Producer Company Registration

Producer Companies are companies that are directly or indirectly involved in the business of Primary Production. Broadly, such companies can be categorized into :

• Business involved in production, procurement, or manufacturing of Primary Produce
• Business involved in the marketing / promotion of primary produce
• Businesses involved in technical assistance to producers, like training and educating members or Research and Development activities
• Businesses that are exclusively financing primary production activities
• Businesses providing infrastructure support for primary business activities

Although a Producer Company is of the nature of a Private Limited Company where the maximum limit on the number of shareholders is 200, there is no such restriction or maximum limit on the number of members in a Producer Company. As far as the directors of Producer Companies are concerned, they cannot have more than 15 directors at a time, except in the case of an inter-State co-operative society incorporated as a Producer Company, where the company may have more than fifteen directors for a period of one year from the date of its incorporation as a Producer Company.

The objects of the Producer Company shall directly or indirectly relate to all or any of the following matters, namely production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the members or import of goods or services for the primary produce of the members.

The duration of the term of a director of a Producer Company must not be less than 1 year and must not exceed 5 years.

Yes, like a private limited company, it is mandatory for a Producer Company to maintain account books and get them audited internally, by a Chartered Accountant appointed in the company. Such audits shall be conducted at intervals specified in the articles of association of the company. The auditor of a Producer company shall be appointed every year at the annual general meeting of its shareholders.

It usually takes 20-25 days to register a Producer Company in India.

Subject to provisions in articles of association of a Producer Company, 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, and surplus if any, remaining after the payment of limited return, 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 of members.

The Income tax Act, 1961, does not provide any exclusive tax benefits that can be applicable to all producer companies in India. However, farmer tax exceptions have been provided for agricultural income of a producer company, earned from certain kinds of agricultural activities only.

A Producer Company shall have the liability of its members limited by the memorandum of association of the company, to the amount, if any, unpaid on the shares respectively held by them.

Only an inter-state co-operative society, the objects of which are not confined to a single state can be converted into a Producer Company.

The memorandum of association of every Producer Company shall state

• The name of the company with “Producer Company Limited” as the last words of the name of such Company
• The State in which the registered office of the Producer Company is to situate
• The main objects of the Producer Company among the many objects specified in section 581B of the Companies Act, 2013
• The names and addresses of the members
• The amount of share capital with which the Producer Company is to be registered and the capital subscribed by each member
• The names, addresses and occupations of the first directors
• The individual liabilities of the members
• In case of inter state co-operative societies, the states to whose territories their objects extend to.

Every Producer Company having an average annual turnover exceeding five crore rupees in each of three preceding consecutive financial years shall appoint a full-time company secretary. A failure to do so shall result in imposition of penalties on the defaulting company and its officers incharge for the appointment of the CS.

No, the shares of a Producer company cannot be transferred to entities other than another member of the same company after seeking an approval from the Board members, or the nominee of a member of the company after his death.

Every Member shall, within three months of his becoming a Member in the Producer Company, nominate, in the manner specified in articles of the company, a person to whom his shares in the Producer Company shall be transferred to in the event of his death. Such a person / nominee shall, on the death of the member, become entitled to all the rights of the deceased member and the Board of that Company shall transfer the shares of the deceased Member to his nominee. Provided that in a case where such a nominee is not a producer, the Board shall direct the surrender of shares together with special rights transferred to the nominee.

A Producer Company may, by special resolution, make donation or subscription to any institution or individual for the purposes of

• promoting the social and economic welfare of Producer Members or producers or general public, or
• promoting the mutual assistance principles among the members

Provided that the aggregate amount of all such donation and subscription in any financial year shall not exceed three per cent of the net profit of the Producer Company in the financial year immediately preceding the financial year in which the donation or subscription is to be made. Additionally, no producer company shall make any political donation to any political party or any person for a political purpose.