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

Narmada Dairy Producer Company has members Asha, who supplies milk worth ₹9 lakh a year, and Bhim, who supplies milk worth ₹1 lakh a year. Its Articles are silent on shareholding ratios. Which statement best reflects Section 378ZB(2)?

Asha, who patronises the company far more, should as far as may be hold proportionately more shares than Bhim. Section 378ZB(2) links shareholding to patronage, while equal voting under Section 378Z is a separate matter from the number of shares.

  1. AAsha's shareholding should, as far as may be, be larger than Bhim's, in proportion to patronageCorrect
  2. BBoth must hold exactly equal shares because each member has one vote
  3. CBhim must hold more shares because he is a smaller supplier
  4. DShareholding must be based on the members' age and years of membership

Explanation

Section 378ZB(2) requires shares to be held, as far as may be, in proportion to patronage. Asha patronises nine times more than Bhim, so her holding should be proportionately larger. Equal voting under Section 378Z concerns votes, not shareholding.

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