Annual Compliance for Producer Companies

An Overview of Annual Compliance for Producer Companies

A producer company is a corporate body regulated by the Ministry of Corporate Affairs and is regulated by the Companies Act of 2013 and is formed with the aim of engaging in activities connected to any primary produce. A producer company is created with the main objective of procurement, harvesting, production, pooling, marketing, grading, handling, and selling primary produce of the members of the producer company or import of such produced goods providing any services for the benefit of the members. Hence, producer companies primarily deal with agricultural and post-harvest activities of processing.

The concept of producer companies was introduced in 2002 and is regulated by Section Chapter IXA of the Companies Act of 2013. Section 378A provide specific definitions pertaining to producer companies. Primary produce has been defined as products which have been produced or grown through agriculture (which also includes horticulture animal husbandry, floriculture, forestry, pisciculture, viticulture, forest products, re-vegetation, farming plantation and bee raising products) or produce of persons engaged in handicraft handloom or any other cottage industries or any other product or by-product resulting from the above activities.

What is a Producer Company?

A producer company has been defined as a body corporate this engagement activities or has objects as specified under Section 378A of the Companies Act of 2013 and is registered as a producer company with the Ministry of Corporate Affairs.

The objects of the producer company, as mentioned under Section 378A of the Companies Act of 2013, is as follows:

• Procurement, harvesting, production, pooling, marketing, grading, handling, selling primary produce of the producer company's members or importing such produced good or providing any services for the benefit of the members. Producer companies have the freedom to carry out these activities either by themselves or in consonance with any other institution.
• Processing includes drying, preserving, brewing, distilling, canning, vinting and packaging of the produce of its members.
• Manufacture, supply or sale of any equipment, machinery, or other consumables to its members.
• Providing education to its members and others on the principle of mutual assistance.
• Engaging in providing consultancy services, technical services, research and development, training, and other activities to promote the interests of its members.
• Transmission or generation or distribution of power, rejuvenation of water and land resources, its uses, and conservation concerning primary produce.
• Providing insurance to producers and their primary produce
• Welfare measures or any other activities carried out for the benefit of the members of the producer company
• Promoting methods of mutual assistance.
• Financing of processing, procurement, marketing other activities, as mentioned above, also include granting credit facilities or any other financial services to the members.

Characteristics of a Producer Company

The members of a producer company shall be primary producers or a producer institution. Producer companies shall be incorporated as private limited companies, not public ones. The liability of the members of a producer company shall be limited to the number of shares held by them. The name of the producer company shall have "Producer Company Limited" added as a suffix. There is no limit to the number of maximum members who can be a part of the producer company.

Requirements To Form a Producer Company

The minimum requirements to form a producer company are as follows:

• There must be at least ten or more individuals who are producers who come together to start a producer company. There is no upper limit requirement for the number of members in a producer company.
• Two or more producer institutions come together to form a producer company.
• There must be a minimum paid-up capital to form a producer company.
• There are to be a minimum of 5 directors and a maximum of 15 directors in the producer company.

Annual ROC Compliance Requirements for a Producer Company

Every producer company duly incorporated under the Companies Act of 2013 is required to adhere to certain compliances to avoid incurring penalties. Annual compliances refer to specific mandates dictated by the Ministry of Corporate Affairs which are necessary to be complied with by the companies during a financial year. It mainly involves filing particular forms with the Registrar of Companies. Annual ROC compliance is mandatory in most cases.

There are many benefits which a producer company can obtain by complying with the yearly ROC compliance. Since Compliance is compulsory for producer companies, it increases the credibility and transparency of the companies involved as they are required to furnish details pertaining to the operations of their business or their financial situations while complying with the requirements of the MCA. Moreover, non-compliance can lead to heavy fines.

Annual ROC Compliance for a Producer Company

Ministry of Corporate Affairs requires companies to adhere to certain compliances. These compliances range from annual to event-based compliances and meet requirements that every company must comply with. Non-compliance with these mandates of the MCA can lead to heavy fines and other penalties. There are specific forms which are required to be filed with the registrar of companies once or annually, or half-yearly. Below mentioned are the forms which are required to be filed with the ROC:

Form INC-20A

This form must be filed before the expiry of 180 days from the date of the company’s incorporation registrar of companies. Form INC-20A must be filed by companies incorporated after November 2^nd, 2018, to inform the ROC of the commencement of the company's business. This is provided under the Companies Act of 2013, Section 10(A).

Form AOC-4

Every producer company incorporated under the Companies Act is required to duly maintain the company's annual financial statements. The financial information shall contain details regarding, inter alia, the balance sheet, trading account, and profit and loss account. Every company is required to file Form AOC-4 to submit the annual financial statements of the company to the registrar of companies. The form is required to be filed within 30 days from when the annual general meeting is held.

