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

Under the Companies Act, 2013, a Producer Company is formed by at least ten individuals who are producers, or two or more Producer Institutions, or a combination of ten or more individuals and Producer Institutions. What is the legal status of such a company once it is registered?

A registered Producer Company is a body corporate treated as a private limited company, with no cap on membership, and it can never become or be deemed a public limited company. Its members' liability is limited to unpaid share amounts, so it is a company limited by shares.

  1. AIt is a body corporate treated as a private limited company, but with no upper limit on the number of members, and it can never become a public limited companyCorrect
  2. BIt is a public limited company as soon as it has more than 200 members
  3. CIt may choose to convert into a public limited company by passing a special resolution
  4. DIt is a company limited by guarantee with no share capital

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 the number of members, and it can never become or be deemed to become a public limited company. Sub-section (3) also makes it a company limited by shares, so the guarantee option is wrong. The special-resolution conversion option is wrong because the Act bars public status under any circumstance.

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