Meaning of Producer Companies in India and Producer company Definition
The MCA has appointed February 11, 2021, as the commencement date of section 52 of the Companies (Amendment) Act, 2020 which is related to the insertion of new Chapter XXIA in the Companies Act, 2013 pertaining to “Producer Companies”.
Section 66 of the Companies (Amendment) Act, 2020 has amended Section 465 of the Companies Act, 2013 related to Repealing of certain enactments and savings respectively. After the introduction of new chapter XXIA on ‘producer companies, the first proviso to section 465 (1) of the Companies Act, 2013 has been omitted which provides for the provisions of Part IXA of the erstwhile Companies Act, 1956, which was applicable to a producer company in a manner as if the Companies Act, 1956 has not been repealed until a Special Act is enacted for Producer Companies.
“Producer company” means a body corporate having objects or activities specified in section 378B and registered as Producer company under this Act or under the Companies Act, 1956;
Producer company Incorporation Requirements
The application for incorporation of a Producer company may be rejected on the following grounds:
a) The Producer Certificate has not been attached or the signatures/stamp of the signing authority is not legible or not on letterhead of the concerned department.
b) The Objects are not in consonance with Section 581(1)( B)of Companies Act, 2013.
c) The MOA and AOA contain the provisions for the issuance of Debentures and Preference Shares.
Producer companies in India have become increasingly popular in recent years. These companies are formed by a group of individuals or organizations with the same interest, such as farmers or fishermen, who pool their resources and form a company to carry out their business activities.
Producer companies are governed by the Companies Act 1956 and are regulated by the Ministry of Corporate Affairs. They are similar to cooperative societies, but with the added benefit of limited liability. P
Producer companies are designed to help members increase their income and reduce their costs while ensuring better access to markets, technology, finance, and training.
They also provide a platform for collective bargaining and collective activities such as marketing and distribution.
In India, producer companies are formed to promote the welfare of small and marginal farmers and fishermen, as well as to ensure sustainable development and equitable distribution of the benefits of industrialization.
Objects of Producer Companies
In terms of Section 378B, of the Companies Act, 2013, the objects of a producer company registered under this Act may be shall relate to all or any of the following matters:
(a) production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import of goods or services for their benefit. Provided that the Producer company may carry on any of the activities specified in this clause either by itself
or through other institutions.
(b) processing including preserving, drying, distilling, brewing, vinting, canning and packaging of the produce of its members.
(c) manufacturing, sale or supply of machinery, equipment or consumables mainly to its Members.
(d) providing education on the mutual assistance principles to its Members and others.
(e) rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its Members.
(f) generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce.
(g) insurance of producers or their primary produce.
(h) promoting techniques of mutuality and mutual assistance.
(i) welfare measures or facilities for the benefit of the members as may be decided by the Board.
(j) any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) above or other activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner.
(k) financing of procurement, processing, marketing, or other activities specified in clauses (a) to (j) above, which include extending of credit facilities or any other financial services to its Members. Further, it has also been clarified that every Producer company shall deal primarily with the produce of its active Members for carrying out any of its objects specified in this section above.
Formation of Producer Companies in India
Formation of Producer Companies and its Registration
Any ten or more individuals, each of them being a producer or any two or more Producer Institutions, or a combination of ten or more individuals and Producer Institutions, desirous of forming a Producer company having its objects specified in section 378B and otherwise complying with the requirements of this Chapter and the provisions of this Act in respect of registration, may form an incorporated company as a Producer company under this Act. Click here for producer company incorporation requirements
If the Registrar is satisfied that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, he shall, within thirty days of the receipt of the documents required for registration, register the memorandum, the articles and other documents, if any, and issue a certificate of incorporation under this Act.
A Producer company so formed shall have the liability of its Members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them and be termed a company limited by shares.
The Producer company may reimburse to its promoters all other direct costs associated with the promotion and registration of the company including registration, legal fees, printing of a memorandum and articles and the payment thereof shall be subject to the approval at its first general meeting of the Members.