Form ADT-1

Section 139 of the Companies Act of 2013 companies to appoint an auditor. The auditor appointed shall be a statutory auditor and will be responsible for auditing the company's book of accounts and annual reports. Companies making such appointments are required to inform the ROC of the appointment of the statutory auditor by filing Form ADT-1 before the expiry of 15 days from the date on which the annual general meeting is held. A statutory auditor is appointed for a period of 5 years.

The first statutory auditor of the company must be appointed within 30 days of the incorporation of the company. This is stated in Section 139(6) of the Companies Act of 2013. Appointment of the first statutory auditor is required to be reported to the ROC before the expiry of 30 days from the date of incorporation of the company by filing a particular form.

Form ADT-3

Section 140 of the companies after 2013 mandates that every company is required to inform the ROC of any resignation of the company's statutory auditor from the expiry of 30 days from the date on which such resignation was submitted. This form is to be filed with the ROC regarding details pertaining to such resignation of the statutory or the time.

Form MBP-1

All company directors are required to inform the company of their interests in other entities during the first board of directors meeting of the company under Form MBP-1. Any change in the interests of such directors is also required to be informed to the company by filing a fresh Form MBP-1.

Form IEPF-2

This form is required to be filed by the company providing statements regarding unclaimed shares or dividends which are necessary to be transferred to the Investor Education and Protection Fund as is mandated under Section 125 of the Companies Act of 2013 and IEPF Authority (Accounting, Audit, Transfer and Refund) Rules of 2016. Form IEPF-2 must be filed within 60 days of the annual general meeting.

Form DIR- KYC

All directors must file Form DIR-3 KYC with a director identification number or DIN for the KYC directors of the company. This is provided under Rule 12A of Companies (Appointment and Qualification of Directors) Rules, 2013. Every director is required to file this form annually for MCA. Directors who have previously filed Eform 10 in the last financial year can complete their KYC through the web-based KYC services of the MCA. They shall be verified through OTPs, which will be sent on the registered mobile number and email ID. Form DIR-3 KYC shall be found within six months from the cessation of the financial year.

Form DIR-8

All directors of a company are required to file this form every financial year with the company to disclose their non-disqualification, if any.

Form DPT-3

This form is filed as per the Companies (Acceptance of Deposits) Rules of 2014- Rule 16 by all companies other than government company furnish details regarding deposits or transactions involving money or loans which do not amount to deposit. This form must be filed annually with the ROC by June 30th of every year.

Form BEN-1

Form BEN-1 is required to be filed giving information regarding any declartion made by significant beneficial owners of the company. Significant beneficial owners must make declarations to the reporting company regarding their interests as provided under the Companies (Significant Beneficial Owners) Amendment Rules, 2019. Such statements need to be made to the reporting company and shall include information regarding any change in the significant beneficial ownership.

This form must be filed within 30 days from when such person was made a significant beneficial owner or from when there was any change in the said ownership.

Form BEN-2

The producer company must file this form with the registrar of companies giving information of any declarations made by the significant beneficial owners of the company. Section 90 of the Companies Act of 2013 and Rule 4 of the Companies (Significant Beneficial Owners) Rules, 2014, provide that a company must file this form before the expiry of 30 days from the date on which the company received such declaration under Form BEN-1.

MSME Form-1

MSME Form-1 must be filed by companies taking supplies from other vendors which are Micro, Small and Medium Enterprises or MSMEs. There must be an outstanding payment which remains to be made to such entities by the producer companies. The amount should be due for a period of more than 45 days. MSME Form-1 shall be filed once every six months with the registrar of companies.

Form MGT-4

Form MGT-4 shall be filed by the persons who are registered owners of shares but do not hold any beneficial interest in the shares of the company. Declaration under the form is to be made to the reporting company within 30 days from the date on which the person's name was written in the register of the company's members. Any change in the interests of such registered owners of shares shall also be declared under this form.

Form MGT-5

Form MGT-5 is required to be filed to furnish declarations made to the reporting company by persons who have a beneficial interest in the shares of the reporting company, but their names have yet to be added to the register of members of the company. The declarations must be made within 30 days from the date on which the person received the beneficial interest. Any change in the beneficial interests of such persons shall also be declared under this form.

Form MGT-6

A producer company shall file this form with the registrar of companies to furnish details pertaining to the declarations made by persons under Form MGT-5 and Form MGT-4. Section 89 of the Companies Act of 2013 mandates this. Form MGT-6 shall be filed within 30 days from the receipt of Form MGT-5 and Form MGT-4 by the company.

Form MGT-7/ Form MGT-7A

This form is submitted by companies to the registrar of companies to file their annual returns in a financial year. This form shall be filed from the expiry of 60 days from the date on which the annual general meeting was conducted.

Form MGT-14

This form must be filed to provide information to the registrar of companies on any resolutions passed in any company meetings. Form MGT-14 must be filed within 30 days from the date on which such resolution was passed.

