Companies Act Section 378G — Articles of association

CHAPTER XXI

Commercial / Corporate

Summary

Sub-section (1) requires that two documents be submitted for registration to the Registrar of the State where the Producer Company's registered office is located, as stated in its memorandum of association. These documents are the memorandum of the Producer Company and its articles of association, with the articles duly signed by all the subscribers to the memorandum.

Sub-section (2) lists the mutual assistance principles that the articles must contain. Under clause (a), membership must be voluntary and open to all eligible persons who can participate in or use the company's facilities or services and are willing to accept the duties of membership. Under clause (b), each Member has only a single vote regardless of how many shares they hold, unless otherwise provided in this Chapter. Under clause (c), the Producer Company is to be administered by a Board of directors elected or appointed in a manner consistent with this Chapter, and the Board must be accountable to the Members. Under clause (d), the articles must include particulars on a limited return on share capital. Under clause (e), any surplus from the company's operations must be distributed equitably by providing for the development of the business, providing for common facilities, and distributing among the Members in proportion to their respective participation in the business. Under clause (f), the articles must provide for the education of Members, employees, and others on the principles of mutuality and techniques of mutual assistance. Under clause (g), the Producer Company must actively cooperate with other Producer Companies and similar organisations at local, national, or international levels to best serve the interests of its Members and the communities it aims to serve.

Sub-section (3) states that, without limiting the provisions of sub-sections (1) and (2), the articles must also contain specific provisions. Under clause (a), these include the qualifications for membership, the conditions for continuing or cancelling membership, and the terms, conditions, and procedure for transferring shares. Under clause (b), the articles must specify how patronage is determined and how voting rights based on patronage are ascertained. Under clause (c), subject to sub-section (1) of section 378N, the articles must cover the manner of constituting the Board, its powers and duties, the minimum and maximum number of directors, how directors are elected and appointed, retirement by rotation, qualifications for being elected or continuing as a director, terms of office, conditions for election or co-option of directors, method of removing directors, filling vacancies on the Board, and the manner and terms of appointing the Chief Executive. Under clause (d), the articles must address the election of the Chairman, the term of office for directors and the Chairman, voting procedures at general or special meetings of Members, voting procedures for directors at Board meetings, the powers of the Chairman, and the circumstances under which the Chairman may exercise a casting vote. Under clause (e), the articles must specify the circumstances and manner in which the withheld price is determined and distributed. Under clause (f), the articles must cover how the patronage bonus is disbursed, whether in cash, by issuing equity shares, or both. Under clause (g), the articles must include the contribution to be shared and related matters referred to in sub-section (2) of section 378ZI. Under clause (h), the articles must address matters relating to issuing bonus shares out of general reserves as set out in section 378ZJ. Under clause (i), the articles must specify the basis and manner of allotting equity shares of the Producer Company in lieu of the whole or part of the sale proceeds of produce or products supplied by the Members. Under clause (j), the articles must cover the amount of reserves, the sources from which funds may be raised, any limitations on raising funds, restrictions on the use of such funds, and the extent of debt that may be contracted and the conditions for it. Under clause (k), the articles must address the credit, loans, or advances that may be granted to a Member and the conditions for granting them. Under clause (l), the articles must provide for the right of any Member to obtain information relating to the general business of the company. Under clause (m), the articles must specify the basis and manner of distributing and disposing of funds available after meeting liabilities in the event of dissolution or liquidation of the Producer Company. Under clause (n), the articles must include authorisation for division, amalgamation, merger, creation of subsidiaries, entering into joint ventures, and other connected matters. Under clause (o), the articles must require that the memorandum and articles be laid before a special general meeting to be held within ninety days of registration. Under clause (p), the articles may include any other provision that the Members recommend by special resolution to be included.

Official Text

(1) There shall be presented, for registration to the Registrar of the State to which the registered office of the Producer Company is, stated by the memorandum of association, to be situate—

(a) memorandum of the Producer Company;

(b) its articles duly signed by the subscribers to the memorandum.

(2) The articles shall contain the following mutual assistance principles, namely:—

(a) the membership shall be voluntary and available, to all eligible persons who, can participate or avail of the facilities or services of the Producer Company, and are willing to accept the duties of membership;

(b) each Member shall, save as otherwise provided in this Chapter, have only a single vote irrespective of the shareholding;

(c) the Producer Company shall be administered by a Board consisting of persons elected or appointed as directors in the manner consistent with the provisions of this Chapter and the Board shall be accountable to the Members;

(d) particulars on limited return on share capital;

(e) the surplus arising out of the operations of the Producer Company shall be distributed in an equitable manner by—

(i) providing for the development of the business of the Producer Company;

(ii) providing for common facilities; and

(iii) distributing amongst the Members, as may be admissible in proportion to their respective participation in the business;

(f) provision for the education of Members, employees and others, on the principles of mutuality and techniques of mutual assistance;

(g) the Producer Company shall actively co-operate with other Producer Companies (and other organisations following similar principles) at local, national or international level so as to best serve the interest of their Members and the communities it purports to serve.

(3) Without prejudice to the generality of the foregoing provisions of sub-sections

(1) and (2), the articles shall contain the following provisions, namely:—

(a) the qualifications for membership, the conditions for continuance or cancellation of membership and the terms, conditions and procedure for transfer of shares;

(b) the manner of ascertaining the patronage and voting right based on patronage;

(c) subject to the provisions contained in sub-section (1) of section 378N, the manner of constitution of the Board, its powers and duties, the minimum and maximum number of directors, manner of election and appointment of directors and retirement by rotation, qualifications for being elected or continuance as such and the terms of office of the said directors, their powers and duties, conditions for election or co-option of directors, method of removal of directors and the filling up of vacancies on the Board, and the manner and the terms of appointment of the Chief Executive;

(d) the election of the Chairman, term of office of directors and the Chairman, manner of voting at the general or special meetings of Members, procedure for voting, by directors at meetings of the Board, powers of the Chairman and the circumstances under which the Chairman may exercise a casting vote;

(e) the circumstances under which, and the manner in which, the withheld price is to be determined and distributed;

(f) the manner of disbursement of patronage bonus in cash or by issue of equity shares, or both;

(g) the contribution to be shared and related matters referred to in sub-section (2) of section 378ZI;

(h) the matters relating to issue of bonus shares out of general reserves as set out in section 378ZJ;

(i) the basis and manner of allotment of equity shares of the Producer Company in lieu of the whole or part of the sale proceeds of produce or products supplied by the Members;

(j) the amount of reserves, sources from which funds may be raised, limitation on raising of funds, restriction on the use of such funds and the extent of debt that may be contracted and the conditions thereof;

(k) the credit, loans or advances which may be granted to a Member and the conditions for the grant of the same;

(l) the right of any Member to obtain information relating to general business of the company;

(m) the basis and manner of distribution and disposal of funds available after meeting liabilities in the event of dissolution or liquidation of the Producer Company;

(n) the authorisation for division, amalgamation, merger, creation of subsidiaries and the entering into joint ventures and other matters connected therewith;

(o) laying of the memorandum and articles of the Producer Company before a special general meeting to be held within ninety days of its registration;

(p) any other provision, which the Members may, by special resolution recommend to be included in the articles.