Transferability of Shares and Attendant Rights in Producer Companies: Understanding Section 378ZD of the Companies Act, 2013
This article delves into Section 378ZD of the Companies Act, 2013, which governs the transferability of shares and attendant rights in producer companies. It aims to simplify the legal jargon and provide a clear understanding for those interested in this topic.
Key Points:
- General Rule: By default, shares in a producer company are not transferable.
- Exceptions:
- Transfer with Board Approval: A member can transfer all or part of their shares, along with any special rights, to another active member at par value, after obtaining prior approval from the Board.
- Transfer on Death: Each member must nominate a person to inherit their shares in the event of their death. This process should be done within three months of joining the company and in accordance with the company’s articles.
- Transfer due to Lost Qualification: If a member ceases to be a primary producer or no longer fulfills the qualifications outlined in the company’s articles, the Board may direct them to surrender their shares, along with any special rights, at par value or another value determined by the Board. However, this process must be preceded by a written notice and a hearing opportunity for the member.
Section 378ZD The Companies Act, 2013 : Legal Text
Transferability of shares and attendant rights
(1) Save as otherwise provided in sub-sections (2) to (4), the shares of a Member of a Producer Company shall not be transferable.
(2) A Member of a Producer Company may, after obtaining the previous approval of the Board, transfer the whole or part of his shares alongwith any special rights, to an active Member at par value.
(3) Every Member shall, within three months of his becoming a Member in the Producer Company, nominate, in the manner specified in articles, a person to whom his shares in the Producer Company shall vest in the event of his death.
(4) The nominee shall, on the death of the Member, become entitled to all the rights in the shares of the Producer Company and the Board of that Company shall transfer the shares of the deceased Member to his nominee: Provided that in a case where such nominee is not a producer, the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board.
(5) Where the Board of a Producer Company is satisfied that-
(a) any Member has ceased to be a primary producer; or
(b) any Member has failed to retain his qualifications to be a Member as specified in articles,
the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board:
Provided that the Board shall not direct such surrender of shares unless the Member has been served with a written notice and given an opportunity of being heard.]
Amendment
1. Inserted by Companies(Amendment) Act 2020 Dated 29.09.2020Amendment Effective from 11th February 2021
Practice area's of B K Goyal & Co LLP
Income Tax Return Filing | Income Tax Appeal | Income Tax Notice | GST Registration | GST Return Filing | FSSAI Registration | Company Registration | Company Audit | Company Annual Compliance | Income Tax Audit | Nidhi Company Registration| LLP Registration | Accounting in India | NGO Registration | NGO Audit | ESG | BRSR | Private Security Agency | Udyam Registration | Trademark Registration | Copyright Registration | Patent Registration | Import Export Code | Forensic Accounting and Fraud Detection | Section 8 Company | Foreign Company | 80G and 12A Certificate | FCRA Registration |DGGI Cases | Scrutiny Cases | Income Escapement Cases | Search & Seizure | CIT Appeal | ITAT Appeal | Auditors | Internal Audit | Financial Audit | Process Audit | IEC Code | CA Certification | Income Tax Penalty Notice u/s 271(1)(c) | Income Tax Notice u/s 142(1) | Income Tax Notice u/s 144 |Income Tax Notice u/s 148 | Income Tax Demand Notice
Company Registration Services in major cities of India
Company Registration in Jaipur | Company Registration in Delhi | Company Registration in Pune | Company Registration in Hyderabad | Company Registration in Bangalore | Company Registration in Chennai | Company Registration in Kolkata | Company Registration in Mumbai | Company Registration in India | Company Registration in Gurgaon