Form CRA-2

This form is only required to be filed by companies on whom cost audit applies as mandated by the central government under the Companies Act of 2013- Section 148 read with Companies (Cost Records and Audit Rules), 2014- Rule 6. Form CRA-2 shall be filed with the registrar of companies to provide details of the appointment of the cost auditor for the company.

This form shall be filed before the expiry of 180 days from the start of the financial year or before the expiry of 30 days from the appointment of the cost auditor. Suppose the appointment is to fill a casual vacancy, in that case, such vacancy must be filled within 30 days and information pertaining to such appointment shall be furnished before the expiry of 30 days from when the board meeting was held.

Form CRA-4

Form CRA-4 is only required to be filed by companies on whom cost audit applies as mandated by the central government under the Companies Act of 2013- Section 148. The reporting company shall file the form once it receives cost audit report prepared by the cost auditor.The cost auditor is required to submit the report to the company before the expiry of 180 days from the closure of the financial year. The audit report is required to be submitted to the central government by the company before the expiry of 30 days from when the cost audit report was received from the cost auditor.

Event Based Compliance for Producer Companies

Other than the annual compliances discussed above, producer companies must also duly comply with specific event-based compliances in the event of the occurrence of certain events or circumstances. Mentioned below are some of the event-based compliances:

• Change in directors

Section 170(2) of the Companies Act of 2013 places the onus on the company to report to the MCA of any appointment of directors or any cessation or change in directorship or regularization of directors of the company under Form DIR-12. This form shall be filed within 30 days from the date when the annual general meeting was held.

• When there any changes which are brought about in the objectives of the company, resolutions are required to be passed by such producer company. The information pertaining to the resolutions shall be furnished by filing Form MGT-14 with the registrar of companies.
• When there occurs any change in the share capital of the company, Form SH-7 shall be filed to inform the registrar of companies of such change.
• When there are any changes in the registered office address of the producer company, The company is required to inform the registrar of companies of such change by filing Form INC 22, before the expiry of 30 days from the date on which such address was changed.
• When shares of the company are allotted, Form PAS-3 shall be filed with the registrar of companies to inform of such allotment.
• When there is any transfer of the shares of the company, the ROC must be informed.
• When any share application money is received by the company, the ROC must be informed.
• When there is any alteration with the authorized bank signatories, the ROC must be informed.
• The ROC must be informed when the company executes any agreement with a related party.
• When there is any change in the statutory auditor who has been duly appointed, the ROC must be informed.

Meeting Requirements for Producer Companies

• Every producer company is required to conduct its first board meeting before the expiry of 30 days from the company's date of incorporation. It shall also complete at least four board meetings in a financial year, and the gap between any two consecutive meetings shall in no case exceed 120 days. Notice of the board meetings is required to be sent to the directors at least seven days from the date on which such board meeting is scheduled to be held.
• The first annual general meeting of every producer company shall be held before the expiry of 18 months from the company's date of incorporation. The first annual general meeting shall be held before the expiry of nine months from the closure of the financial year. The next annual general meeting is required to be held before the expiry of the last day of the calendar year or six months from the closure of the financial year, whichever is earlier. Also, the gap between any two consecutive annual general meetings shall be, at most, a period of 15 months.
• Every company duly incorporated under the Companies Act is required to conduct four audit committee meetings at least in a financial year. Subsequent audit meetings must be held before the period of 12 months expires from when the previous audit committee meeting was held.
• Producer company shall conduct at least one stakeholders’ relationship committee meeting in a financial year.

Penalties for Non-Compliance

The Ministry of Corporate Affairs has put in place specific procedures and mandates to which all companies are required to adhere. Non-compliance can often lead to incurring heavy fines and other penalties. Mentioned below are some penalties that producer companies can incur for non-compliance with the MCA mandates:

• If the Central Government has any granted licence to the company, and it is discovered that such company is in violation of any of the mandates on which the permit was granted or isn't working correctly, the MCA may cancel such permit.
• Companies at fault may be fined, which can extend up to ₹1,00,00,000 but shall not be less than ₹10,00,000.
• Any official of the company responsible for the non-compliance by the producer company can be fined for an amount which may extend to ₹25,00,000 or may also be imprisoned.

Corpbiz Support

Every producer company must ensure that they are fully compliant with the mandates set out by the Ministry of Corporate Affairs. Adherence to the annual compliances and other requirements is imperative not only to avoid heavy fines and other penalties but also to increase transparency and credibility of the business of the company. However, keeping a check on all the annual compliances can be a daunting and taxing endeavour.

The expert team of professionals at Corpbiz has a proven record of helping many producer companies become MCA compliant. Corpbiz shall help your company with every Compliance involved, from the preparation of Documents to filing requisite forms with the MCA within the prescribed period of time and avoid incurring unnecessary fines and penalties.