Companies Act Section 378M

Companies Act, Section 378M: Continuation of Concessions, Licences, and Benefits upon Transformation into a Producer Company 

Section 378M of the Companies Act, 2013 deals with the preservation and continuity of fiscal and legal benefits that were available to an inter-State co-operative society before it was transformed into a Producer Company. This provision ensures that the transformation of the legal form of the entity does not result in the loss or withdrawal of any benefits that were already conferred by law. A detailed explanation of the section is provided below:

Preservation of Existing Benefits Post-Transformation

When an inter-State co-operative society is transformed into a Producer Company under the provisions of Chapter XXIA of the Companies Act, 2013, all concessions, licences, benefits, privileges, and exemptions that were granted to the co-operative society under any prevailing law shall be automatically transferred and deemed to have been granted to the Producer Company from the date of transformation.

Scope of Benefits Covered

The provision broadly covers a wide range of fiscal and non-fiscal benefits including:

Tax concessions and exemptions, such as those relating to income tax, sales tax, or GST.
Licences or registrations obtained under laws governing agriculture, manufacturing, trade, cooperative development, or environmental clearances.
Subsidies, grants, or financial assistance provided by government authorities or public financial institutions.
Statutory privileges or exemptions, such as priority sector lending benefits, access to concessional credit lines, or exemption from specific regulatory compliances.
Legal Continuity and Non-Disruption of Entitlements

The main objective of this section is to provide legal continuity in the affairs of the entity. It ensures that by virtue of mere transformation from a co-operative society to a Producer Company:

The legal personality of the entity, in terms of its entitlements, remains unaffected.

There is no need for fresh applications or approvals for availing the concessions and privileges already granted to the co-operative society.

Government departments, regulatory authorities, and other stakeholders are obliged to treat the Producer Company as the lawful successor to the co-operative society for all such purposes.
Legal Fiction to Avoid Repetition or Redundancy

Section 378M creates a legal fiction, meaning that for all intents and purposes under any law for the time being in force, the Producer Company shall be deemed to have been granted the same concessions and benefits that were available to the inter-State co-operative society, as though the Producer Company itself had originally been the beneficiary.

This deeming provision avoids legal redundancy, saves administrative time, and protects the transformed entity from the risk of being denied pre-existing benefits merely because of its change in legal structure.