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

Kisan Agro Producer Company Ltd. paid its promoters for registration fees, legal fees and printing of its memorandum and articles. Under section 378C, when can the company reimburse such direct costs to the promoters?

A Producer Company may reimburse promoters for direct promotion and registration costs such as registration, legal fees and printing of the memorandum and articles, but the payment is subject to approval at its first general meeting of the Members.

  1. AOnly with the prior approval of the Central Government
  2. BPayment is subject to approval at the company's first general meeting of the MembersCorrect
  3. COnly after the first annual return is filed with the Registrar
  4. DSuch reimbursement is prohibited for Producer Companies

Explanation

Section 378C(4) allows a Producer Company to reimburse promoters for direct costs of promotion and registration, including registration, legal fees and printing of the memorandum and articles, with payment subject to approval at its first general meeting of the Members. Central Government approval is not required for this.

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