Sections 378O to 378Q explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 378O to 378Q set the Board of a Producer Company. Section 378-O fixes the number of directors (five to fifteen), section 378P deals with how directors are designated, elected, co-opted and for how long they serve, and section 378Q lists the events on which a director's office becomes vacant.
A Producer Company must have at least five and not more than fifteen directors (section 378-O). The subscribers may designate the first Board; elections must be held within ninety days of registration (section 378P(2)). A director holds office for not less than one year and not more than five years, as the articles specify. The Board may co-opt expert or additional directors up to one-fifth of the total. Under section 378Q a director's office falls vacant on grounds such as a conviction with imprisonment of six months or more or default in repayment of loans continuing ninety days. The Bill 2026 proposes changes to sections 378P and 378Q; these are pending.
The three sections at a glance
| Section | Subject | Key point |
|---|---|---|
| 378-O | Number of directors | Minimum five, maximum fifteen; converted societies may exceed fifteen for one year |
| 378P | Appointment | First Board designated; election in 90 days; term 1 to 5 years; co-option up to one-fifth |
| 378Q | Vacation of office | Six grounds in sub-section (1); applies also to directors of Producer Institutions |
For the wider picture of the Board, read Board of Directors in a Producer Company: special rules. If you are about to bring new directors on, our appointment of director service can help with the paperwork.
Section 378-O: how many directors
Every Producer Company shall have at least five and not more than fifteen directors. The proviso lets an inter-State co-operative society that becomes a Producer Company have more than fifteen directors for one year from the date of its incorporation as a Producer Company. The official text prints this section number as "378-O". For conversion, see sections 378J to 378N.
Section 378P: appointment of directors
| Sub-section | Rule |
|---|---|
| (1) | Save as provided in section 378N, the Members who sign the memorandum and articles may designate in them a Board of not less than five directors, who govern until directors are elected under the section |
| (2) | The election of directors shall be conducted within ninety days of registration. Proviso: for a society registered under section 378J(4) in which at least five directors (including those continuing under section 378N(1)) hold office on registration, read "three hundred and sixty-five days" instead |
| (3) | A director holds office for a period not less than one year but not exceeding five years, as specified in the articles |
| (4) | A director who retires in accordance with the articles is eligible for re-appointment |
| (5) | Save as provided in sub-section (2), directors are elected or appointed by the Members in the annual general meeting |
| (6) | The Board may co-opt one or more expert directors or an additional director, not exceeding one-fifth of the total number of directors, or appoint any other person as additional director, for such period as it deems fit |
Expert directors. Under the first proviso to sub-section (6), expert directors have no right to vote in the election of the Chairman but are eligible to be elected Chairman if the articles so provide. The second proviso says the maximum period for which an expert or additional director holds office shall not exceed the period the articles specify.
Articles. Section 378G(3)(c) and (d) require the articles to cover the Board's constitution, minimum and maximum directors, election, retirement by rotation, qualifications, terms, co-option, removal, filling of vacancies, the Chairman and his casting vote. See sections 378F to 378I.
Section 378Q: when a director's office becomes vacant
Section 378Q(1) says the office of the director of a Producer Company becomes vacant if:
| Clause | Ground |
|---|---|
| (a) | He is convicted by a court of an offence involving moral turpitude and sentenced to imprisonment for not less than six months |
| (b) | The Producer Company has defaulted in repaying advances or loans taken from any company, institution or other person, and the default continues for ninety days |
| (c) | He has defaulted in repaying advances or loans taken from the Producer Company of which he is a director |
| (d) | The company (i) has not filed annual accounts and annual return for any continuous three financial years; or (ii) has failed to repay its deposit, withheld price, patronage bonus or interest on the due date, or to pay dividend, and the failure continues for one year or more |
| (e) | Default in holding an election for the office of director as the Act and articles require |
| (f) | The annual or extraordinary general meeting is not called as the Act requires, except due to natural calamity or other reason |
Under sub-section (2), sub-section (1) applies, as far as may be, to a director of a Producer Institution that is a Member of a Producer Company.
Clauses (b), (d), (e) and (f) are triggered by the company's default, not the director's own act. That is why timely filings, repayments and meetings matter to every director. Annual filings are covered in annual compliance for a Producer Company.
A worked example
A Producer Company of pulse growers is registered on 1 April. It must hold the election of directors within ninety days. If it forgets, clause (e) of section 378Q(1) can make the directors' offices vacant for default in holding the election. The Board wants an irrigation engineer on the Board. It may co-opt him as an expert director, as long as the co-opted and additional directors stay within one-fifth of the total number of directors; he cannot vote in the Chairman's election.
Proposed change (Corporate Laws (Amendment) Bill, 2026)
The Bill is pending and is not law. Two clauses touch these sections.
- Clause 83 (section 378P). It proposes to omit sub-section (2) (the ninety-day election requirement and its proviso) and to substitute sub-section (5) so that "the directors of the Board shall be elected or appointed by the Members in the general meetings" (instead of the annual general meeting, and without the "save as provided in sub-section (2)" words).
- Clause 84 (section 378Q). In sub-section (1)(b), it proposes to replace "ninety days" with "one hundred and eighty days", so Producer Companies get additional time before a loan default makes a director's office vacant. The statement of objects describes this as giving "additional period".
Until Parliament passes and notifies the Bill, the ninety-day election rule and the ninety-day loan default period in the current text continue. Note that section 378Q(1)(e), default in holding election "in accordance with the provisions of this Act and articles", is not shown as amended.
Need help with Producer Company directors?
Board composition, elections and director vacancies all have time limits that the company, not just the director, must meet. Our appointment of director team can help you plan elections, co-option and the filings that follow a change in the Board.
Key takeaways
- A Producer Company must have five to fifteen directors.
- Elections are due within ninety days of registration under the current text; the Bill proposes to omit that rule.
- A director's term is one to five years, as the articles say; retiring directors can be re-appointed.
- Co-opted expert or additional directors are capped at one-fifth of the total.
- Section 378Q lists six grounds of vacancy, including ninety-day loan default (the Bill proposes 180 days).
Read next
- Section 378R: powers of the Board
- Sections 378J to 378N: co-operative society to Producer Company
- Sections 378U and 378V: committees and Board meetings
- Board of Directors in a Producer Company: special rules
Disclaimer: Based on the Companies Act, 2013 as amended up to 1 April 2021 (official consolidated text), read with later developments noted in the article; proposals in the Corporate Laws (Amendment) Bill, 2026 are pending and not law as on 30 September 2026. Verify current notifications and rules before acting.