Companies Act Section 378W

Companies Act, Section 378W: Chief Executive of a Producer Company and His Functions

Section 378W of the Companies Act, 2013, lays down comprehensive provisions concerning the appointment, status, powers, responsibilities, and reporting obligations of the Chief Executive of a Producer Company. The section ensures that the Producer Company has a dedicated and competent individual in a leadership role who manages the day-to-day operations under the strategic oversight of the Board. The section is detailed below in an elaborated form:

1. Appointment of a Full-time Chief Executive

Every Producer Company is mandated to appoint a full-time Chief Executive, who may be known by any title the company chooses (such as Managing Director, CEO, or any other designation), provided the individual is appointed to serve in a permanent, executive capacity.

This appointment must be made by the Board of Directors.
It is explicitly stated that the person appointed as the Chief Executive must not be a Member (i.e., shareholder or owner) of the Producer Company. This provision ensures the separation of ownership and management and avoids conflicts of interest.
2. Position on the Board of Directors

The individual appointed as the Chief Executive shall serve as an ex officio director on the Board of the Producer Company. The term ex officio implies that the person holds a seat on the Board by virtue of being the Chief Executive, not through election by Members.

Importantly, this ex officio director is not subject to retirement by rotation, unlike other directors who may be periodically re-elected. This provides continuity and stability in the executive leadership of the company.
3. Qualifications, Experience, and Terms of Service

Unless otherwise provided in the Articles of Association of the Producer Company, the responsibility for deciding the following aspects of the Chief Executive's position lies with the Board of Directors:

The required qualifications and professional experience for appointment as Chief Executive.
The terms and conditions of service, which may include remuneration, tenure, benefits, evaluation criteria, and termination provisions.
This flexibility enables the Board to appoint a suitable individual best aligned with the company’s operational and strategic needs.

4. Powers of Management

The Chief Executive shall be entrusted with substantial powers of management, as defined and delegated by the Board of Directors. These powers allow the Chief Executive to play a central role in the administration and functioning of the Producer Company.

5. Specific Powers and Functions of the Chief Executive

In addition to the general powers mentioned above, the Chief Executive is also explicitly empowered to carry out a variety of specific duties and responsibilities, which include:

(a) Administrative and Operational Management

Handling administrative activities of a routine nature and managing the daily operations of the Producer Company.

(b) Banking Authority

Operating the company's bank accounts, and where permitted by the Board, authorising other persons to do so, either generally or for specific transactions.

(c) Asset Management

Making arrangements for the safe custody of cash and other assets belonging to the Producer Company.

(d) Execution of Documents

Signing documents on behalf of the company, as authorised by the Board, including contracts, agreements, and other legal or operational paperwork.

(e) Financial Records and Audit

Ensuring that the company maintains proper books of accounts. Preparing the annual financial statements. Facilitating the audit of these statements.
Presenting the audited financials to the Board of Directors and subsequently to the Members at the Annual General Meeting (AGM).
(f) Information Dissemination

Providing periodic and relevant information to Members to keep them informed about the activities, progress, and performance of the Producer Company.

(g) Staff Appointments

Making appointments to various posts within the Producer Company, subject to the authority delegated by the Board.

(h) Strategic Support to the Board

Assisting the Board in framing and developing the company’s goals, objectives, strategic plans, and policies.

(i) Legal and Regulatory Advisory

Advising the Board on legal and regulatory issues relating to both ongoing and proposed activities of the company, and taking the necessary action to ensure compliance.

(j) Ordinary Course of Business

Exercising such powers as may be necessary in the ordinary course of business, ensuring smooth and uninterrupted operations.

(k) Other Delegated Functions

Discharging any other responsibilities or exercising powers that may be delegated by the Board from time to time.

6. Accountability and Reporting

While the Chief Executive plays a pivotal role in managing the affairs of the Producer Company, this role must be exercised under the general superintendence, direction, and control of the Board of Directors.

The Chief Executive remains accountable to the Board for the overall performance and management of the company.
This structure ensures that strategic control rests with the Board while day-to-day operational authority lies with the Chief Executive.