Companies Act Section 378ZH — Donation or subscription by Producer Company
CHAPTER XXI
Commercial / Corporate
Summary
A Producer Company may, by passing a special resolution, give donations or subscriptions to any institution or individual. This can be done for the purpose of promoting the social and economic welfare of Producer Members, producers, or the general public, or for promoting the principles of mutual assistance.
However, the total amount of all such donations and subscriptions in any financial year cannot exceed three per cent of the net profit of the Producer Company from the financial year immediately before the one in which the donation or subscription is made.
Additionally, no Producer Company may make any contribution or subscription, directly or indirectly, to any political party or for any political purpose to any person, nor may it make available any facilities, including personnel or material, for such purposes.
Sub-section (1) states that every Producer Company must maintain a general reserve in every financial year, in addition to any other reserve that may be specified in its articles.
Sub-section (2) states that if a Producer Company does not have sufficient funds in any financial year to transfer to maintain the reserves specified in its articles, then the contribution to the reserve must be shared amongst the Members in proportion to their patronage in the business of that Company in that year.
Official Text
A Producer Company may, by special resolution, make donation or subscription to any institution or individual for the purposes of—
(a) promoting the social and economic welfare of Producer Members or producers or general public; or
(b) promoting the mutual assistance principles:
Provided that the aggregate amount of all such donations and subscriptions in any financial year shall not exceed three per cent. of the net profit of the Producer Company in the financial year immediately preceding the financial year in which the donation or subscription was made:
Provided further that no Producer Company shall make directly or indirectly to any political party or for any political purpose to any person any contribution or subscription or make available any facilities including personnel or material. 378Z-I. 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.