Section 378ZI Companies Act 2013 - General and Other Reserves

Section 378ZI of the Companies Act, 2013 forms part of Chapter XXIA dealing with Producer Companies. It requires every Producer Company to maintain a general reserve in each financial year and also addresses the manner of contribution where sufficient funds are not available for reserves specified in the articles of the company.

Updated: 17 September 2026

Meaning and scope of Section 378ZI

A Producer Company is a body corporate incorporated under the special provisions contained in Chapter XXIA of the Companies Act, 2013. Section 378ZI concerns the financial discipline of such companies by requiring a general reserve and by recognising additional reserves that may be required under the company's articles.

General reserve: For the purpose of Section 378ZI, the general reserve is the reserve that every Producer Company is statutorily required to maintain in every financial year, apart from any other reserve required by its articles.

Articles: The expression refers to the articles of association of the company as defined under the Companies Act, 2013. The articles may specify reserves in addition to the general reserve required by Section 378ZI.

Patronage: In the Producer Company framework, patronage relates to participation by members in the business activities of the Producer Company. Under sub-section (2), a member's share of contribution is linked to that member's patronage in the business during the relevant year.

Text of Section 378ZI - General and other reserves

(1) Every Producer Company shall maintain a general reserve in every financial year, in addition to any reserve maintained by it as may be specified in articles.

(2) In a case where the Producer Company does not have sufficient funds in any financial year for transfer to maintain the reserves as may be specified in articles, the contribution to the reserve shall be shared amongst the Members in proportion to their patronage in the business of that Company in that year.

Key requirements under Section 378ZI

  • Every Producer Company must maintain a general reserve in every financial year.
  • The statutory general reserve is additional to reserves that may be specified in the articles.
  • If funds are insufficient for transfer to reserves specified in the articles, members share the contribution.
  • The members' contribution is proportionate to their patronage in the business of the Producer Company for that year.

Investment of general reserves

Section 378ZI should also be read with Rule 5 of the Producer Companies Rules, 2021. Rule 5 specifies permitted avenues in which a Producer Company may invest amounts from its general reserves, including specified government securities, deposits and other permitted securities or institutions.

Related provision - Section 378ZJ

Section 378ZJ deals with issue of bonus shares by a Producer Company. Subject to the statutory requirements, bonus shares may be issued by capitalisation of amounts from the general reserves referred to in Section 378ZI. This makes the reserve maintained under Section 378ZI relevant not only for financial prudence but also for the capital structure provisions applicable to Producer Companies.

Legislative background

Section 378ZI was inserted into the Companies Act, 2013 by Section 52 of the Companies (Amendment) Act, 2020 and came into force on 11 February 2021 as part of the statutory framework for Producer Companies.

Official resources

For the authoritative statutory text and rules, refer to the Companies Act, 2013 - Ministry of Corporate Affairs, the Producer Companies Rules, 2021 - Ministry of Corporate Affairs, and the India Code portal.

Practical note: The articles of a Producer Company should be checked together with Section 378ZI because the articles may prescribe additional reserves and therefore affect the amount that must be maintained or contributed in a particular financial year.

Insertion note: Inserted by the Companies (Amendment) Act, 2020, Section 52, with effect from 11 February 2021.