How to Start a PRODUCER COMPANY REGISTRATION

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Overview of Producer Company Registration

Agriculture plays a pivotal role in India's economy, with around 62% of the population relying on agricultural activities either directly or indirectly. However, Indian farmers often face significant challenges, including a lack of access to advanced farming technologies and insufficient financial resources. This leaves them struggling to secure a fair share of the profits, and tragically, over 12% of Indian farmers resort to suicide due to these hardships.

In response to these dire conditions, the Indian government established an expert committee in 2002 to address the issues faced by farmers. This led to the introduction of Producer Companies as a way to uplift the status of agricultural producers. Since then, the government has worked relentlessly to improve the conditions of Indian farmers and agriculturalists.

What is a Producer Company?

A Producer Company is a unique hybrid of a Cooperative Society and a Private Company, incorporated under Part IX-A of the Companies Act, 1956, and Section 465(1) of the Companies Act, 2013. It primarily serves the needs of producers, particularly farmers, by focusing on activities related to the production, processing, marketing, and export of agricultural products.

A Producer Company can be formed with:

  • Ten or more individual producers, or
  • Two or more producer institutions, or
  • A combination of both.

Like a private company, the liability of members in a Producer Company is limited to the extent of their unpaid share capital. Unlike other business structures, there is no ceiling on the maximum number of members in a Producer Company. The formation and regulation of Producer Companies are governed by the provisions of both the Companies Act, 1956 and the Companies Act, 2013, along with the relevant rules.

Objectives of a Producer Company

The primary objective of a Producer Company is to enhance the financial well-being of small-scale farmers, promote savings, and help them adopt modern farming technologies. The key objectives of a Producer Company are:

  • Production of primary agricultural produce.
  • Procurement of the primary agricultural produce.
  • Harvesting and grading of the primary agricultural produce.
  • Pooling and handling of the primary agricultural produce.
  • Marketing of the primary agricultural produce.
  • Selling, importing, or exporting agricultural produce.

A major goal of a Producer Company is to simplify the process of forming a cooperative business as a private company, making it easier to transition from an existing cooperative business structure into a private company format.

Advantages of Producer Company Registration

The advantages or the benefits annexed with the Producer Company registration are summarised below:

  • Producer Company enjoys the status of a separate legal entity.
  • The liability of the members of a producer company is limited to the extent of the unpaid amount on the shares subscribed.
  • Producer Company provides greater credibility to its members as compared to any unregistered organisation of farmers or agriculturalists.
  • Producer Company is providing the benefit of easy management. And in case the said company wants to change in its Board of management, the same can be informed to ROC (Registrar of Companies) just by filling out simple forms.
  • A registered producer company can easily acquire or sell property in its name.
  • A producer company is qualified to accept deposits or give loans to the farmers at a reasonable rate of interest.
  • A producer company is eligible to accept deposits in the form of FD (Fixed Deposits) or RD (Recurring Deposits). Also, read the full benefits of the Farmer Producer Company in India.

Basic Requirements for Producer Company Registration

Following listed are the requirements that need to be complied with before Producer Company Registration:

  • A Minimum of 5 or a maximum of 15 directors are required for the incorporation of a Producer Company.
  • Maximum 200 members: if the proposed entity wants to function as a Private Limited Company.

Important Point: Inter-state co-operative society functioning as a Producer Farmer Company may have more than 15 directors for 1 year from the Registration date of the Producer Company.

What are the Authorised Activities that a Producer Company can Perform?

The authorised activities for a producer company are mentioned under section 581 B of the Companies Act, 1956; the detailed list is enumerated below:

  • Production, Procurement, Harvesting, Pooling, Grading, Marketing, Handling, Selling, or Exporting of the primary agricultural produce of the Members or Import produce for their benefit.
  • Processing together with preserving, distilling, drying, venting, brewing, canning, and Packaging of the agricultural produce of its members.
  • Manufacturing, selling, or supplying the equipment, machinery, or consumables primarily to its members.
  • Offering education based on the principle of mutual assistance to its members and others.
  • Delivering consultancy services, technical services, training, research and development (R&D), and all other activities required for the promotion of the interest of its members.
  • Generation, transmission, and distribution of the power.
  • The revitalisation of both land and water resources regarding their use, conservation, and communications relevant to primary produce.
  • Insurance of either the producers or their primary agricultural produce.
  • Promoting techniques based on the principle of mutual assistance.
  • Welfare facilities or measures for the benefit of members as may be determined by the Board.

Documents Required for Producer Company Registration

The documents that are needed for incorporation of a Producer Company are listed below:

From all the Directors and Shareholders:

  • Identity proof such as PAN Card, Voter ID Card, Passport, etc;
  • Address Proof;
  • Copy of the Latest Bank Statement;
  • Utility bills such as Telephone Bill or Mobile Bill or Electricity Bill;
  • Passport-sized photographs of all the Shareholders and Directors;
  • Sarpanch Letter or Khasra-Khatuni or ITR with Agriculture Incomes or any other proof a person as a serving member.