On registration under sub-section (1), the Producer company shall become a body corporate as if it is a private limited company to which the provisions contained in this Part apply, without, however, any limit to the number of Members thereof, and the Producer company shall not, under any circumstance, whatsoever, become or be deemed to become a public limited company under this Act.
Membership and Voting Rights of members of Producer company
In a case where the membership consists solely of individual members, the voting rights shall be based on a single vote for every Member, rrespective of his shareholding or patronage of the Producer company.
In a case where the membership consists of Producer institutions only, the voting rights of such Producer institutions shall be determined on the basis of their participation in the business of the Producer company in the previous year, as may be specified by articles.
Provided that during the first year of registration of a Producer company, the voting rights shall be determined on the basis of the shareholding by such Producer institutions.
In a case where the membership consists of individuals and Producer institutions, the voting rights shall be computed on the basis of a single vote for every Member.
The articles of any Producer company may provide for the conditions, subject to which a Member may continue to retain his membership, and the manner in which voting rights shall be exercised by the Members.
Notwithstanding anything contained in sub-section (7) or sub-section(2), any Producer company may, if so authorised by its articles, restrict the voting rights to active Members, in any special or general meeting.
No person, who has any business interest which is in conflict with business of the Producer company, shall become a Member of that company.
A Member, who acquires any business interest which is in conflict with the business of the Producer company, shall cease to be a Member of that company and be removed as a Member in accordance with articles.
Benefits to Members
Subject to provisions made in articles, every Member shall initially receive only such value for the produce or products pooled and supplied as the Board of Producer company may determine, and the withheld price may be disbursed later in cash or in kind or by allotment of equity shares, in proportion to the produce supplied to the Producer company during the financial year to such extent and in such manner and subject to such conditions as may be decided by the Board.
Every Member shall, on the share capital contributed, receive only a limited return.
Provided that every such Member may be allotted bonus shares in accordance with the provisions contained in section 581ZJ.
The surplus if any, remaining after making provision for payment of limited return and reserves referred to in section 581ZI, may be disbursed as patronage bonus, amongst the Members, in proportion to their participation in the business of the Producer company, either in cash or by way of allotment of equity shares, or both, as may be decided by the Members at the general meeting.
Producer Companies Rules, 2021
Applicability
These rules shall apply to a Producer company as referred in clause (I) of section 378A of the Companies Act, 2013.
“co-operative society” means a society registered or deemed to be registered under any law relating to cooperative societies for the time being in force in any State.
Change of place of registered office from one State to another
The rules 27, 30, and 31 of the Companies (Incorporation) Rules, 2014, including the forms stated therein shall be applied for the purpose of change of place of registered office of a Producer company from one State to another.
Click here for Producer company Rules 2021
Investment of General Reserves
A Producer company shall make investments from and out of its general reserves in anyone or in a combination of the following, namely:-
(a) in approved securities, fixed deposits, units and bonds issued by the Central Government or State Governments or co-operative societies or scheduled bank; or
(b) in a co-operative bank, State co-operative bank, co-operative land development bank or Central cooperative bank; or
(c) with any other scheduled bank; or
(d) in any of the securities specified in section 20 of the Indian Trusts Act, 1882 (02 of 1882); or
(e) in the shares or securities of any other inter-State co-operative society or any co-operative society; or
(f) in the shares, securities or assets of public financial institutions specified under clause (72) of section 2 of the Companies Act, 2013.
Management of Producer company
Management of Producer company
Number of Directors
Every Producer company shall have at least five and not more than fifteen directors.
Provided that in the case of an inter-State co-operative society incorporated as a Producer company, such company may have more than fifteen directors for a period of one year from the date of its incorporation as a Producer company.
Appointment of Directors
Save as provided in section 581N, the Members who sign the memorandum and the articles may designate therein the Board of directors (not less than five) who shall govern the affairs of the Producer company until the directors are elected in accordance with the provisions of this section.
