Producer Company - An Overview

What is a Producer Company?

A Producer Company is a legally recognized entity formed by farmers or agriculturists with the primary goal of improving their livelihoods, financial well-being, and income. It operates as a hybrid structure, combining features of both private limited companies and cooperative societies. Its main purpose is to facilitate the formation of cooperative businesses as companies and enable existing cooperatives to adopt a company structure.

Legal Framework:

• Established under the amended Companies Act of 1956.
• Governed by Section 465 of the Companies Act, 2013, and subject to the regulations in Part IX A of the Companies Act, 1956 (with modifications).
• Objectives must align with the activities specified in Section 581B of the Companies Act 1956.

Objective:

To advance members' interests through activities related to the production, marketing, sale, and export of their primary products. They can also import essential goods or services for members' welfare.

Key Activities:

Producer Companies engage in a range of activities to benefit their members, including:

• Production, harvesting, procurement, grading, pooling, handling, marketing, selling, and exporting of primary produce.
• Importing goods or services for members.
• Processing activities like preservation, drying, distilling, brewing, venting, canning, and packaging.
• Manufacturing, marketing, or supplying machinery, equipment, and consumables primarily to members.
• Providing education and training based on mutual assistance.
• Offering technical assistance, consultancy, training, research, and development services.
• Involving in power generation, transmission, distribution, and sustainable resource management.
• Offering insurance products for producers or their produce.
• Promoting mutuality and mutual assistance among members.
• Implementing member welfare measures.
• Engaging in ancillary activities that support the main objectives.
• Financing procurement, processing, marketing, and other activities, including extending credit.

Advantages:

• Hybrid Structure: Combines professional management of a Private Limited Company with the mutual benefits of a Cooperative Society.
• Ownership by Primary Producers: Exclusively owned by primary producers or Producer Institutions, preventing takeovers and ensuring focus on member benefit.
• Professional Framework: Operates under specific clauses (581-A to 581-ZL) of the Producer Company Act within the framework of a Private Limited Company.
• Limited Liability: Members' liability is limited to their share contribution, protecting personal assets.
• Minimal Capital Requirement: Minimum paid-up capital of Rs. 1 Lakh and minimum authorized capital of Rs. 5 Lakhs.
• Flexibility in Membership: Requires a minimum of 10 producers with no upper limit.
• No Government or Private Equity Stake: Ensures autonomy and professional functioning.
• National Scope: Can operate across India, allowing for expansion.

Membership Structure:

• Membership is open to primary producers or producer organizations.
• Membership is obtained by purchasing shares.
• Actions are executed through members.
• Members are crucial for establishment and dissolution.
• Decisions are made collectively in general meetings.

Governance Structure:

• Managed by a Board of Directors elected by members during a general meeting.
• Minimum of 5 directors.
• Directors serve a term of five years and can be re-elected for up to two consecutive terms.

Minimum Share Capital Requirements:

• Minimum Authorized Capital: Rs. 5 Lakhs (can be higher as per Memorandum).
• Minimum Paid-up Capital: Rs. 1 Lakh.

How to Register a Farmer Producer Company:

The registration process is similar to incorporating a Private Limited Company:

1. Obtain Digital Signature Certificate (DSC): For all proposed directors.
2. Obtain Director Identification Number (DIN): For each director.
3. Name Reservation: File Form SPICe+ with the Registrar of Companies (ROC), proposing names ending with "Producer Company."
4. Preparation of Essential Documents: Draft the Memorandum of Association (MoA) and Articles of Association (AoA), prepare Form INC-22 (Registered Office) and DIR-12 (Directors Appointment), affidavits, Power of Attorney, and registered office proof.
5. Filing of Incorporation Application: Submit all documents and the application in Form SPICe+ to the ROC.
6. ROC Verification and Certificate of Incorporation: The ROC scrutinizes the application and issues the Certificate of Incorporation upon satisfaction.

Post-Incorporation Steps:

Typically include applying for PAN, TAN, and opening a bank account.

Compliance for Producer Companies:

• Audit and Reporting: Mandatory annual audits, presentation of audited financials and reports at the AGM, and filings with the ROC.
• Conversion: Existing cooperatives can convert into Producer Companies.
• Taxation: Subject to corporate taxation, with potential agricultural activity-related benefits.
• Share Capital: Must maintain minimum authorized and paid-up capital and can raise further capital.
• Operational Objective: Focus on primary produce activities for member benefit.
• Leadership and Decision-making: Board elected by members ensures alignment with interests.
• Profit Sharing: Dividends capped at 20% of annual profits.
• Operational Restrictions: Speculative activities unrelated to primary production are prohibited.
• Structural Flexibility: Conversion to a regular company is possible under specific conditions.
• Dissolution/Winding-Up: Follows standard company procedures.
• Voting Limitations: No voting by proxy, focusing on production-related resolutions.
• Regular Meetings: At least four board meetings annually with required quorum.
• Financial Prudence: Mandated statutory reserve from net profits.
• Expertise Utilization: Can hire professional managers with approval.
• NABARD Registration: Enables access to financial and technical support.
• Operational Expansion: Branches are permitted under central management and Companies Act compliance.
• Annual Return: Mandatory filing with the ROC detailing operations, membership, and financials.

List of Documents: