular, the voting method may depend on whether the membership consists of individuals, Producer Institutions, or both. The articles may also, where Section 378D(3) permits, restrict voting rights to active Members at a special or general meeting.
Section 378D context for voting
| Situation | Voting principle under Section 378D |
|---|---|
| Only individual Members | A single vote for every Member, irrespective of shareholding or patronage. |
| Only Producer Institutions | Voting rights are determined by participation in the business of the Producer Company in the previous year, as specified by the articles. In the first year of registration, voting rights are based on shareholding. |
| Individuals and Producer Institutions | A single vote for every Member. |
| Active Members | If authorised by the articles, the Producer Company may restrict voting rights to active Members in a special or general meeting. |
Key points for Producer Companies
A Producer Company should read Sections 378Y, 378Z and 378D together when conducting a general meeting. The company must first ensure that the required quorum is present. It should then identify the voting rule applicable to its membership structure and articles. Where votes are tied, the presiding person may exercise the casting vote provided by Section 378Z, except in an election for the Chairman.
Legislative background
Chapter XXIA on Producer Companies was inserted into the Companies Act, 2013 by Section 52 of the Companies (Amendment) Act, 2020 and came into force on 11 February 2021. Sections 378Y and 378Z are contained in this Chapter. The provisions broadly carry forward the earlier Producer Company framework that appeared in Part IXA of the Companies Act, 1956.