Companies Act Section 378A

Companies Act, Section 378A: Pertaining to Producer Companies

In Chapter XXIA of the Companies Act, 2013, which deals specifically with Producer Companies, the term "definitions" refers to the various key expressions used throughout the chapter. Unless the context clearly indicates a different interpretation, the following definitions shall apply:

(a) "Active Member"
An active Member is defined as a Member of the Producer Company who meets the specific criteria related to the quantum and duration of patronage, as may be prescribed in the Articles of Association of the Producer Company. In essence, this refers to someone who actively uses or contributes to the Company’s business, in accordance with the conditions laid down in its internal governance documents.

(b) "Chief Executive"
The Chief Executive refers to the individual appointed as such by the Producer Company, in accordance with the provisions of sub-section (1) of section 378W of the Act. This person is essentially responsible for managing the day-to-day operations and administration of the Producer Company under the overall supervision and direction of the Board of Directors.

(c) "Inter-State Co-operative Society"
An inter-State co-operative society means a multi-State co-operative society as defined in clause (p) of section 3 of the Multi-State Co-operative Societies Act, 2002 (Act No. 39 of 2002). Additionally, it includes any co-operative society registered under any other prevailing law, which after its formation extends any of its objectives or activities beyond a single State. This may be accomplished either directly or indirectly, or through any institution of which it is a constituent, thereby involving participation from persons or organizations in multiple States.

(d) "Limited Return"
This term refers to the maximum dividend that may be paid to the Members of a Producer Company. The actual quantum of this dividend is to be specified in the Articles of Association of the Company and serves to limit the return on capital, distinguishing Producer Companies from purely profit-driven enterprises.

(e) "Member"
A Member means any person or Producer Institution whether incorporated or unincorporated who has been formally admitted as a Member of a Producer Company. Such a Member must continue to fulfill the necessary qualifications for maintaining their membership status under the Company’s rules and policies.

(f) "Mutual Assistance Principles"
This expression refers to the cooperative principles laid out in sub-section (2) of section 378G of the Act. These principles govern the functioning of the Producer Company and guide the relationships between the Company and its Members, emphasizing shared responsibility, participation, and support.

(g) "Officer"
An officer of a Producer Company includes any of the following individuals:

A Director, The Chief Executive, The Secretary, or any other person who, whether officially designated or not, is in a position to influence or direct part or all of the business operations of the Producer Company.
(h) "Patronage"
Patronage means the use of services provided by the Producer Company to its Members. It reflects the degree to which Members participate in the Company's business activities, such as supplying produce, availing services, or conducting transactions with the Company.

(i) "Patronage Bonus"
A patronage bonus refers to payments made by the Producer Company to its Members from the Company’s surplus income. These payments are made in proportion to the extent of each Member’s patronage, i.e., based on how much they have participated in or contributed to the Company’s business.

(j) "Primary Produce"
This term includes a wide range of products and activities connected to agriculture and rural industries. It is defined broadly to cover the following:

(i) Produce of farmers derived from agricultural activities, which may include:
Animal husbandry, Horticulture, Floriculture, Pisciculture (fish farming), Viticulture (grape cultivation), Forestry and forest products, Re-vegetation, Bee raising, Plantation crops.
(ii) Produce from handloom, handicrafts, and other cottage industries.
(iii) Any product derived from the above, including by-products.
(iv) Any product resulting from ancillary activities that promote or support the aforementioned industries and processes.
(v) Any activity undertaken to increase production or improve quality of the items listed in sub-clauses (i) to (iv).
(k) "Producer"
A producer is any individual engaged in an activity that is connected to or can be related to the production of primary produce. This includes farmers, artisans, weavers, or others who are part of the production value chain in agriculture, cottage industry, or similar sectors.

(l) "Producer Company"
A Producer Company refers to a body corporate that:

Has one or more of the objects or activities as specified under section 378B of the Act, and is registered as a Producer Company under the Companies Act, 2013, or previously under the Companies Act, 1956.
It functions with a special focus on serving the interests of producers, particularly farmers and artisans, by pooling their resources and providing a corporate structure to improve their income and operations.

(m) "Producer Institution"
A Producer Institution means any Producer Company or any other type of institution incorporated or not that consists only of:

Producers, Other Producer Institutions, Producer Companies. Such an institution must have objects similar to those described under section 378B and must agree, as per its own articles, to utilize the services provided by the concerned Producer Company or Companies.

(n) "Withheld Price"
Withheld price refers to a portion of the payment due to a Member of the Producer Company for the goods they have supplied. This portion is deliberately retained by the Company to be paid out at a later stage, as determined by the Company’s policies or Articles of Association.