Rules and Regulation for Producer Company

17 Jun, 2025

Rules and Regulation for Producer Company

Producer Company is the special category of the company registered under the Companies Act 2013. It is incorporated with the objective of 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. Here we discuss rules & regulation for the Producer Company.

Produce are all those things that have been produced or grown especially by the process of farming. A producer company deals primarily with agriculture and post-harvest processing activities.

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

Rules and Regulation for Producer Company Registration and compliance:

S. No.	Particulars	Section	Provisions
1	Name of the company	Section 581F(a)	The company name must be ended as “Producer Company
2	Number of the Directors	Section 581P	Minimum- 5 Directors
			Maximum- 15 Directors
			In case of an inter-State co-operative society incorporated as a Producer Company registration, such company may have more than 15 directors for a period of 1 year from the date of its incorporation as a Producer Company.
3	Election of the Directors	Section 581P(2)	1st Directors of the company must be re-elected within 90 days from the date of incorporation. “Inter-State co-operative society incorporated as Producer Company can avail privileges of 365 days instead of 90 days.
4	Additional Directors and Expert Directors	Section 581P(6)	Every Director or an additional director of the company may be co-opted but the number of such directors shall not be exceeding 1/5th of the total number of directors.
4	Additional Directors and Expert Directors	Section 581P(6)	But such expert directors shall not be having the right to vote in the election of the Chairman but are eligible to be elected as a Chairman.
5	Private Company	Section 581C(5)	On registration, the Producer Company shall become a body corporate as if it is a private limited company.
5	Private Company	Section 581C(5)	It cannot become or deemed to become a public limited company
6	Share Capital and transfer of the shares of Producer Company	Section 581ZB	The share capital of the Producer Company can consist of equity shares only.
		Section 581ZC	The active members may have special rights if provided in the Articles.
		Section 581ZD	The shares will be non -transferable. The shares having special rights may be transferred to another active member with the approval of the Board.
			On becoming the member of the company the member shall nominate a nominee within 3 months of becoming the member. After the death of the member, the nominee shall get all the benefits. In case the nominee is not a producer, the board shall direct the nominee to surrender his shares.
7	Alteration of Memorandum of association and Articles of Association	Section 58111- MoA	Memorandum or Articles of the company can be altered by passing the special resolution, but such alteration shall be inconsistent with the section 581B.
7		Section 5811- AoA	In case of alteration of Articles- It has to be proposed by; • not less than 2/3rd of the elected directors or; • not less than 1/3rd of the Members and adopted by special resolution. Copy of the altered MoA or AOA along with the copy of the special resolution has to be filed with the Registrar within 30 days of adoption of such alteration.
8	Annual General Meeting	Section- 581ZA	1. First AGM shall be conducted within 90 days from the date of incorporation.
			2. The Registrar may permit extension of the time for holding Annual General Meeting (not being the first annual general meeting), but such extension shall not be more than 3 months.
			3. Every year Producer Company shall hold Annual General Meeting and not more than 15 months shall elapse between the dates of one Annual General Meeting to the next.
			4. The Notice for AGM shall be issued at least 14 days’ before the meeting.
			5. The proceedings of every AGM along with Directors’ Report, the audited Balance Sheet and Profit & Loss Account shall be filed with the Registrar within 60 days of conducting the AGM.
		Section 581 S	The shareholders shall have exclusive rights to be exercised in the Annual General Meeting such as:
			a. Approval of budget,
			b. Adoption of annual accounts,
			c. The issue of bonus shares,
			d. Approval of patronage bonus,
			e. Declaration of limited return and decision on the distribution of patronage,
			f. Specify the conditions and limits of loans that may be given by the Board to any director; and
			g. Approval of any transaction of nature as is to be reserved in the articles for approval by the Members.
		Section- 581Y	Quorum: – 1/4th of the total number of members.
9	Meetings of the Board Quorum.	Section 581V	The board shall meet at least once in every three months and at least four such meetings shall be convened in every year.
			The Chief Executive shall give notice for the board meeting at least 7 days in advance of the meeting. The meeting can be called with shorter notice but the reasons thereof shall be recorded by the Board.
			Quorum: – 1/3rd of the total strength of Directors subject to a minimum – 3
			Penalty: If the Chief Executive fails to comply with the provisions of sending notice, he shall be punishable with a maximum fine of Rs. 1,000/,
10	Chief Executive	Section 581W	Producer Company shall appoint a Full-time Chief Executive who shall be amongst person other than the member of the company.
11	Company Secretary	Section 581X	Every Producer Company, having an average annual turnover exceeding Rs. 5.00 crores in each of three consecutive financial years shall have a whole time Company Secretary.
			The penalty for not appointing Company Secretary:
			Every Officer and the company which is in default shall be punishable with a fine. The fine shall be Rs. 500/- for every day during which the default continues.
12	Internal Audit	Section 581ZF	Every Producer Company shall have an internal audit of its accounts carried out in such intervals and in such manner as specified by its articles, by a Chartered Accountant.
13	General Reserve and other reserves	Section 5S1ZI	Every Producer Company shall maintain a general reserve in every year in addition to the Reserves as may be specified in the Articles.
13	General Reserve and other reserves	Section 5S1ZI	If the company does not have sufficient funds in any financial year for transfer to maintain the reserves as may be specified in articles, the contribution to the reserve shall be shared amongst the Members in proportion to their patronage in the business of that company in that year