Section 378ZS of Companies Act 2013: Re-conversion of Producer Company to Inter-State Co-operative Society
Section 378ZS of the Companies Act, 2013 provides a statutory route by which an eligible Producer Company that was formerly an inter-State co-operative society may seek re-conversion into an inter-State co-operative society. The process requires an application to the Tribunal, prescribed voting support, disclosure of material facts, filing of the Tribunal order with the Registrar and subsequent registration under the applicable co-operative societies law.
What is Section 378ZS?
Section 378ZS forms part of Chapter XXIA of the Companies Act, 2013 relating to Producer Companies. It specifically deals with the re-conversion of a Producer Company into an inter-State co-operative society. The provision applies to a Producer Company that was an erstwhile inter-State co-operative society and was formed and registered as a Producer Company under Chapter XXIA.
The term Tribunal in the Companies Act generally refers to the National Company Law Tribunal as defined by the Act. For the statutory framework governing Producer Companies, readers should also refer to the definitions and other applicable provisions of Chapter XXIA.
Text and requirements of Section 378ZS
Sub-section (1): Who may initiate re-conversion?
An eligible Producer Company may apply to the Tribunal for re-conversion after a resolution is passed in the general meeting by not less than two-thirds of the Members present and voting. The process may also be initiated on the request of creditors representing three-fourths in value of the total creditors.
Sub-section (2): Tribunal-directed meeting
After an application is made, the Tribunal may direct that a meeting of the Members or creditors, as applicable, be held in the manner directed by it.
Sub-section (3): Approval and Tribunal sanction
The statutory threshold at the Tribunal-directed meeting is a majority in number representing three-fourths in value of the creditors or Members, as the case may be, present and voting in person. The arrangement for re-conversion becomes binding when sanctioned by the Tribunal.
The Tribunal must also be satisfied that all material facts relating to the company have been disclosed. These include the latest financial position, the latest auditor's report and the pendency of investigation proceedings under Chapter XIV, among other relevant matters.
Sub-section (4): Filing with Registrar
The Tribunal's order does not take effect until a certified copy of the order is filed with the Registrar.
Sub-section (5): Order to accompany constitutional documents
After the certified order is filed, a copy of the order must be annexed to every copy of the memorandum subsequently issued, or to the relevant constitutional instrument where the company does not have a memorandum.
Sub-section (6): Consequence of default
The section provides a monetary consequence for the company and every officer in default where the statutory requirement referred to in the provision is not complied with. For any compliance action, the current official text and applicable rules should be checked before filing.
Sub-section (7): Power to stay proceedings
After an application under Section 378ZS has been made, the Tribunal may stay the commencement or continuation of a suit or proceeding against the company on such terms as it considers appropriate until the application is finally disposed of.
Sub-section (8): Registration after sanction
A Producer Company whose re-conversion has been sanctioned must, within six months of the Tribunal's sanction, apply for registration under the Multi-State Co-operative Societies Act, 2002 or other applicable law, as the case may be. It must also report the registration to the Tribunal, the Registrar of Companies and the appropriate Registrar of Co-operative Societies.
Section 378ZS procedure at a glance
| Stage | Key requirement |
|---|---|
| Eligibility | Producer Company must be an erstwhile inter-State co-operative society formed and registered under the Producer Company chapter. |
| Initial approval | Resolution by not less than two-thirds of Members present and voting, or qualifying request by creditors representing three-fourths in value of total creditors. |
| Application | Application is made to the Tribunal for re-conversion. |
| Meeting | Members or creditors meet in the manner directed by the Tribunal. |
| Required support | Statutory majority and value threshold under sub-section (3) must be met. |
| Disclosure | Material facts, financial position, auditor's report and relevant investigation details must be disclosed to the Tribunal. |
| Sanction and filing | Tribunal sanction is followed by filing of the certified order with the Registrar. |
| Co-operative registration | Application under the applicable co-operative societies law must be made within six months of sanction. |
Important legal points
- Limited eligibility: Section 378ZS is framed for a Producer Company that was formerly an inter-State co-operative society.
- Tribunal supervision: The process is subject to directions and sanction of the Tribunal.
- Member and creditor protection: The section prescribes voting thresholds and requires disclosure of material company information.
- Order must be filed: The Tribunal order does not become effective merely on pronouncement; the certified copy must be filed with the Registrar.
- Six-month post-sanction requirement: The sanctioned Producer Company must proceed with registration under the applicable co-operative societies legislation within the statutory period.
Related provisions
Section 378ZS should be read with the other Producer Company provisions in Chapter XXIA, particularly Section 378ZQ on the overriding effect of the Chapter, Section 378ZR on the application of provisions relating to private companies, and Section 378ZT concerning the power to modify the application of the Act to Producer Companies.
Official legal resources
This page is intended as a general legal information resource. For a filing, proceeding or transaction, verify the current statutory text, applicable rules, notifications, forms and Tribunal requirements.