The election of directors shall be conducted within a period of ninety days of the registration of the Producer company.
Provided that in the case of an inter-State co-operative society which has been registered as a Producer company under sub-section (4) of section 581J in which at least five directors [including the directors continuing in office under sub-section (1) of section 581N] hold office as such on the date of registration of such company, the provisions of this sub-section shall have effect as if for the words “ninety days”, the words “three hundred and sixty five days” had been substituted.
Every person shall hold office of a director for a period not less than one year but not exceeding five years as may be specified in the articles.
Every director, who retires in accordance with the articles, shall be eligible for re-appointment as a director.
Save as provided in sub-section (2), the directors of the Board shall be elected or appointed by the Members in the annual general meeting.
The Board may co-opt one or more expert directors or an additional director not exceeding one-fifth of the total number of directors or appoint any other person as additional director for such period as the Board may deem fit.
Provided that the expert directors shall not have the right to vote in the election of the Chairman but shall be eligible to be elected as Chairman, if so provided by its articles.
Provided further that the maximum period, for which the expert director or the additional director holds office, shall not exceed such period as may be specified in the articles.
Share Capital
The share capital of a Producer company shall consist of equity shares only.
The shares held by a Member in a Producer company, shall as far as may be, be in proportion to the patronage of that company.
Special User Rights
The producers, who are active Members may, if so provided in the articles, have special rights and the Producer company may issue appropriate instruments to them in respect of such special rights.
The instruments of the Producer company issued under sub-section (1) shall, after obtaining approval of the Board in that behalf, be transferable to any other active Member of that Producer company.
Explanation. – For the purposes of this section, the expression “special right” means any right relating to supply of additional produce by the active Mem ber or any other right relating to his produce which may be conferred upon him by the Board.
Transferability of Shares and Attendant Rights
Save as otherwise provided in sub-sections (2) to (4), the shares of a Member of a Producer company shall not be transferable.
A Member of a Producer company may, after obtaining the previous approval of the Board, transfer the whole or part of his shares along with any special rights, to an active Member at par value.
Every Member shall, within three months of his becoming a Member in the Producer company, nominate, in the manner specified in articles, a person to whom his shares in the Producer company shall vest in the event of his death.
The nominee shall, on the death of the Member, become entitled to all the rights in the shares of the Producer company and the Board of that company shall transfer the shares of the deceased Member to his nominee.
Provided that in a case where such nominee is not a producer, the Board shall direct the surrender of shares together with special rights, if any, to the Producer company at par value or such other value as may be determined by the Board.
Where the Board of a Producer company is satisfied that –
(a) any Member has ceased to be a primary producer ; or
(b) any Member has failed to retain his qualifications to be a Member as specified in articles, the Board shall direct the surrender of shares together with special rights, if any, to the Producer company at par value or such other value as may be determined by the Board.
Provided that the Board shall not direct such surrender of shares unless the Member has been served with a written
notice and given an opportunity of being heard.
Loans to Members and Investments
Loan etc., to members
The Board may, subject to the provisions made in articles, provide financial assistance to the Members of the Producer company by way of –
(a) credit facility, to any Member, in connection with the business of the Producer company, for a period not exceeding six months ;
(b) loans and advances, against security specified in articles to any Member, repayable within a period exceeding three months but not exceeding seven years from the date of disbursement of such loan or advances.
Provided that any loan or advance to any director or his relative shall be granted only after the approval by the Members in general meeting.
Investment in Other Companies, Formation of Subsidiaries etc.
The general reserves of any Producer company shall be invested to secure the highest returns available from approved securities, fixed deposits, units, bonds issued by the Government or co-operative or scheduled bank or in such other mode as may be prescribed.
Any Producer company may, for promotion of its objectives acquire the shares of another Producer company.
Any Producer company may subscribe to the share capital of, or enter into any agreement or other arrangement, whether by way of formation of its subsidiary company, joint venture or in any other manner with any body corporate, for the purpose of promoting the objects of the Producer company by special resolution in this behalf.
