Producer Company Registration

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Producer Company Registration – Overview

The Indian economy is known for the amount and quality of agricultural produce in the world. After China, India is the largest exporter of rice in the world. The amount of export from India depends on the amount of production in India.

Agricultural Sector is predominantly the backbone of the Indian economy. Most of the population in India directly and indirectly depends on the agriculture sector. However, in this sector farmers are the most deprived in the chain of agriculture process. They do not have access to technology and digitization due to lack of knowledge and shortage of funds.

Due to this the Government of India, headed by the Alagh Committee examined the matter in advance. This committee came out with a whitepaper to increase the benefits for farmers in deprived sector.

In 2002, the term producer company was brought out. Due to this the status of producers and agriculture individuals has drastically improved. Till date the government has brought out different measures to improve the status of farmers.

Statutory Meaning of Producer Company 

The meaning of Producer Company was already present even before the implementation of the Companies Act, 2013. Hence the meaning of a producer company was present under the Companies Act, 1956.

Under part IXA of the Companies Act, 1956 the meaning and objects of producer company is present. This part has been incorporated in the provisions of the Companies Act, 2013 under section 465(1).

Section 581 A (m) provides the meaning of a producer institution. A producer institution can be understood as a producer company, where the members and directors have incorporated the company with the primary objects to carry out activities of a producer company. This company also agrees to carry out any form of services and activities carried out by a producer company.

Under section 581 (B) of the Companies Act, 1956 the objects of the producer company are present. Any individual or farmer that wants to incorporate this form of institution must go by the objects of the business.

Hence from the above it can be understood that a producer company is a mix between a co-operative society and a company incorporated as a private company under the provisions of the Companies Act. Under section 465(1) of the Companies Act, 2013 the members have to be actively engaged in activities related to production.

More than ten members are required for incorporation of a producer company. The liabilities of the members are limited to the amount of unpaid share capital of the company. It is crucial to go for the producer company registration process, as the members would get added benefits of technology, market information and opportunities related to seed funding.

Objects of the Producer Company 

The main objects of the producer company are:

When individuals form a producer company, then the objects must be in accordance to incorporating a producer company. The company must ensure not to deviate from the main objects.

The objects of the producer company are present under section 581(B) of the Companies Act, 1956 and section 465(1) of the Companies Act, 2013. The above objects are explained below:

objects of the producer company

  • Production

Production activities can include any form of production or any other activity which relates to harvesting, grading, procurement, pooling, marketing or export of agriculture produce outside the country.

  • Processing

Processing would include any activities related to processing. This will include preserving, distilling, drying, brewing, vinting and canning related activities.

  • Manufacturing

Any activities related to manufacturing would be included here. Manufacturing would also include any sale or machinery or other equipment which help in manufacturing activities.

  • Providing Education

Education and other activities which relates to mutual based activities to the members and directors of the producer company.

  • Rendering Technical Services

Technical services would include any technology-related services. Consultancy services and any research and development (R & D) would also be an integral part of a producer company.

  • Generating Activities

Any form of generational activities which relates to producing electricity and water for producing agricultural activities.

  • Insurance

Any activities related to insurance of producers and primary producers.

  • Promotional Activities

Activities related to the promotion of technology and allied services would be included under this.

  • Welfare Measures

Any producer company that comes out with different processes related to welfare measure for agriculture produce.

  • Any other Allied Activity

Any other activity which is incidental or allied to the above activities which are carried out will be included in the meaning of a producer company.

Benefits of Producer Company Registration 

The following are benefits of producer company registration:

benefits of producer company registration

  • Legal Entity

The principle of separate legal entity would apply to a producer company. When a company is incorporated as a producer company, the liability of members and directors is limited to a specific amount of capital. This capital is the measure of the unpaid capital related to the company. Any third-party creditors will not go after the personal assets off the members and directors for any debts payable by the company.

  • Liability is Limited

One of the main benefits of this form of entity is the principle of limited liability. Through this principle, the liability of the company is limited to a specific amount. The liability of the members is also limited.

  • More Credible

By incorporating a producer company, the members get additional benefits such as increased transparency and credibility. Other advantages would be increase in access to technology, digitisation and seed funding processes. Apart from this, members of the public would also find this form of entity credible to invest in.

  • Forming Management is Simple

Forming the management in the company is simple when compared to other business structures. The company must have members and directors in compliance with the requirement of the act. All particulars relating to management have to be submitted to the Registrar of Companies (ROC).

  • Easy Dealings for Conveyance

Conveyance would include the buying and selling of agricultural land. As this company is primary engaged in carrying out agricultural activities, the process of buying and selling land would become seamless.

  • Can Accept Deposits

A producer company can accept any form of deposits. These deposits would include any form of fixed deposits or recurring deposits.

Eligibility Criteria for Farmers Producer Company

The following requirements have to be met to incorporate a producer company:

incorporate a producer company

  • Ten or More Individuals

Ten individuals who are natural persons are required for the formation of a producer company.

  • Two or More Institutions

Two or more private registered companies can also register for incorporating a producer company. Either 10 or more individuals can start the producer company or along with institutions.

  • Combination of Institutions and Individuals

Either the above requirement can be satisfied or institutions and individuals can combine to form the producer company.

  • Directors

Under the Companies Act, 1956 and Companies Act, 2013 there has to be minimum number of directors to form a producer company. The minimum amounts of directors are 5 and the maximum amount of directors which a producer company can have is 15.

  • Full Time Executives

Apart from directors and members, the entity must also have a full time Chief Executive Officer (CEO) to overlook the operations of a producer company.

