What is a Producer Company? – Formation, benefits & registration

Last Updated at: May 16, 2020
7706
producer company
What is a Producer Company
Tamilnadu CM exempted traders from paying one per cent market fee for procuring farm produce from farmers as part of efforts to ensure reasonable prices for consumers.

Introduction:

With agriculture being the backbone of the Indian economy, the sector employs more than 50% of India’s total workforce and contributes almost 17-18% to the country’s GDP.
Considering the pressing issues of farmers and agriculturalists (collectively termed “Producers”) in India, like agricultural labour, technological advancements, policy changes, etc., and to bring in better governance and channelize the agricultural activities, the concept of “Producer company” was introduced in 2002. In this blog, we will further know about what producer company means, what are the registration procedures of a producer company, the formation and the benefits of a producer company.

Definition of Producer Company: 

Producer Company allows farmers cooperatives to function as a corporate entity under the Ministry of Corporate Act. 

According to the Companies Act 1956, the objective of the Producer Company is related to all or any of the following matters:

  • Production
  • Harvesting
  • Procurement
  • Grading
  • Pooling
  • Handling
  • Marketing
  • Selling 
  • Import/Export of primary produce
The Members of the Producer Company can carry these activities by themselves or through other entities:
  1. Processing, including preserving, drying, brewing, distilling, vinting, canning and packaging of produce
  2. Manufacture or sale of equipment/machinery
  3. Providing education on the mutual assistance principles to its Members and others
  4. Offering technical services, consultancy services, training, R&D, and all other activities for the promotion of the interests of its Members
  5. Generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce ; 
  6. Insurance of producers or their primary produce
  7. Promoting techniques of mutuality and mutual assistance
  8. Welfare measures or facilities for the benefit of Members as may be decided by the Board
  9. Other activities that may promote the principles of mutuality and mutual assistance amongst the Members in any other manner
  10. Financing of procurement, processing, marketing or other activities specified in clauses (a-j) which include extending of credit facilities or any other financial services to its Members

Every Producer Company shall deal primarily with the produce of its active Members for carrying out any of its objects specified in this section. 

Source: MCA website- http://www.mca.gov.in/

Register Your Business Now

Formation and Producer Company Registration

A Producer Company must be formed by:

  • Ten or more individuals each of them being Producers; or by 
  • Two or more Producer institutions; or by 
  • A combination of 10 or more individuals and Producer institutions

The Producer Company must fulfil its objects as specified in the Act.   

The Registrar after being satisfied with the requirements will issue the Certificate of Incorporation within 30 days of receiving the necessary documents. 

How to register a Producer Company in 5 steps?

The procedure for a Producer Company registration is almost similar to that of a Private Limited Company.

Step 1: Obtain Digital Signature Certificate (DSC) and Director’s Identification Number (DIN) from all the Directors with self-attested copies of documents like PAN, Aadhaar card, and contact details.

Step 2: File the proposed company name in FORM-1A with the RoC of the respective state along with the prescribed fee. Once the name is available, the ROC informs about the availability of the name.

Step 3: Draft the necessary documents like MoA to incorporate the objects of the company and the amount of share capital to be registered, AoA to contain the by-laws of the company. 

Step 4: Filing of other documents like Statutory declaration in the Form-1 declaring compliance of all and incidental matters regarding the formation of companies; affidavit signed by the subscribers of the proposed company. Director’s consent, utility bill, and NOC are required.

Step 5: The Certificate will be issued after which the Company shall become a corporate body as if it is a private limited company. Under any circumstances, it cannot become a public limited company

Management of Producer Company 

Following are the important compliances a Producer Company is required to adhere to:

  1. Every Producer Company shall have a minimum of five directors and a maximum of 15 directors.
  2. The election for directors to be conducted within 90 days from registering the company.
  3. The Directors may be appointed or elected by the Members in the Annual General Meeting (AGM).
  4. Every designated Director shall hold office for a minimum of one year and a maximum of 5 years as specified in the relevant articles.
  5. AGM to be conducted once a year and shall be intimated through a notice specifying the meeting agenda, MoM (Minutes of Meeting), audited balance sheet, etc. The notice shall be sent not more than 15 months between the date of AGM and the next.
  6. The first AGM should be conducted within 90 days from the date of incorporation.
  7. The proceedings of every AGM along with the Director’s Report audited balance sheet, P&L account and the annual returns shall be filed with the Registrar within 60 days of conducting the AGM.
  8. If the Producer Company is formed by producer institutions, such institutions shall be represented in the general body through the Chairman of the Chief Executive
  9. Proper books of accounts to be maintained with respect to cash flow, expenditure, sales & purchase of goods, assets & liabilities, cost of labour, profit and loss statements, etc.
  10. Internal Audit must be conducted by the Chartered Accountant at a specific interval and manner as specified in the Company’s articles and per the Institute of Chartered Accountants Act, 1949.

Benefits of registering a Producer Company

Producer Companies avail the following benefits:

  • Every member of the Company will receive a value for the product or products pooled and supplied as determined by the Director. The amount will be distributed in cash or by allotment of equity shares. This may be subject to the conditions of the Board. 
  • Members can get bonus shares in proportion to the amount held.
  • The additional amount that may be remaining after making provision for payment of limited return and reserves can be distributed as patronage bonus. This will be in proportion to their participation in business activities either in cash or through equity shares.
  • Members of Producer Company are also eligible to get financial assistance by way of credit facility for a period not exceeding 6 months.
  • Loans and advances against security as specified in articles, upon the condition of repayment within a period of 3 months and not more than 7 years. 

FAQs on producer company

Who can form a producer company?
Any 10 or more producers or individuals can join together to form a production company but there is no maximum limit on the number of members. Or, any 2 or more producer institutions can form a producer company. A minimum capital of Rs. 500,000 is required to incorporate a producer company.
What is a farmer producer company?
A Farmer Producer Company can be formed by any 10 or more primary producers or by two or more producer institutions, or by a contribution of both. They can undertake activities related to production, harvesting, procurement, grading, pooling, marketing, processing, etc., of agricultural produce.
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What is a Producer Company? – Formation, benefits & registration

7706
Tamilnadu CM exempted traders from paying one per cent market fee for procuring farm produce from farmers as part of efforts to ensure reasonable prices for consumers.

Introduction:

With agriculture being the backbone of the Indian economy, the sector employs more than 50% of India’s total workforce and contributes almost 17-18% to the country’s GDP.
Considering the pressing issues of farmers and agriculturalists (collectively termed “Producers”) in India, like agricultural labour, technological advancements, policy changes, etc., and to bring in better governance and channelize the agricultural activities, the concept of “Producer company” was introduced in 2002. In this blog, we will further know about what producer company means, what are the registration procedures of a producer company, the formation and the benefits of a producer company.

Definition of Producer Company: 

Producer Company allows farmers cooperatives to function as a corporate entity under the Ministry of Corporate Act. 

According to the Companies Act 1956, the objective of the Producer Company is related to all or any of the following matters:

  • Production
  • Harvesting
  • Procurement
  • Grading
  • Pooling
  • Handling
  • Marketing
  • Selling 
  • Import/Export of primary produce
The Members of the Producer Company can carry these activities by themselves or through other entities:
  1. Processing, including preserving, drying, brewing, distilling, vinting, canning and packaging of produce
  2. Manufacture or sale of equipment/machinery
  3. Providing education on the mutual assistance principles to its Members and others
  4. Offering technical services, consultancy services, training, R&D, and all other activities for the promotion of the interests of its Members
  5. Generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce ; 
  6. Insurance of producers or their primary produce
  7. Promoting techniques of mutuality and mutual assistance
  8. Welfare measures or facilities for the benefit of Members as may be decided by the Board
  9. Other activities that may promote the principles of mutuality and mutual assistance amongst the Members in any other manner
  10. Financing of procurement, processing, marketing or other activities specified in clauses (a-j) which include extending of credit facilities or any other financial services to its Members

Every Producer Company shall deal primarily with the produce of its active Members for carrying out any of its objects specified in this section. 