Any Producer company, either by itself or together with its subsidiaries, may invest, by way of subscription, purchase or otherwise, shares in any other company, other than a Producer company, specified under sub-section (2), or subscription of capital under sub-section (3), for an amount not exceeding thirty per cent of the aggregate of its paid-up capital and free reserves.
Provided that a Producer company may, by special resolution passed in its general meeting and with prior approval of the Central Government, invest in excess of the limits specified in this section.
All investments by a Producer company may be made if such investments are consistent with the objects of the Producer company.
The Board of a Producer company may, with the previous approval of Members by a special resolution, dispose of any of its investments referred to in sub-sections (3) and (4).
Every Producer company shall maintain a register containing particulars of all the investments, showing the names of the companies in which shares have been acquired, number and value of shares ; the date of acquisition ; and the manner and price at which any of the shares have been subsequently disposed of.
The register referred to in sub-section (7) shall be kept at the registered office of the Producer company and the same shall be open to inspection by any Member who may take extracts therefrom.
The Benefits of Joining a Producer company in India
Producer Companies are a unique business model in India, and they offer a range of benefits to their members.
A Producer company is a type of corporate entity that is owned by a group of individual producers, and it is used to promote their collective interests.
These companies are governed by the Companies Act of 2013.
One of the primary benefits of joining a Producer company is the access to resources and services. These companies are able to provide their members with access to capital, technology, and market information. This allows the members to increase their productivity and efficiency, and to become more competitive in the market.
Furthermore, these companies can also provide their members with access to government subsidies and schemes, which can help them to reduce their costs and improve their profitability.
Another advantage of joining a Producer company is the ability to pool resources. By pooling resources, the members are able to increase their buying power and reduce their costs.
This can lead to increased profits and a more competitive market position. The members of Producer Companies also have access to risk management services. These services can help the members to reduce their risks and to manage their investments more effectively. This can help the members to protect their investments and to maximize their returns.
Finally, joining a Producer company also provides its members with a sense of community. These companies often have events and activities that bring the members together and allow them to network with each other. This can help the members to gain knowledge and develop relationships that can help them to succeed in their businesses.
In conclusion, joining a Producer company in India can provide a range of benefits to its members. These companies can provide access to resources, pool resources, provide risk management services, and create a sense of community. All of these benefits can help the members to become more successful and to maximize their returns.
How to Become a Member of a Producer company in India
Producer companies are a new form of business organisation in India, established under the Companies Act,
They are mainly formed by primary producers, such as farmers, to benefit from economies of scale and collective strength. In order to become a member of a Producer company, there are several steps that must be followed.
First, it is important to understand the eligibility criteria for becoming a member. Generally, any individual or entity involved in the production of commodities or services that are related to the Producer company’s business can become a member. It is also possible to become a shareholder in a Producer company, which gives the shareholder voting rights and the right to receive dividends.
Second, it is necessary to fill out an application form for membership. This form must be certified by a chartered accountant, and submitted to the Producer company along with the prescribed application fee.
Third, the Producer company must approve the application. This can be done by the Board of Directors or by the General Body of the company, depending on the company’s articles of Association. Once the application is approved, the applicant will become a member of the company.
Fourth, the applicant must execute the necessary documents for membership. These documents may include an Agreement of Association, a Memorandum of Understanding, and a Share Subscription Agreement. These documents must be registered with the Registrar of Companies.
Finally, the applicant must make the necessary payments for membership. The payment may include the application fee, a share subscription fee, and any other fees prescribed by the company. Once the payment is made, the applicant will become a full-fledged member of the Producer company.
By following the steps outlined above, one can easily become a member of a Producer company in India. It is important to note, however, that the process may vary slightly depending on the Producer company’s articles of Association. Therefore, it is advisable to consult with a lawyer or a chartered accountant before applying for membership.
