The concept of the ‘farmer producer organizations’ was introduced in 2002 keeping in mind the pressing issues of farmers and agriculturalists - collectively termed producers. In this article, you will learn how to start one with the help of our experts at Vakilsearch
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. The concept of ‘producer company’ was introduced in 2002, keeping in mind the pressing issues of farmers and agriculturalists – collectively termed producers. This article will tell you more about a farmer producer company, the registration processes, the formation, and the benefits.
Definition of Producer Company
A producer company allows farmers’ co-operatives to function as a corporate entity under the Ministry of Corporate Act.
The objective of the producer company is related to all or any of the following matters:
- Import/export of primary produce.
The members of the producer company can carry these activities by themselves or through other entities
- Processing, including preserving, drying, brewing, distilling, vinting, canning, and packaging of produce
- Manufacture or sale of equipment/machinery
- Providing education on the mutual assistance principles to its members and others
- Offering technical services, consultancy services, training, R&D, and all other activities for the promotion of the interests of its members
- Generation, transmission, and distribution of power, revitalisation of land and water resources, their use, conservation, and communications relatable to primary produce
- Insurance of producers or their primary produce
- Promoting techniques of mutuality and mutual assistance
- Welfare measures or facilities for the benefit of members as may be decided by the board
- Other activities that may facilitate the principles of mutuality and mutual aid amongst the members in any different manner
- 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.
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 objectives as specified in the Act.
The registrar will issue the certificate of incorporation within 30 days of receiving the necessary documents.
How to Form a Producer Company in 5 Easy Steps
The procedure for a producer company registration is almost similar to that of a private limited company:
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 detail
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
Draft the necessary documents like MoA to incorporate the company’s objects and the amount of share capital to be registered, AoA to contain the company’s by-laws
Filing of other documents like the statutory declaration in 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
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 essential compliances a producer company is required to adhere to:
- Every producer company shall have a minimum of five directors and a maximum of 15 directors
- Once the company is registered, the directors must join within 90 days
- Likewise, the directors may be appointed or elected by the members in the annual general meeting (AGM)
- Every designated director shall hold office for a minimum of one year and a maximum of 5 years as specified in the relevant articles
- AGM to be conducted once a year and shall be intimated through a notice specifying the meeting agenda, MoM (minutes of the meeting), audited balance sheet, and others. The notice shall be sent not more than 15 months between the date of AGM and the next
- Further, the first AGM should be conducted within 90 days from the date of incorporation
- The proceedings of every AGM and 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
- If producer institutions form the producer company, such institutions shall be represented in the general body through the chairman of the chief executive
- Additionally, proper books of accounts to be maintained regarding cash flow, expenditure, sales & purchase of goods, assets & liabilities, cost of labour, and profit and loss statements
- 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
- Moreover, the additional amount remaining after making provision for payment of limited return and reserves can be distributed as a patronage bonus. This will be in proportion to their participation in business activities either in cash or through equity shares
- Members of the producer company are also eligible to get financial assistance through a 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.
If such a structure seems like it might work for you, do reach out to the experts at Vakilsearch for assistance with setting up your own producer company.