For the Proposed Registered Office:

  • Copy of any Utility Bill and it should not be older than two months.
  • Scanned Copy of the Rent Agreement together with the NOC (No-Objection Certificate) from the actual owner.
  • In case the said property is owned, then the ownership documents or the sale deed for the same.
 

Procedure for Producer Company Registration

The process for registering a Producer Company involves several steps, as outlined below:

Step 1: Name Approval

The first step is to choose a suitable name for the Producer Company. The proposed name must be legally approved by the Ministry of Corporate Affairs (MCA). This is done by submitting the name through the SPICe+ form, which is an integrated application that streamlines the registration process.

Step 2: Obtain DSC and DIN

The next step is for the proposed directors of the company to obtain a Digital Signature Certificate (DSC) and a Director Identification Number (DIN). The DSC is required to electronically sign documents, while the DIN is necessary for all proposed directors of the company. Both of these can be acquired by filing the SPICe+ form, eliminating the need for separate filings.

Step 3: Drafting of MOA and AOA

Once the DSC and DIN are obtained, the next step is to prepare the Memorandum of Association (MOA) and Articles of Association (AOA) for the Producer Company. These documents, along with an affidavit signed by all members and a declaration of the competency to act as legal subscribers to the company, must be submitted to the Registrar of Companies (ROC) along with the SPICe+ form for incorporation.

Step 4: Certificate of Incorporation

Once the ROC verifies the application and documents, a Certificate of Incorporation (COI) is issued, signifying the legal existence of the Producer Company. This certificate is proof that the company has been officially registered.

Note: The SPICe+ form is an integrated digital form introduced by the Indian government as part of the Ease of Doing Business (EODB) initiative. It simplifies the registration process by offering 10 different services from 3 different ministries at both the State and Central levels, saving time and reducing costs. Typically, the MCA issues the Registration Certificate within 30 days from the date of receipt of the application.

 
 
 
 

Rules and Regulations for Easy Availability of Loans & Credits in a Producer Company

A Producer Company is designed to offer financial assistance to its members, with certain provisions under the Companies Act that allow for the sanctioning of loans and credits. The methods through which financial assistance can be provided to members of a Producer Company are as follows:

  1. Credit Facility: Credit can be provided to members for a maximum period of six months.

  2. Loans and Advances: Loans and advances are granted to members, secured by some form of collateral, for a period not exceeding seven years from the date of disbursement.

  3. NABARD Loan: The National Bank for Agriculture and Rural Development (NABARD) offers financial support to Producer Companies. In 2011, NABARD created the Producer Organization Development Fund (PODF), worth Rs. 50 Crore, to support such companies.

Why is a Producer Company Known as a Hybrid Structure?

A Producer Company is termed a hybrid structure because it combines the characteristics of a Cooperative Society and a Private Limited Company. It combines the cooperative model's inclusivity and social welfare focus with the efficiency, professionalism, and flexibility of a private company, making it unique and adaptable to agricultural and farming-related businesses.

What Happens If a Member Ceases to be a Primary Producer?

If any member of a Producer Company ceases to be a primary producer, the company's directors will instruct the member to surrender their shares. These shares will be bought back at par value or at a value determined by the directors. This action will only occur after a written notice is issued to the member and they are given the opportunity to be heard.

Internal Audit Requirements for a Producer Company

A Producer Company must undergo regular internal audits by a Practising Chartered Accountant. The auditor will prepare an annual audit report based on a thorough examination of the company’s accounts, including aspects like:

  • Outstanding debts and bad debts
  • Cash balance
  • Assets and liabilities
  • Loans offered to directors
  • Donations received
  • Subscriptions made by members

Tax Benefits for a Registered Producer Company

Registered Producer Companies enjoy various tax benefits under the Income Tax Act, 1961:

  • Agricultural Income Exemption: Under section 10(1) of the Income Tax Act, agricultural income is exempt. The extent of exemption depends on the activity:
    • 100% exemption for agricultural income
    • 60% exemption for income from tea production

Comparison of Producer Company with Public and Private Limited Companies

Feature Producer Company Private Limited Company Public Limited Company
Objective Specified under Section 581B of the Companies Act, 1956 Any lawful object Any lawful object
Company Name Must end with "Producer Company Limited" Must end with "Private Limited" Must end with "Public Limited"
Members Minimum of 10 members or 2 institutions; no max limit Minimum of 2 members, Maximum 200 Minimum of 7 members; no max limit
Directors Minimum of 5, Maximum of 15 directors Minimum of 2, Maximum of 15 directors Minimum of 3, Maximum of 15 directors
Cessation of Membership - Ceases to be a primary producer
- Business conflict with the Producer Company
- Transfer, buyback, insolvency, death		 - Buyback of shares
- Transfer of shares
- Non-payment of call money
- Death of member
- Insolvency		 - Buyback of shares
- Transfer of shares
- Non-payment of call money
- Death of member
- Insolvency