Exploring the Different Types of Producer Companies in India
Producer companies are a unique type of corporate entity in India. They are owned and managed by a group of primary producers, such as farmers, artisanal producers and small-scale entrepreneurs.
The objective of producer companies is to promote the collective economic and social interests of their members, while also providing them with a platform to engage in collective activities and increase their market access. In India, producer companies are recognized under the Companies Act,
They operate according to the regulations defined in the Act and the guidelines issued by the Ministry of Corporate Affairs. Producer companies are registered as limited companies and are governed by the principles of cooperative societies.
There are various types of producer companies in India, depending on the nature of their activities. The most common types are:
Agriculture Producer Companies (APCs): APCs are formed by the farmers, with the aim of improving their agricultural practices and increasing their market access. APCs are regulated by the Ministry of Agriculture and Farmers Welfare.
Horticulture Producer Companies (HPCs): HPCs are created by horticulturalists and other stakeholders in the horticulture sector, with the aim of promoting horticulture practices and improving market access. HPCs are regulated by the Ministry of Food Processing Industries.
Fisheries Producer Companies (FPCs): FPCs are formed by fishers and other stakeholders in the fisheries sector, with the aim of promoting fisheries practices and improving market access. FPCs are regulated by the Ministry of Fisheries, Animal Husbandry and Dairying.
Dairy Producer Companies (DPCs): DPCs are formed by dairy farmers and other stakeholders in the dairy sector, with the aim of promoting dairy practices and improving market access. DPCs are regulated by the Ministry of Animal Husbandry and Dairying.
Forestry Producer Companies (FPCs): FPCs are formed by forestry stakeholders, with the aim of promoting sustainable forestry practices and improving market access. FPCs are regulated by the Ministry of Environment, Forests and Climate Change.
Industrial Producer Companies (IPCs): IPCs are created by small-scale entrepreneurs in the manufacturing, services and other sectors, with the aim of promoting industrial practices and improving market access. IPCs are regulated by the Ministry of Micro, Small and Medium Enterprises.
Producer companies in India are playing a crucial role in empowering small-scale producers and promoting sustainable practices. They are a vital part of the country’s rural economy, and serve as a platform for the collective economic and social development of their members.
Examining the Role of Producer Companies in India’s Economic Growth
The role of producer companies in India’s economic growth has been an increasingly important focus in recent years.
Producer companies are a form of organization in which farmers, small enterprise owners, and other producers are able to pool their resources in order to gain access to better production technologies, marketing opportunities, and even access to capital.
This type of organization has been instrumental in helping India to increase its agricultural productivity and to diversify its rural economy.
In recent years, producer companies have made a significant contribution to increasing rural income and employment in India.
These companies have been able to increase the incomes of small farmers by providing access to modern technologies and improved agricultural management practices.
This has enabled farmers to increase their yields, allowing them to sell their produce at higher prices.
Furthermore, producer companies have been able to provide access to markets, allowing farmers to access larger markets and thereby increase their incomes. Producer companies have also been instrumental in diversifying India’s rural economy.
These companies have been able to introduce new products, such as value-added agricultural products, processed foods, and other services.
This has enabled rural communities to diversify their sources of income and to become more resilient to market fluctuations.
Furthermore, producer companies have been able to provide access to capital, allowing farmers and entrepreneurs to invest in new businesses, creating jobs and further diversifying the rural economy.
The formation of producer companies has also had a positive impact on the overall economy. These companies have enabled farmers to access new markets, thereby increasing their incomes and creating more jobs.
This has resulted in increased spending in the rural economy, which has in turn driven economic growth in the country.
Furthermore, producer companies have been able to provide access to capital, enabling entrepreneurs to start new businesses and create employment opportunities.
This has increased the level of economic activity in the country, further contributing to economic growth. In conclusion, producer companies in India have played a crucial role in India’s economic growth.
They have been instrumental in increasing agricultural productivity and diversifying the rural economy, as well as providing access to capital and markets.
