What do you mean by Registration of Producer Company?
As India is an agriculture-based country and it approx. employs more than 50 % of the total workforce available in India and contributes around 17-18 % to the country's Gross Domestic Product (GDP). Due to completely unorganized agricultural sector, farmers are not able to utilize the modern and updated technology to produce agricultural products. To solve such matters, an expert committee has been set up.
The object of Producer Company is the performance of activities such as production, activities which are performed after the harvesting, procurement, selling and distribution, export of member’s primary production or import of goods for their benefit. Dealing with agricultural activities and post-harvest processing activities are the main objective of Producer Company which is also defined under Section 581B of the Companies Act 1956. To improve their income and standard of living in the society, farmers form groups who come together for the same.
What do you mean by Farmer Producer Company?
Disorganization under agriculture sector results as most of the small and marginal farmers owns less than 2 acres of land for producing agricultural produce due to which such farmers are not able to make use of modern and updated technology. Registration of Producer Company helps the farmers in achieving the economics of scale, improves the livelihood of farmers by organizing the agricultural sector.
What are the necessary requirements to be fulfilled by Producer Company Registration?
- Ten or more Individuals
- Two or more producer institution
- Combination of ten or more individuals and two or more producer institutions.
What are the other requirements of the Producer Company?
Other requirements of Producer Company are as follows:
- At least 5 and maximum 15 directors must be there in the company.
- To overview the management and activities of the company, there must be a full time chief executive officer (CEO).
What is the main objective of Farmer Producer Company?
By creating a registered and structured body of farmers as Producer Company. Producer Company aims at helping farmers so that they can use the modern and updated technology and curtail the cost of agriculture harvesting.
Farmer Producer Company can be registered with any of the following below mentioned objectives:
- Primary produce production
- Primary produce procurement
- Primary produce Harvesting and Grading
- Primary produce Poling and Handling
- Agricultural primary produce Marketing
- In relation to agricultural produce, performing selling or export/import activities
Forming a society in the form of company and the conversion of existing co-operative society into the company is the core objective of the Farmer Producer company.
Note: The Companies Act 1956 defines the Primary produce as “Produce from agriculture activity which consists 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”.
What are the activities which the Producer Company in India are liable to perform?
Following are the activities which are performed by the Producer Company:
Activities such as Production, procurement, harvesting, pooling, grading, marketing, handling, selling and export of member’s primary produce.
The Producer Company itself or through any other institution shall continue the below-mentioned activities in addition to the above activities;
- Process related to drying, preserving, brewing, venting, canning, distilling and packaging of the agricultural produce;
- Manufacturing /supplying of machinery, equipment or consumables to its members;
- Providing knowledge on the mutual assistance principles to its members;
- For the promotion of interests of its members, delivering technical services, consultancy services, training, and other activities;
- Rendering technical and consultancy services to promote the interest of the members.
- Insuring producers and or the primary produce;
- Promoting mutual assistance techniques;
- Performing other activities related to above mentioned activities.
What are the benefits of Registration of Producer Company?
Separate Legal Entity
The concept of separate legal entity is followed, and the members of the company have limited liability.
Credibility offered by Producer Company as compared to other unregistered organizations of agriculturists or farmers is more.
Ease of Management and Control
Without any hassle, changes in the Board of Management of a producer company can be made by filing simple forms with the concerned Registrar of Companies (ROC).
Owing the Property
Duly registered producer company can sell or own a property in its own name and it is entitled to accept deposits from or give loans to its agriculturist members at very reasonable rates of interest.
Acceptance of Deposits
Deposits in the form of Recurring deposit or fixed deposit are accepted by the Producer Company and it is also eligible to disburse loans to its members at the concessional rate of interest.
What are the advantages to the members of the Producer Company?
- After the determination by the directors of the producer company is done, members of the Producer Company will receive the amount for the activities performed such as produce pooled and produce supplied at the initial stage. Further, the amount shall be disbursed to the members of the company in the form of cash/ kind/ equity shares.
- Members of such company also receive bonus shares in the proportion in which they hold the equity shares in the producer company.
