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

A Producer Company, Kisan Agro Producers, has grown to 4,000 members. A member argues that it has now automatically become a public limited company. Under the Companies Act, 2013, what is the position?

The member is wrong. A Producer Company is treated as a private limited company without any limit on members, and the Act says it can never become or be deemed a public limited company, however large its membership grows.

  1. AIt becomes a public company automatically once members exceed 200
  2. BIt becomes a public company only if it passes a special resolution
  3. CIt becomes a public company only if the Registrar so directs
  4. DIt cannot under any circumstance become or be deemed a public limited company; it is treated as a private company with no cap on membersCorrect

Explanation

On registration, a Producer Company becomes a body corporate as if it were a private limited company, but with no limit on the number of members. The Act states it shall not, under any circumstance, become or be deemed to become a public limited company. Hence neither membership growth, a resolution nor a Registrar's direction changes its status.

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