Producer Company

A Producer Company is an officially established group of farmers or agriculturists to enhance their quality of life, financial support, and income. This kind of company combines elements of both private limited companies and cooperatives. Its primary goal is to encourage cooperative businesses to form as companies and to allow current cooperatives to transition into company structures.

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Producer Company

A Producer Company also referred to as a Farmer Producer Company, is an officially acknowledged organisation composed of farmers or agriculturists. Its primary goal is to improve the livelihoods of its members and ensure the long-term viability of their resources, incomes, and profitability. Operating as a hybrid between private limited companies and cooperative societies, a farmer-producer company is registered under the Companies Act 2013. It functions with democratic governance principles, ensuring that each member or producer has an equal say in decision-making, regardless of the number of shares they hold.

Legal Framework of Farmer Producer Company

A Producer Company, as defined, is a legal entity established under the amended Companies Act of 1956.

• Governed by the provisions outlined in Section 465 of the Companies Act, 2013, it is subjected to the regulations outlined in Part IX A of the Companies Act, 1956, with necessary modifications.
• The objectives of a Producer Company must align with the activities specified in Section 581B of the Companies Act 1956.

Objective of Producer Company

A Producer Company's objective is to advance its members' interests by facilitating activities related to the production, marketing, sale, and export of their primary products.

Additionally, the company is empowered to import goods or services essential for the welfare of its members.

Activities of Farmer Producer Company

Producer Companies are established with diverse objectives aimed at enhancing their members' welfare and economic status.

• Agricultural Advancements: Initiating and supporting activities related to the production, harvesting, procurement, grading, pooling, handling, marketing, selling, and exporting of members' primary produce. Additionally, it includes importing goods or services beneficial to the members.
• Processing and Preservation: Engaging in processing activities such as preservation, drying, distilling, brewing, venting, canning, and packaging of the members' produce to add value and extend its marketability.
• Equipment and Consumables Supply: Manufacturing, marketing, or supplying machinery, equipment, and consumables, primarily catering to the needs of its members.
• Educational Initiatives: Offering education and training based on the principles of mutual assistance to its members and the broader community.
• Technical and Consultancy Services: Providing a spectrum of services, including technical assistance, consultancy, training, research and development, aimed at promoting the interests and enhancing the capabilities of its members.
• Energy and Resource Management: Involving in power generation, transmission, distribution and revitalisation and sustainable management of land and water resources.
• Insurance Services: Offering insurance products tailored to protect producers or their primary produce.
• Mutual Cooperation: Promoting techniques and practices of mutuality and mutual assistance among members.
• Member Welfare: Implementing welfare measures or facilities decided by the Board for the benefit of members.
• Ancillary Activities: Engaging in any other activity that is ancillary or incidental to the primary objectives or that may promote the principles of mutuality and mutual assistance among members in different manners.
• Financial Support: Financing the procurement, processing, marketing, and other specified activities, which includes extending credit facilities or other financial services to its members.

Advantages of a Producer Company

The benefits of starting a Producer Company are listed as follows:

• Hybrid Structure: A Producer Company combines the professional management of a Private Limited Company with the mutual benefits of a Cooperative Society.
• Ownership by Primary Producers: Ownership and membership are held exclusively by "primary producers" or "Producer Institutions," ensuring that the organisation remains focused on benefiting those involved in primary production. Member equity cannot be traded, safeguarding against takeovers or exploitation.
• Professional Framework: While adhering to the clauses of a Private Limited Company, a Producer Company operates under specific clauses outlined in the Producer Company Act (referenced from 581-A to 581-ZL), providing a professional framework tailored to the needs of primary producers.
• Limited Liability: In a Producer Company, members' financial responsibility is capped at their share contribution. This implies that members' assets are safeguarded against the company's debts or financial setbacks, limiting their liability strictly to the amount they've invested in shares.
• Minimal Capital Requirement: With a minimum paid-up capital of Rs. 1 Lakh and minimum authorised capital of Rs. 5 lakh, it is easier to mobilise small capital for a Producer Company.
• Flexibility in Membership: A minimum of 10 producers is required to form a Producer Company, with no limit on the maximum number of members. This flexibility allows even small groups of 10 individuals to establish a Producer Company, promoting accessibility.
• No Government or Private Equity Stake: Producer Companies cannot have government or private equity stakes, preventing them from becoming public or deemed public limited companies. This ensures autonomy and professional functioning without external threats.
• National Scope: Producer Companies can operate nationwide, providing flexibility to expand and conduct business freely and professionally.

Membership Structure of Producer Company

A producer company's membership excludes primary producers or producer organisations.

• Membership is attained through the purchase of shares in the company.
• The actions of a Producer Company are solely executed through its members.
• Members are pivotal in establishing the company and hold the authority to initiate its dissolution.
• Decisions within the company are made collectively through general meetings convened by the members.

Governance Structure of a Producer Company

• A Board of Directors oversees the management of a Producer Company.
• Members of the company elect the Board during a general meeting.
• The Board must consist of a minimum of 5 directors.
• Directors serve a term of five years.
• Directors can be re-elected for up to two consecutive terms.

Minimum Share Capital Requirements

Minimum Share Capital Requirements for a Producer Company are listed as follows:

• The minimum Authorized Capital for a Producer Company is Rs. 5 lakh.
• However, the Authorized Capital can exceed Rs. 5 lakh as specified in the Memorandum of Association.
• The Authorized Share Capital must adequately fulfil the objectives outlined in the memorandum.
• The Authorized Share Capital needs to be realistic.
• Furthermore, the minimum paid-up capital for a Producer Company is Rs. 1 lakh.