- Patronage bonus may be given to the members of the Producer Company from the surplus (after providing the provision for payment of limited return and reserves).
Note: Patronage bonus refers the surplus amount which is distributed to the members of the Producer Company in proportion of their respective contribution. On the other hand, Patronage is the member who participates in business activities.
Compliances regarding loans and investments made by the Producer Company?
Individuals who are primary producers and require financial assistance form Producer Company. In order to sanction loan to the members of the company, a special provision was passed by the Companies Act.
The following methods are followed through which financial assistance can be provided by the Producer Company to its members:-
The credit facility will be provided for a period not more than 6 months by the producer company to its members.
Loans and advances
Loan and advances will be issued only against security and for a period not more than 7 years from the date of loan disbursement.
NABARD (National Bank for Agriculture & Rural Development) Loan
The NABARD (National Bank for Agriculture & Rural Development) provides the financial assistance to meet the requirement of the Producer Company. In the year 2011, Out of the NABARD operating surplus, NABARD has been set up Producer Organization Development Fund (PODF) of Rs. 50 Crore.
Availability of Tax advantages to Farmer Producer Company in India?
As such no tax benefits are available to the Producer Company, however exemption and other tax benefits varies as per the agricultural activities carried out by them. In general Agricultural income is exempt under section 10(1) of the Income Tax Act.
For example, currently 100% agriculture income is exempt from Income Tax. However if the tea levers are used for tea manufacturing purpose then 60% income shall be exempt and 40% shall be taxed.
So, it means tax exemption depends upon the agricultural activities carried out by Producer Company.
Producer Company is required to pay Dividend Tax and patronage bonus and limited return distribution received by the members of the Producer Company are tax free in the hands of members.
Bonus shares received by the members of the Producer Company shall be exempt, however at the time of sale or redemption of such bonus shares, capital gain tax are required to be paid
Pre-registration requirements for Farmer Producer Company?
- Minimum 5 directors and 10 members are required.
- Minimum paid-up capital must of Rs. 5, 00,000.
- The number of maximum members is not defined as there is no such restriction on the maximum number of members
- Producer Company is not treated as a public company.
- A Producer Company cannot have more than equity share capital.
- The board meeting shall be held not less than once every three months and at least four board meetings must be conducted every year.
Documents needed to register the Producer Company?
I. From All Directors and Shareholder
- Permanent Account Number Card or Passport or Election Identity Card of directors and shareholders.
- Latest and Updated Bank Statement/Telephone or Mobile Bill
- Voter's Identity Card/Passport/Driver's License
- All directors and shareholder’s passport-sized photograph
II. From Proposed Registered office (Residential or commercial)
- Utility bill ‘s Copy
- Scan copy of Rent agreement with No Objection Certificate (NOC) from the owner
- Copy of Property Papers where the property is owned by the registered office itself.
Procedure to be followed for registering the Producer Company?
Registration of Farmers Producer Company is quite similar to the registration process under Private Limited Company Registration. An application in the prescribed format is filed with the registrar of companies along with the necessary relevant documents. ROC issues certificate of incorporation once it is satisfied on the verification of such documents.
The following steps are required to be followed for incorporating the company:
Obtaining DSC (Digital Signature Certificate)
All the proposed directors of a company are required to obtain DSC (Digital Signature Certificate) in the first step. The certifying authority issues the DSC which is used to sign the documents electronically
Obtaining DIN (Director Identification Number)
All the proposed directors of a company are required to obtain DIN (Director Identification Number) in the next step. SPICE Form provides the DIN (Director Identification Number) for which you do not need to file a separate form.
Name Approval Application
An application for registering the name of Producer Company is filed with the registrar of companies along with the prescribed fee in RUN (Reserve Unique Name) form. Registrar of Companies confirms the availability of name on receipt of application. An application of incorporation is filed within the period of 20 days once the name gets approved.