By doing so, they have enabled farmers and entrepreneurs to increase their incomes and create new jobs, which in turn have driven economic growth in the country.
Analyzing the Impact of Producer Companies on Small-Scale Farmers
The impact of producer companies on small-scale farmers has been widely studied in recent years. This research has shown that producer companies are making a positive contribution to the livelihoods of small-scale farmers.
Producer companies are cooperative entities that are owned and managed by small-scale farmers. They provide a range of services such as financial services, access to inputs, marketing services and technical advice.
By pooling resources and combining their efforts, small-scale farmers are able to benefit from economies of scale. The presence of producer companies has allowed small-scale farmers to access credit and other financial services.
Many small-scale farmers lack access to formal banking services, which can limit their ability to purchase inputs and hire labor. Producer companies provide access to credit through savings and loan schemes, allowing small-scale farmers to invest in their farms and increase their yields.
Producer companies also provide access to inputs such as fertilizers and seeds. This helps small-scale farmers to improve the quality of their crops, which can result in higher yields and increased income.
In addition, producer companies offer marketing services to small-scale farmers. This helps small-scale farmers to access markets which they may otherwise not have access to. This enables small-scale farmers to obtain better prices for their produce, which can further increase their incomes.
Finally, producer companies provide access to technical advice. This can be particularly important for small-scale farmers who lack the capacity to access such services from other sources. Technical advice can help small-scale farmers to improve their farming practices and increase their yields.
In conclusion, producer companies are making a positive contribution to the livelihoods of small-scale farmers. They provide access to financial services, inputs, marketing services and technical advice, which can all help small-scale farmers to improve their incomes and increase their yields.
Exploring the Challenges Faced by Producer Companies in India
Producer companies in India are a relatively new business model, established in 2003 by the Companies Act.
These companies provide a platform for members to collaborate and create a sustainable and equitable business model.
They are different from traditional companies in that they have a collective ownership structure, and their profits are shared among the members. Despite the potential benefits of producer companies, they face a number of challenges that prevent them from being successful.
The first challenge is access to capital. Producer companies rely heavily on capital to finance their operations, and they often lack access to formal sources of finance. This is due to their unique structure and lack of collateral.
Furthermore, members of producer companies are often small-scale farmers, and they often do not have the resources to invest in the company. This makes it difficult for producer companies to access capital and invest in their operations.
Another challenge is the lack of technical expertise. Members of producer companies often lack the technical knowledge and expertise to effectively manage the business operations. This is due to the fact that most of the members are small-scale farmers who do not have the necessary skills and experience. This makes it difficult for producer companies to develop and implement effective strategies and processes.
Thirdly, there is a lack of market access. Producer companies often face difficulties in accessing markets due to the lack of infrastructure and sufficient resources. Many of the markets that these companies target are located in remote areas, making it difficult for them to reach potential customers. Furthermore, due to the lack of resources and infrastructure, they are often unable to compete with larger companies in terms of pricing and quality.
Finally, producer companies often face difficulties in terms of legal and regulatory compliance. Many of the laws and regulations applicable to traditional companies are not applicable to producer companies, and they often lack the resources to comply with these regulations. This makes it difficult for them to establish a legal presence and attract customers.
Overall, producer companies in India face several challenges that hinder their success. These include access to capital, lack of technical expertise, lack of market access, and difficulties in terms of legal and regulatory compliance. Despite these challenges, producer companies offer a unique business model that can provide numerous benefits to members and the larger economy.
In conclusion, producer companies in India are vital to the country’s economy and have made a significant contribution to the growth and development of the country. They have enabled farmers and small-scale producers to access better markets, improved technology, and improved capital resources. They have also enabled small-scale producers to access greater economies of scale and improved marketing opportunities. Producer companies have been instrumental in helping farmers and small-scale producers to increase their incomes, improve their quality of life, and create more jobs.
Additionally, producer companies have also been instrumental in helping to promote environmental sustainability, reduce poverty, and contribute to the overall economic development of the country.