Source: MCA website- http://www.mca.gov.in/

Register Your Business Now

Formation and Producer Company Registration

A Producer Company must be formed by:

  • Ten or more individuals each of them being Producers; or by 
  • Two or more Producer institutions; or by 
  • A combination of 10 or more individuals and Producer institutions

The Producer Company must fulfil its objects as specified in the Act.   

The Registrar after being satisfied with the requirements will issue the Certificate of Incorporation within 30 days of receiving the necessary documents. 

How to register a Producer Company in 5 steps?

The procedure for a Producer Company registration is almost similar to that of a Private Limited Company.

Step 1: Obtain Digital Signature Certificate (DSC) and Director’s Identification Number (DIN) from all the Directors with self-attested copies of documents like PAN, Aadhaar card, and contact details.

Step 2: File the proposed company name in FORM-1A with the RoC of the respective state along with the prescribed fee. Once the name is available, the ROC informs about the availability of the name.

Step 3: Draft the necessary documents like MoA to incorporate the objects of the company and the amount of share capital to be registered, AoA to contain the by-laws of the company. 

Step 4: Filing of other documents like Statutory declaration in the Form-1 declaring compliance of all and incidental matters regarding the formation of companies; affidavit signed by the subscribers of the proposed company. Director’s consent, utility bill, and NOC are required.

Step 5: The Certificate will be issued after which the Company shall become a corporate body as if it is a private limited company. Under any circumstances, it cannot become a public limited company

Management of Producer Company 

Following are the important compliances a Producer Company is required to adhere to:

  1. Every Producer Company shall have a minimum of five directors and a maximum of 15 directors.
  2. The election for directors to be conducted within 90 days from registering the company.
  3. The Directors may be appointed or elected by the Members in the Annual General Meeting (AGM).
  4. Every designated Director shall hold office for a minimum of one year and a maximum of 5 years as specified in the relevant articles.
  5. AGM to be conducted once a year and shall be intimated through a notice specifying the meeting agenda, MoM (Minutes of Meeting), audited balance sheet, etc. The notice shall be sent not more than 15 months between the date of AGM and the next.
  6. The first AGM should be conducted within 90 days from the date of incorporation.
  7. The proceedings of every AGM along with the Director’s Report audited balance sheet, P&L account and the annual returns shall be filed with the Registrar within 60 days of conducting the AGM.
  8. If the Producer Company is formed by producer institutions, such institutions shall be represented in the general body through the Chairman of the Chief Executive
  9. Proper books of accounts to be maintained with respect to cash flow, expenditure, sales & purchase of goods, assets & liabilities, cost of labour, profit and loss statements, etc.
  10. Internal Audit must be conducted by the Chartered Accountant at a specific interval and manner as specified in the Company’s articles and per the Institute of Chartered Accountants Act, 1949.

Benefits of registering a Producer Company

Producer Companies avail the following benefits:

  • Every member of the Company will receive a value for the product or products pooled and supplied as determined by the Director. The amount will be distributed in cash or by allotment of equity shares. This may be subject to the conditions of the Board. 
  • Members can get bonus shares in proportion to the amount held.
  • The additional amount that may be remaining after making provision for payment of limited return and reserves can be distributed as patronage bonus. This will be in proportion to their participation in business activities either in cash or through equity shares.
  • Members of Producer Company are also eligible to get financial assistance by way of credit facility for a period not exceeding 6 months.
  • Loans and advances against security as specified in articles, upon the condition of repayment within a period of 3 months and not more than 7 years. 

FAQs on producer company

Who can form a producer company?
Any 10 or more producers or individuals can join together to form a production company but there is no maximum limit on the number of members. Or, any 2 or more producer institutions can form a producer company. A minimum capital of Rs. 500,000 is required to incorporate a producer company.
What is a farmer producer company?
A Farmer Producer Company can be formed by any 10 or more primary producers or by two or more producer institutions, or by a contribution of both. They can undertake activities related to production, harvesting, procurement, grading, pooling, marketing, processing, etc., of agricultural produce.
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