Application for Incorporation
An application of incorporation is filed with the concerned Registrar of Companies once the name is approved, in SPICE (Submission of Final Incorporation form) form along with the other documents which are necessary such as Memorandum of Association (MOA), Article of Association (AOA), affidavit, and declaration
Registrar of Companies (ROC) issues the incorporation certificate once the application is verified by the ROC and it takes around 7 days.
Which internal audit requirements are specified for Producer Company?
As per the Articles of Association, Chartered Accountant (CA) is required to carry out an internal audit of the Producer Company at regular intervals. After proper and careful examination done by the auditor, annual audit report shall be prepared by the auditor itself.
A report on some additional items such as debts due and bad debts, scrutiny of the cash balance, information of assets and liabilities, loans to directors and donations and subscriptions are also required to be made by the auditor.
What are the compulsory compliances are there for Producer Company?
- Ownership in a Producer Company can be applied by those persons only who are engaged in any activity which is related to primary produce.
- Members of Producer Company are required to be primary producers.
- The Members of the producer company shall be liable up to the unpaid amount on the shares subscribed by them.
- Producer Company shall add "Producer Company Limited" at the end of the company name.
- As per the applicable law, Producer Company is treated as a private limited company.
- There are no restrictions on the number of members in a Producer Company.
Which law governs the Producer Company in India?
Producer Company registration is governed by the Section 581 B of the Companies Act, 1956 governs which is read along with Companies Act 1956 and the rules made there under.
What are the consequences where a member of the producer company ceases to become a primary Producer?
In case a member ceased to be a primary producer, Directors of the Producer Company will direct the shares surrendered at par value or the at the value as determined by the directors together with special right if any attached to such shares. When member of the company serves notice and an opportunity of being heard is given, then only such procedure is carried out.
What distinguishes the Producer Company, Private Limited Company, and Public Limited Company from each other?
|Particulars||Producer Company||Private Limited Company||Public Limited Company|
|Objective||The objective of such company is specified under Section 581B of the Companies Act, 1956.||Any lawful object should be there.||Any lawful object should be there.|
|Suffix of the Company||“Producer Company Limited” at the end of the company name||“Private Limited Company” at the end of the company name||“Public Limited Company” at the end of the company name|
|Provision related to Members||10 or more individuals or 2 or more institutions or their combination.
No restriction on the maximum number of members
|Minimum 2 members are required and maximum 200 can be there.||Minimum 7 members must be there.
And there is no restriction on the maximum number of members
|Provision related to Directors||Minimum 5 and maximum 15 directors||Minimum 2 and maximum 15 directors||Minimum 3 and maximum 15 directors|
|Cessation of Membership||In the following cases a person ceases to be a member of the company :
||Buy-back of shares/ transfer of shares/ Non-payment of allotment or call money/ if a member gets expired/ if a member becomes insolvent or by the order of court etc.||Buy-back of shares/ transfer of shares/ Non-payment of allotment or call money/ if a member gets expired/ if a member becomes insolvent or by the order of court etc.|
Frequently Asked Questions about Producer Company Registration
Yes but only after obtaining valid Director Identification Number, a foreign national can be appointed as a director. However, one director must be a resident in India.
Registration of Indian Subsidiary does not require your presence as it is a 100% online process. For document signature, we will send our personnel to your home or office.
No, you don't need to pay any extra money except at the time of registration of Producer Company. Our invoice will be inclusive of all without any hidden charges.
It usually depends on the documents obtained from the applicant but it usually takes 30 days for registration of India Financial.
Producer Company Limited is added at the end of the Company name which seems to be a Public Limited Company however as per section 581C of the Companies Act 1956, Registration of Producer Company is considered as body corporate which will not be deemed as Public Limited Company.
"Producer" or "Producer institution" can become a member of the Producer Company.
If it is mentioned in the Article of Association then members of the Producer Company are provided with the special rights. Appropriate instrument are required to be issued to the producer company in respect of such special rights.
The member of the producer company is eligible to transfer the shares after obtaining approval from the board of directors. Shares are transferred along with the special rights (if any).
The member of the producer company is eligible to appoint nominee within 3 months of becoming a member of such Company, the appointment shall be done in a specified manner to which shares will vest in case of demise.