Producer Company Registration

1. What is producer Company?

• A producer company in India is a company registered under the Companies Act with the mutual objectives of agricultural production, procurement, post-harvesting processing activities, importing, selling and distributing goods, exporting primary production to members to make more profit.
• A producer company shall be a committee of 10 or more persons and two institutions with a common objective of dealing with agricultural and post-harvesting processing activities.
• In simple words, it is a cluster of farmers who joint hands for better living and to improve their income.

2. What are Authorized Activities of Producer companies?

The Producer Company is required to deal with the produce of its members and is authorized to carry on any of the following activities:

• Processing (processing also includes, preserving, brewing, vinting,  drying, distilling, canning and packaging) of the produce of its members;
• Manufacture, sale or supply of equipment, machinery or consumables to its producer members;
• To provide education on the mutual assistance principles to the producer members of the producer company and others;
• To render consultancy services, technical services, training, R&D and all other required activities for promoting the interests of producer members;
• Generation, transmission and distribution of power, conservation and communication relatable to primary produce, revitalisation of land and water resources,
• Insurance of the primary produce and its producer;
• To promote the techniques of mutuality and mutual assistance;
• The welfare of members as may be decided by the Board;
• Financing of procurement, marketing, processing or other activities such as extending of credit facilities or any other financial assistance to its producer members.
• Any other activity (ancillary or incidental to the main objectives of the producer company) in order to promote the mutual assistance amongst the producer members and the lines of principles of mutuality.

Note: Primary produce has been defined under the Companies Act 1956 as a produce arising from agriculture by a farmer which includes animal husbandry, floriculture, horticulture, viticulture, pisciculture, re-vegetation, bee raising, forestry, forest products and farming plantation products, produce of hand-loom, handicraft and other cottage industries.

3. What are the types of Producer Companies?

Following are the types of Producer Company:

• Production Businesses – Companies which are involved in the manufacturing and the production of the primary produce.
• Marketing Businesses – Businesses involved in the marketing or promotion of the primary produce.
• Technical Service Businesses – Companies who offers technical assistance to producers.
• Financing Businesses –
• Infrastructure Businesses – Business involved in providing infrastructure facilities like electricity, water resources etc.

 4. What are the main Major Benefits/difference of producer Company?

Understanding the meaning of the producer company in the best possible way is to understand its features. Producer Company is essentially a production company that creates a pool of small producers who will become members of the company and trade with them, help them financially, help them and promote mutual and mutual assistance techniques.

• 100% Income Tax Exemption- Producer Company is exempted from paying income tax
• Loan Facility to Members- Producer Company can extend the credit and financial facility to its members
• Deposit Acceptance- Producer Company is eligible to accept deposits in the form of recurring deposit or fixed deposit
• Loan against security- Producer Company can lend only against gold, property, FD, Govt securities
• Members under Producer Company- Producer Company can deal with its members only

5. Can foreign national be appointed as a director in a Producer Company?

Yes, a foreign national can be appointed as a director after obtaining valid DIN. However, one director must be a resident in India.

6. Can we transfer shares of the Producer Company?

Yes, they are transferrable — members of the producer company transfer shares along with the special rights.

7. Can Producer Company give special rights to its members?

Special rights can be given to the members of the Producer Company if the article of association provides so. In respect of such special rights, the appropriate instrument may be issued to the producer company.

8. What will happen in the event that a member of the producer company has ceased to be a primary producer?

In the event that a member ceases to be a primary producer, the directors of the Producer Company shall direct the surrender of shares at par value or at the value determined by the directors, together with the special right attached, if any. It will only be done if the written notice is given to the member and the opportunity to be heard is given.

9. Can a nominee be appointed by the members in a Producer Company?

With 3 months of becoming a member of the Producer Company, the member shall nominate a person in a specified manner to which shares will vest in case of death.

10. What are the benefits derived by the members of producer companies?

Following benefits are derived by the members of producer companies:

• 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.

11. What is the Liability of the Directors in a Producer Company?

Liabilities of directors in a Producer Company:

• Section 581T of the Companies Act, 1956, provides that any contravention of the provisions of this Act or any other law or provisions of articles, done by the directors shall make such directors either jointly or severally liable towards the Producer Company to make good any loss or damage suffered by such Company.
• the Producer Company shall have the right to recover from its directors and if such director has made any profit (with ill intention), the Producer Company shall have the right to recover an amount equal to said profits from such directors and if in case of a loss or damage an amount equal to that loss or damage.
• The liability so imposed shall be in addition to and not in derogation of a liability imposed under this Act or any other law for the time being in force. However all acts done by the directors in the general interest of the

company and its members and in accordance with the provisions of Memorandum, Articles and provisions of this act and loss or damage, if

any suffered by company, then such loss or damage shall not be considered as personal liability of the directors and they shall not be required to make good such loss or damage.

• There can be various Committees of Directors which can be formed as means of improving board effectiveness and efficiency, in areas where more focused, specialised and technical discussions are required. There commendation of the committee has to be approved by the Board.
• Section 581U of the Companies Act, 1956, states that the Board may constitute such number of committees as it may deem fit for the purposes of assisting the Board in efficient discharge of its functions. However, the Board of directors shall not delegate any of its powers or assign the powers of the Chief Executive, to any committee of directors.
• Every such committee may with the approval of the Board, co-opt such number of persons, as it deems fit, as the members of the committee. However in every such committee the Chief Executive appointed under Section 581W or a director of Producer Committee shall be a member.
• Every such committee shall be subject to general superintendence, direction and control of the Board. The Board may decide the duration, functioning and the fees and allowances to be paid to the members of the  committee. The minutes of every Committee meeting shall be placed before the next Board meeting