All you need to know about Producer Companies Rules 2021

Ashish M. Shaji

15 Sep, 2021

The Ministry of Corporate Affairs issued a notification regarding the Producer Companies Rules 2021. The rules will supersede the earlier Producer Companies (General Reserve) Rules, 2003, and will be enforced from the date of publication in the official gazette. In this article, we shall discuss about the concept of Producer Company and also regarding the provisions of Producer Company Rules notified by MCA.

What is Producer Company?

Producer Company refers to a legally recognized business structure that is formed by the body of farmers or agriculturalists. The main objective of this type of business is to enhance the living standard of farmers and to ensure support, income, and profitability to them.

As per provisions of the Companies Act, 1956^[1], a producer company should have at least 10 individuals or 2 institutions or a combination of both who have the business objective of procurement, harvesting, production, grading, pooling, handling, marketing, selling, or export.

The business objectives deal with the primary produce or harvest of members or the import of goods or services for their own benefit. Another object of a producer company could be to simplify the incorporation of co-operative business as companies and to allow conversion of existing co-operative business to business entities or companies.

Applicability of Producer Companies Rules 2021

Producer Companies Rules 2021 shall be applicable to producer companies as provided under the provisions of clause (I) of section 378 A.

Key Highlights of Producer Companies Rules 2021

Definition clause

Rule 3 (1) (c) – Co-operative society refers to a society registered or deemed to be registered under any law pertaining to cooperative societies for time being in force in any state.

Rule 3 (2)- words and expressions used in the rules but not defined in the Act or in Companies (Specifications of Definition Details) Rules, 2014, will have the same meaning respectively assigned to them in the Act or in the said rules.

Change of registered office from a state to another

Rule 4 states that the rules 27, 30, and 31 of the Companies (Incorporation) Rules, 2014, including the forms provided therein, will apply for the purpose of change in place of registered office of a Producer Company from a state to another.

Notice of Change

Rule 27 of Companies (Incorporation) Rules, 2014 provides for the issue of notice and verification of change of situation of the registered office. The rules provide that the notice regarding change of situation of the registered office and verification thereof will be filed in Form INC-22 with the fee and will be attached to the said form, the same documents and manner of verification as specified for verification of the registered office on incorporation in the terms of sub-section (2) of section 12.

MOA alteration

As per Rule 30 of Companies (Incorporation) Rules, 2014, it deals with the procedure of shifting of registered office from one state or union territory to another. Therefore the Memorandum of Association has to be altered. An application for the purpose of getting approval for alteration of memorandum for change of place registered office from one state or union territory to another shall be filed with the Central government in Form INC 23 with the required fee.

Documents to be attached-

• Copy of MOA with proposed alterations;
• Copy of the minutes of the general meeting wherein the resolution authorizing the alteration was passed, providing the details of the number of votes cast in favour or against the resolution; and
• Copy of the board resolution or copy of the power of attorney or the executed Vakalatnama, as the case may be.

Certified copy of Central Government’s Order

A certified copy of the order of Central Government approving the memorandum alteration for transfer of the registered office of the company from one state to another has to be filed in Form INC 28 with the fee to the registrar of the state within 30 days from date of receipt of certified copy of the order.

Investment of General Reserves

A Producer Company will make investments from and out of the general reserves in any one or in combination of the following:

• In approved securities, fixed deposit, units and bonds issued by Central Government or the state governments or co-operative societies or scheduled bank or;
• In a cooperative bank, state cooperative bank, co-operative land development bank or central co-operative bank or;
• With any other scheduled bank or;
• In any of the securities as mentioned in section 20 of the Indian Trusts Act 2882 (02 of 1882) or;
•  In the shares or the securities of any other inter-state cooperative society or any cooperative society, or; and
• In the shares or securities or assets of public financial institutions mentioned under clause (72) of section 2 of the Act.

Conclusion

Overall the provisions of the Producer Companies Rules 2021 shall supersede the provisions of the Companies (General Reserve) Rules, 2003, and in a nutshell, the amended regulations provide the definition of cooperative society and specifies the rules regarding the change in registered office and Investment of general reserves.

Read our article:Incorporation of Producer Company under Companies Act, 2013