Section 378ZD: Transferability of shares and attendant rights
This section is for regulating the transfer of shares and related rights in a Producer Company.
The section, clause by clause
What the section says
In plain terms
(1)Save as otherwise provided in sub-sections (2) to (4), the shares of a Member of a Producer Company shall not be transferable.
Shares of a Producer Company member are not transferable except as provided in the following rules.
(2)A Member of a Producer Company may, after obtaining the previous approval of the Board, transfer the whole or part of his shares alongwith any special rights, to an active Member at par value.
A member can transfer shares to an active member at par value if the Board approves it beforehand.
(3)Every Member shall, within three months of his becoming a Member in the Producer Company, nominate, in the manner specified in articles, a person to whom his shares in the Producer Company shall vest in the event of his death.
Each member must nominate someone to inherit their shares within three months of joining the company.
(4)The nominee shall, on the death of the Member, become entitled to all the rights in the shares of the Producer Company and the Board of that Company shall transfer the shares of the deceased Member to his nominee:
When a member dies their nominee becomes entitled to their shares and the Board must transfer them unless the nominee is not a producer.
provisoProvided that in a case where such nominee is not a producer, the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board.
(5)Where the Board of a Producer Company is satisfied that—
If a member stops being a primary producer or fails to meet membership qualifications the Board can require them to surrender their shares at par value after giving them notice and a chance to respond.
(5)(a)any Member has ceased to be a primary producer; or
(5)(b)any Member has failed to retain his qualifications to be a Member as specified in articles, the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board:
provisoProvided that the Board shall not direct such surrender of shares unless the Member has been served with a written notice and given an opportunity of being heard.
(5)PART VI FINANCE, ACCOUNTS AND AUDIT
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.