Section 378-O of the Companies Act, 2013 governs the minimum and maximum number of directors that can be appointed in a Producer Company. A Producer Company is a special type of company formed by farmers or producers, aimed at enhancing their earnings and providing better support in terms of infrastructure, input procurement, and marketing.
This section is crucial as it ensures that the governance of a Producer Company is neither too centralized (few directors) nor overly fragmented (too many directors).
“Every Producer Company shall have at least five and not more than fifteen directors:
Provided that in the case of an inter-State co-operative society incorporated as a Producer Company, such company may have more than fifteen directors for a period of one year from the date of its incorporation as a Producer Company.”
Detailed Interpretation
Minimum Number of Directors: 5
- This ensures adequate quorum and diversity in board-level decisions.
- Avoids control by a single group or individual.
- Encourages participation from various producer members or regions.
✅ Maximum Number of Directors: 15
- Ensures that board operations remain efficient and manageable.
- Prevents governance issues such as indecisiveness or conflicting directions.
- Unlike other companies, Producer Companies cannot exceed this cap by special resolution — it’s a hard cap.
✅ Temporary Relaxation for Inter-State Co-operative Societies
- Where an inter-State co-operative society is converted into a Producer Company, it can retain more than 15 directors, but only for 1 year from the date of incorporation.
- This transitional provision allows time to restructure the board as per the Producer Company format.
- After one year, the company must reduce the number of directors to 15 or fewer.
Compliance Requirements
- Directors must be appointed as per Section 378N (Election of directors).
- Names of all directors should be updated with the Registrar via DIR-12.
- Proper board composition is necessary to comply with corporate governance standards.
- The board should represent the interests of producer members, ensuring that operational decisions align with the objectives of the Producer Company.
Practical Implications
| Scenario | Action/Requirement |
| Incorporating a new Producer Company | Must appoint minimum 5 and maximum 15 directors at the time of registration. |
| Existing Inter-State Co-op converted to Producer Company | Can retain more than 15 directors only for 1 year from the date of incorporation. |
| Appointment of additional directors beyond 15 | Not permitted under law. No provision for expansion through special resolution unlike other company types. |
| Non-compliance | May result in ROC objections, penalties under Section 378ZR, or questions on the validity of board decisions. |
Comparison with Other Company Types
| Type of Company | Minimum Directors | Maximum Directors | Can Exceed 15? |
| Private Company | 2 | 15 | Yes (via Special Resolution) |
| Public Company | 3 | 15 | Yes (via Special Resolution) |
| OPC (One Person Company) | 1 | 1 | No |
| Producer Company | 5 | 15 | No (except for 1-year relaxation for converted co-ops) |
Filings
| Requirement | Form | Due Date |
| Appointment of directors | DIR-12 | Within 30 days of appointment |
| Change in number of directors (within permitted limit) | DIR-12 + Resolution | As and when change occurs |
| Annual confirmation | MGT-7A (Annual Return for small companies/OPCs) or MGT-7 | Within 60 days of AGM |
Issues & Non-Compliance Risks
- Non-adherence to director limits may attract:
- Penal action under Section 378ZR.
- Scrutiny by the Registrar of Companies (ROC).
- Invalidation of board decisions if quorum or composition is unlawful.
- If an inter-State co-operative society fails to restructure its board after 1 year, it must immediately reduce the number of directors, failing which compliance notices may be issued.
Regulatory Guidance
Though specific case law on Section 378-O is scarce, the principle of corporate governance and statutory compliance under general company law has been upheld in several rulings. Key takeaway:
“The structure of a company must reflect statutory intent. Deviations from mandatory provisions on board composition, unless explicitly exempted, are non-negotiable.”
– ROC v. XYZ Agro Producer Co.