  • Minimum Paid- up Share Capital

Every Company has to have a minimum paid up capital for formation. Similarly, a producer company must have a minimum paid-up capital of Rs. 5 Lakhs to establish itself. Apart from this, the producer company is permitted to have only and raise equity share capital for the business.

  • Minimum Amount of Board Meetings

Annually the producer company must have at least four board meetings.

  • Company Name

The name of the entity must comply with the requirements of the Companies Act in India. After the end of the name, the company must have the words ‘producer company Ltd’. Apart from this, the name of the producer company must be unique.

  • Members have to be Individuals

All the members of the producer company must be individuals.

Procedure for Incorporation of Producer Company

The process or procedure to incorporate a producer company is similar to incorporating a private limited company. The above procedure is required to incorporate this form of entity:

procedure to incorporate a producer company

  • Apply and Obtain the DIN and DSC

In the first step, the applicant must make an application for obtaining the digital signature certificate. The digital signature certificate allows the applicant to make any form of electronic or digital signature. The applicants must also apply for the Director Identification Number. All the above must be carried along with the SPICe form.

  • Name Approval

After the above step, the process of name approval for the producer company must be initiated. The name approval process can be initiated by applying for the MCA (Ministry of Corporate Affairs) and the ROC. This can be done by considering the RUN process (Reserve Unique Name). After this procedure is carried out, the ROC and MCA will check for the name availability. If the name is available, then within 20 days of the application, the applicant has to make the process for securing the certificate of incorporation.

  • Drafting the Memorandum of Association and Articles of Association

The next step, is carrying out measures related to drafting the memorandum of association and articles of association. This must be done after the necessary papers with the SPICe Form are submitted. An affidavit with the same must be signed and provided by the members of the company indicating their purpose.

  • Incorporation Certificate

In the final step, the certificate of incorporation is provided by the company. Usually this would take around 10 days for the company to receive the certificate of incorporation.

Recent Amendments related to Agriculture in India

  • The Farmers Amendment Bill, 2020

This bill is also known as the Farmers Produce Trade and Commerce Bill, which brings out many remunerative benefits for farmers. This bill supports the requirement for trading between states.

  • The Farmers Agreement for Price Assurance Bill, 2020

This bill would affect the prices at which farmers would get an assured price for their produce. Under this bill, farmers can have an agreement which would affect the prices of their produce.

  • Essential Commodities Act, 2020

This amendment would be applicable to any form of commodity which is considered to be essential. Any form of government control is present on the commodities under this act.

necessary papers required for Incorporation of Producer Company

Member Related necessary papers

  • Identification necessary papers- Such as PAN Card, Election ID, Aadhaar Card and any other information relating to identification.
  • Latest Bank Statement of the Producers.
  • Utility Bills related to telephone or mobile.
  • Passport Size Photos of members and directors.

Registered Office necessary papers

  • Utility Bills of the Premises- The utility bill has to be not older than three months.
  • Rent Agreement.
  • No Objection Certificate from the Owner of the Premises.
  • Information pertaining to the sale deed.
  • MOA and AOA.
  • Certificate of Incorporation.

Enterslice Advantage- Producer Company Registration

  • Our team of professionals comprising of Chartered Accountants, Company Secretaries, Lawyers, and Financial Executives.
  • We have experience in registering different forms of entities.
  • Constant monitoring and 24*7 customer service.

How to reach Enterslice?

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Frequently Asked Questions

Any company which is incorporated under the Companies Act 2013 or previous company law 1956 with the main object of carrying out activities such as grading , production, harvesting, retailing, exporting or importing products is understood as a producer company.

The provisions related to the producer company are present under section 581 of the Companies Act, 1956. These provisions have been incorporated under section 465(1) of the Companies Act, 2013.

No any producer company cannot deviate from the main objects of the business.

The producer company has the structure of a co-operative society along with the private limited company. The government have brought out different form of benefits for producer companies by introducing different advantages used in the above structures.

Yes financial assistance can be provided to a producer company. One of the main objects of a producer company is to secure finance. However, as per the provisions related to the companies act, the options of securing different credit facilities for a producer company has to comply with different rules.

This entity can rely on the following forms of finance:

• Credit Facilities- This will be offered to the producer company only for a minimum period of 6 months.

• Advances and Loans- Credit is offered through the way of loans and advances against some form of security. Loans and advances are provided for a maximum period of 7 years

• Any Loans provided by NABARD- Any loan or money provided by the National Bank for Agriculture and Rural Development. A special fund known as the Producer Organisation Development Fund (PODF) which is worth more than 50 crores has been set up the by NABARD. This fund is worth Rs 50 Lakhs.

In case the member ceases to be part of the producer company, then the directors will notify the member to give up the shares of the member. A written notice will be provided by the directors to the member of the company.

The producer company has to follow the below compliances:

• Get its annual accounts audited by a practising chartered accountant

• Have minimum of four board meetings

• File Income Tax Returns

• ROC and MCA compliance.

One of the major tax benefit derived by this form of entity is that any form of agriculture income is exempted from the requirements of income tax. This provision is present under section 10(1) of the Income Tax Act, 1961. Income which is derived from the production of tea is exempted up to 60%.

Yes the shares of the member of a producer company can be transferred. This requirement can be carried out after incorporation of a producer company.

Yes there has to be a minimum number of members for this form of entity. However, there is no upper limit on the amount of members in a producer company.

Above from the above benefits, a producer company would have perpetual succession. This means the company can succeed its members and directors.

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