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The Concept of Producer Company in India

Narendra Kumar

| Updated: Jan 27, 2018 | Category: Producer Company Registration

Producer Company in India

With agriculture being the mainstay of the Indian economy, the concerned sector employs more than 50 per cent of India’s total workforce and also contributes almost 17 to 18 per cent to the country’s GDP (Gross Domestic Product).In view of the pressing issues of farmers and agriculturalists (collectively termed as “Producers”) in India, like agricultural labour, policy changes, technological advancements etc., and to fetch in better governance and channelize the agricultural activities, the concept of the “Producer company” was introduced in the year 2002. In this learning blog, we will further talk about what does a producer company means, what is the procedure for registering a producer company, the incorporation and the benefits of choosing a Producer Company in India.

Producer Company in India

The Producer Companies are the companies which is registered under the Companies Act 2013 and which is incorporated with the following objective:

  • Harvesting;
  • Procurement;
  • Grading;
  • Pooling;
  • Handling;
  • Marketing;
  • Selling; and
  • Export of primary products of its members and;
  • Import of goods or services for the benefit of its members.

Produce can is defined as all those things that have been produced or grown especially by the process of farming.

Any producer company deals primarily with agriculture and post-harvest processing activities.

The concept of the Producer Company Registration is based on empowering farmers by creating clusters of farmers organized as a Producer Company.

Types of Producer Company in India

There are following types of Producer Company in India:

Production Businesses

Production Businesses are those types of Producer Companies which are mainly involved in the business of a) production b) procurement c) manufacture of any primary produce for its members.

Marketing Businesses

Even that business that is involved in marketing or promotion of primary produce or provision of educational services of its members can constitute itself as a Producer Company.

Technical Services Businesses

Any company offering technical assistance to producers, providing training and education or conducting research and development can register as a Producer Company in India.

Financing Businesses

Any business financing producer activities, be it marketing, producing, development domain can register as a producer company.

Infrastructure Businesses

The business involved in providing infrastructure to producers whether, in the form of electricity, water resources, irrigation techniques, land utilization may constitute themselves as a producer company.

Minimum Capital required for the Formation of Producer Company in India

Minimum authorized capital required for the formation of Producer Company in India is₹. 5 Lakhs.

The share capital of Producer Company Compliances cannot consist of preference shares it can consist only of equity shares, these equity shares shall be non-transferable. The shares having special rights can be transferred to another active member but that too with the approval of the Board.

The Advantage of Forming a Producer Company in India

Advantages of Forming a Producer Company:

  • Liability is limited.
  • Better Management.
  • Economies of Scale.

Who can form a Producer Company in India?

A Producer Company can be formed by any of them:

  • With 10 or more individual members each of them should be a producer or;
  • By 2 or more producer institutions;
  • With the combination of 10 or more individuals and a producer institution.

If any member at any time ceases to be a primary producer he is entitled to surrender his shares at that time only.

Management of a Producer Company in India

Following listed are the important compliances that a Producer Company is needed to adhere to –

  1. Every Producer Company must have a minimum of 5 directors and a maximum of 15 directors.
  2. The process of election for choosing directors is to be conducted within a period of 90 days starting from the date of registering the said company.
  3. The Directors shall be appointed or elected by the Members in the AGM (Annual General Meeting).
  4. Every designated Director is required to hold his office for a minimum period of one year and a maximum of 5 years as stated in the relevant articles.
  5. AGM (Annual General Meeting) is required to be conducted once a year and the same shall be intimated by way of a notice specifying the agenda of the said meeting,Minutes ofMeeting (MoM), audited balance sheet, etc. The notice shall be sent after not more than fifteen months between the date of current AGM (Annual General Meeting) and the next.
  6. The first AGM (Annual General Meeting) must be conducted within a period of 90 days starting from the date of incorporation.
  7. The proceedings of every AGM (Annual General Meeting) together with the Director’s Report, audited balance sheet, Profit and Loss account and the annual returns must be filed with the Registrar within a period of 60 days of conducting the AGM.
  8. If in case the Producer Company is incorporated by the producer institutions, then such institutions shall be represented in the general body by way of the Chairman of the Chief Executive
  9. Proper books of accounts are required to be maintained with respect to the company’s cash flow, expenditure, sales and purchase of goods, assets and liabilities, cost of the labour, profit and loss statements, etc.
  10. Internal Audit is required to mandatorily be conducted by the Chartered Accountant (CA) at a specific interval and manner as prescribed in the Company’s articles and also as per the provisions of the Institute of Chartered Accountants Act, 1949[1].

How to register a Producer Company in just 5 steps?

The procedure for incorporating a Producer Company in India is almost similar to the registration of a Private Limited Company. Following listed are the steps involved in the procedure for incorporating a Producer Company –

  • Step 1 -Obtain DSC ( Digital Signature Certificate) and DIN (Director’s Identification Number) from all the proposed Directors along with self-attested copies of the documents like PAN (Permanent Account Number), Aadhaar card, and other contact details.
  • Step 2 – File the name of the proposed company in the FORM-1A with the RoC (Registrar of Companies) of the respective state together with the fees prescribed in the provisions for incorporating a Producer Company. Further, once the name is available, then the concerned ROC will inform about the availability of the name.
  • Step 3 – Draft the necessary documents like MoA (Memorandum of Association) in order to incorporate the objects of the concerned company and also the amount of share capital to be registered, AoA (Article of Association) to contain all the by-laws of the company. 
  • Step 4 – Filing of the other required documents like the Statutory declaration in the Form-1 stating compliance of all and incidental matters concerning the formation of companies together with the affidavit signed by the subscribers of the proposed producer company. Lastly, Director’s consent, utility bill in form of electricity and water bill, and NOC (No-Objection Certificate) are also required.
  • Step 5 – ROC will issue the certificate of Incorporation after which the said Producer Company shall become a corporate body as if it is a Private Limited Company. Further, it is significant to mention that a Producer Company shall in no circumstance convert itself and become a public limited company

Can a Producer Company become a Public Company?

At the time of registration, the Producer Company shall become a body corporate as if it is a private limited company to which the provisions contained in the Companies Act apply.

And the producer company shall not in any circumstances, whatsoever become or deemed to become a public limited company under this Act.

So, the conclusion is a producer company in India shall never become a public (or deemed public) limited company.

Read our article:Producer Company Compliances: Compliances of the Producer Company

Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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