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CMA Intermediate · Business Laws and Ethics · Company Types, Promotion, Formation and Related Procedures

A Producer Company is registered under section 378C. What is the position regarding its status and membership under that section?

On registration, a Producer Company becomes a body corporate as if it were a private limited company, but without any limit on the number of Members. It can never, under any circumstance, become or be deemed to become a public limited company under the Act.

  1. AIt becomes a public limited company once its membership exceeds 200
  2. BIt is treated as a private limited company with no limit on the number of Members, and never becomes a public limited companyCorrect
  3. CIt is treated as a public company with a maximum of 200 Members
  4. DIt may elect to convert into a public limited company by special resolution

Explanation

Section 378C(5) says that on registration the Producer Company becomes a body corporate as if it were a private limited company, without any limit on Members. It shall not under any circumstance become or be deemed a public limited company, so the conversion and 200-member options are wrong.

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