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CS Executive · Company Law and Practice · Share and Share Capital - Concepts

Kaveri Agro Producer Company Ltd is a Producer Company. A member asks what kind of share capital it may have and how members' holdings are linked to their dealings with the company. Which answer reflects the Act?

A Producer Company's share capital consists of equity shares only, and each member's shareholding is, as far as may be, proportionate to that member's patronage of the company, as provided in section 378ZB.

  1. AIts share capital may consist of equity and preference shares, held in equal proportion by all members
  2. BIts share capital consists of equity shares only, and members' shares are as far as may be in proportion to their patronageCorrect
  3. CIts share capital consists of preference shares only, proportionate to capital contributed
  4. DIts share capital may include shares with differential voting rights, held in proportion to profits earned

Explanation

Section 378ZB(1) states that the share capital of a Producer Company consists of equity shares only. Section 378ZB(2) states that shares held by a member shall, as far as may be, be in proportion to patronage of the company. Allowing preference shares contradicts sub-section (1).

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