Companies Act Section 378L

Companies Act, Section 378L: Vesting of Undertaking in Producer Company

Section 378L of the Companies Act, 2013 lays down comprehensive provisions governing the vesting of the entire undertaking of an inter-State co-operative society into a Producer Company upon its transformation. This section ensures continuity, legal recognition, and seamless transition of all rights, liabilities, assets, and obligations from the co-operative society to the newly formed Producer Company. A detailed explanation of its provisions is given below:

1. Vesting of Property and Assets

Upon the transformation of an inter-State co-operative society into a Producer Company, all the properties and assets of the co-operative society whether movable or immovable automatically vest in the Producer Company. This vesting is effective from the date of transformation, meaning that the Producer Company becomes the lawful owner of all such assets that were previously owned by the inter-State co-operative society.

2. Transfer of Rights and Liabilities

In addition to property, all rights, debts, liabilities, interests, privileges, and obligations that belonged to the inter-State co-operative society as on the date of transformation stand transferred to the Producer Company. These elements are deemed to be the rights and liabilities of the Producer Company without the need for any separate conveyance, assignment, or documentation.

3. Continuity of Contracts and Obligations

Further reinforcing the smooth transition, the law provides that all debts, liabilities, and obligations incurred, and all contracts and arrangements entered into by or on behalf of the inter-State co-operative society, shall be treated as having been incurred, entered into, or undertaken by or on behalf of the Producer Company. This provision ensures that all pending and ongoing business, contractual, or statutory matters continue without interruption and are now the responsibility of the Producer Company.

4. Continuity of Receivables

Any money that was due to the inter-State co-operative society immediately before the transformation shall now be deemed to be due to the Producer Company. This means that all receivables, including loans, payments, and outstanding amounts, are to be collected by the Producer Company in place of the society.

5. Management of Subsidiary Organizations

If the inter-State co-operative society was managing any subsidiary or other organization prior to the date of transformation, such management responsibility shall continue with the Producer Company. The extent, period, and manner of this management shall be determined based on the specific requirements and circumstances prevailing at the time.

6. Continuation of Assistance to Beneficiary Organizations

Any financial, managerial, or technical assistance that was being provided by the inter-State co-operative society to other organizations shall, at the discretion of the Producer Company, continue to be provided. The Producer Company may decide the period, extent, and nature of such continued assistance, based on what it considers appropriate.

7. Treatment of Capital

The capital of the erstwhile inter-State co-operative society shall now be considered part of the capital of the Producer Company. This integration ensures that the financial base of the new entity continues without disruption or loss of equity.

8. Legal Reference Substitution

Any reference to the inter-State co-operative society in any law, contract, agreement, or legal instrument, other than the Companies Act, shall now be construed as a reference to the Producer Company. This substitution is automatic and applies universally unless explicitly stated otherwise.

9. Continuity of Legal Proceedings

If there are any pending legal proceedings whether a suit, arbitration, appeal, or any other legal process filed by or against the inter-State co-operative society as on the date of transformation, such proceedings shall not abate, be discontinued, or be adversely affected solely due to the transformation. Instead, these proceedings shall be continued, prosecuted, or enforced by or against the Producer Company in the same manner and to the same extent as they would have been against the inter-State co-operative society, as if the Producer Company had always been a party.