Producer Company Registration Procedure

Registering a Producer Company involves a structured procedure resembling incorporating a Private Limited Company in India. The steps are methodically designed to ensure legal compliance and the proper establishment of such a company. Here's a detailed breakdown of the registration procedure:

Step 1: Obtain a Digital Signature Certificate (DSC)

The initial step is to acquire a Digital Signature Certificate (DSC) for all the proposed directors of the company. The DSC is an electronic signature used to submit e-forms online securely. The documents required for obtaining a DSC include:

• PAN Card of the Director
• Aadhaar Card a Director
• Recent Photograph
• Email ID
• Contact Number

Step 2: Obtain Director Identification Number (DIN)

Subsequent to the acquisition of DSC, the next step involves obtaining the Director Identification Number (DIN) for each director. The DIN is a unique identifier for a director and is required for a director to be appointed in any company. This can be obtained by filing the DIR-3 form or through the SPICe+ form, accompanied by:

• Self-attested identity proof (like PAN card)
• Address proof
• Recent photograph

Step 3: Name Reservation

The name of the Producer Company must be unique and end with the words “Producer Company.” For name reservation, Form SPICe+ is filed with the Registrar of Companies (ROC), proposing two names in order of preference and the significance behind those names. The ROC will then approve one of the proposed names based on availability and compliance with naming standards.

Step 4: Preparation of Essential Documents

Once the name is approved, the following vital documents need to be prepared for incorporation:

• Memorandum of Association (MoA): This document outlines the primary, ancillary/subsidiary, and other objects of the company.
• Articles of Association (AoA): This document lays down the by-laws on which the company will operate.
• Form INC-22 for the Registered Office
• Form DIR-12 for Directors Appointment
• Affidavit: File Affidavits (if necessary): If any of the subscribers to the Memorandum of Association have signed in Hindi, file Form INC-7 containing affidavits as required. All subscribers to the proposed company must sign an affidavit declaring their legal competency to act as subscribers.
• Execute Power of Attorney: Execute a Power of Attorney in favour of a consultant or authorised person, empowering them to make necessary changes in the MoA and AoA as required by the RoC.
• Registered Office Proof: If the registered office location is owned by one of the directors, a utility bill and a No Objection Certificate (NOC) from the owner is required. A lease agreement and a NOC from the landlord must be attached if the premises are rented.

Step 5: Filing of Incorporation Application

All the prepared documents and the application for incorporation are to be filed in Form SPICe+ with the ROC. The application must meticulously detail the company’s proposed structure, directors, and registered office.

Step 6: ROC Verification and Certificate of Incorporation

The ROC will scrutinise the application and the attached documents for compliance with legal requirements. Upon satisfaction, the ROC will issue the Certificate of Incorporation, proving that the company has been legally constituted. The company can then commence its business operations.

Post-Incorporation Steps

After incorporation, the company may need to undertake additional steps such as applying for a PAN, TAN, and opening a bank account in the name of the Producer Company.

The experts at IndiaFilings are ready to assist you at every step of the registration process.

Compliance for Producer Companies

Critical Aspects of Producer Company Operations are listed as follows:

• Audit and Reporting: Producer Companies must ensure rigorous financial management, including annual audits and presenting audited financials and reports at the AGM, with mandatory filings to the Registrar of Companies.
• Conversion: Existing cooperative societies in primary production can transition into Producer Companies under the Companies Act 2013.
• Taxation: Producer Companies are subject to standard corporate taxation but may qualify for agricultural activity-related tax benefits.
• Share Capital Requirements: A minimum of Rs. 5 lakhs authorised and Rs. 1 lakh paid-up share capital is required, with options to raise further capital per the Companies Act provisions.
• Operational Objective: The company's objectives must emphasise the production, handling, and marketing of members' primary produce, including import for member benefits.
• Leadership and Decision-making: Managed by a member-elected board, ensuring decisions align with company and member interests.
• Profit Sharing: Dividends can be distributed, capped at 20% of annual profits, in line with shareholdings.
• 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 Procedures: Voluntary or NCLT-ordered winding up follows standard company procedures.
• Voting Limitations: Voting by proxy is disallowed, focusing only on production-related resolutions.
• Regular Meetings: At least four board meetings yearly, adhering to quorum requirements.
• Financial Prudence: A statutory reserve from net profits is mandated until it matches the paid-up share capital designated for specified uses.
• Expertise Utilization: Option to hire professional managers with board and member approval.
• NABARD Registration: Registration with NABARD enables access to financial and technical support for agricultural advancements.
• Operational Expansion: Branches for primary activities are permitted under central management and Companies Act compliance.
• Annual Return: An annual return detailing company operations, membership, and financial health must be filed with the Registrar of Companies.

Seamless Producer Company Registration with IndiaFilings

IndiaFilings offers comprehensive assistance in obtaining Producer Company Registration, providing expert support throughout the process. With a dedicated team of professionals, IndiaFilings ensures seamless end-to-end support for incorporation, guiding you through every step, from initial paperwork to final approval. Beyond the registration phase, IndiaFilings offers a range of post-incorporation services designed to help your Producer Company thrive and comply with regulatory requirements, making it a one-stop solution for all your incorporation needs.