Overview of Producer Company Registration
The agricultural industry is the backbone of Indian economy. 60% of India’s population relies on agricultural activities for their livelihood. But these primary producers and farmers struggle a lot to get their share of profit. Keeping their miserable condition in mind, the Government of India has come up with an expert committee, headed by Y.K. Alagh to look into the matter. In 2002, the committee brought the concept of Producer companies in the Indian economy. Since then, they are working with the motive to uplift Indian farmers and agriculturalists (collectively termed “Producers”).
What is a Producer Company?
A legally formed company with the aim to improve the standard of living of farmers and agriculturists can be defined as a ‘Producer Company’. Producer Company is formed under the Companies Act 1956, and as per the act it can be formed by 10 individuals (or more) or 2 institutions or more or by a combination of both (10 individuals and 2 institutions) having one of the following as their business objective:
India is an agricultural-based country where more than 85% of people are dependent upon farm activities. Most of the farmers in India are small or marginal scale farmers holding less than 2 hectares of land. Low production and poor facilities make their life miserable and make them deprived of the latest technologies. Producer Company aims at empowering all the small and marginal scale farmers so that their economies can be unlocked and they could also opt the latest and new technologies to lead better and improved lives.
To form a Producer company, they have to obtain a Producer Company Registration as per the rules and regulations.
Benefits of a Producer Company Registration
A Producer company enjoys all the benefits of a private limited company such as:
A separate legal entity
Just like a private limited company, a registered farmer producer company is also considered as a separate legal entity that can purchase or sell land at its own name.
More credibility is offered to the registered companies as compared to the non-registered ones.
Ease in Management
An applicant can make desired changes in the board of management by filling some simple form with regards to the registrar of Companies (ROC)
The liabilities of the members are limited, and their personal assets cannot be used to cover up the debt and losses of the company.
Documents required for Producer Company Registration
From All Directors and Shareholder
1. PAN Card or Passport or Election ID Card
2. Latest Bank Statement/Telephone or Mobile Bill
3. Voter's ID/Passport/Driver's License
4. Passport-sized photograph of all directors and shareholder
For Proposed Registered office (Residential or commercial)
1. Copy of any Utility bill
2. Scan copy of Rent agreement with NOC from the owner
3. In case of owned Property then copy of Property Papers.
Rules and Regulations for Easy Availability of Loans and Credits
The main aim of the producer company is to uplift the standard of living of the primary producers in India. And to fulfil this aim, a special provision was passed according to which loan would be sanctioned to the respective members of the producer company through:
Loans and Advances
As per the law, loans and advances would be issued to the members of the producer company against security for 7 or less than 7 years from the date of disbursement of the loan.
Credit facilities would be given to the members of the producer company for a period of 6 months or less than that.
NABARD stands for National Bank for Agriculture & Rural Development that helps to meet the financial requirements of small and regional scale farmers. The members of Producer Company can obtain loans under the NABARD loan scheme.
What are the Activities Performed by the Farmer Producer Company?
As mentioned, Producer Company deals with all the production and harvesting as well as post-harvesting activities. Here is the detail of activities performed by them:
- Processing of crops and farm products: the first step is processing of crops which involve various procedures such as brewing, preserving, drying, venting, distilling, packaging, and canning.
- Manufacturing of crops and farm products: manufacturing involves the production on a large scale by using the high tech machines. They further supply and sale the necessary types of equipment and machines for better outcomes and manufacturing.
- Assistance and Education: low scale farmers are deprived of using new technologies, so guidance and assistance are provided to them so that they can opt for better ways to grow crops. Education related to mutual assistance principle is provided to the members of farmer Producer Company.
- Render various services such as technical, consultancy, training and other promotional activities as per the interest and requirements of the producer company.
- Insurance of the producer and his primary produce
- Make sure to generate, transmit and distribute power and best utilization of water and land resources.
- Promotes various techniques related to mutual assistance and mutuality
- Financial assistance to the members for marketing, procurement or other activities.
- Some additional activities to promote the mutuality and mutual assistance amongst the members of the company.
Note: as per the Companies Act, 1956, primary production is the product arising from the agricultural land of a farmer such as floriculture, horticulture, animal husbandry, re-vegetation, viticulture, pisciculture, bee raising, forest products, forestry, and farming products.
Before incorporation, the farmer producer company has to fulfil below-given requirements:
- There must be a minimum number of 5 directors and 10 members to incorporate the company
- The minimum paid-up capital should be Rs 5 lakhs or more to register a company
- There is no limit for the maximum number of members in a producer company
- Further, the company cannot be registered or considered as a Public Limited Company
- The company can only possess equity share capital
- The company must carry on 4 board meetings per year, and it should hold after every three months
Other Mandatory Requirements
Here are some additional mandatory requirements for Producer Company Registration:
- Only a person or member engaged in activities related to the production of primary produce can participate in the ownership of the company.
- All the members should be primary producers
- The liabilities of the producer company members are limited to the amount of their unpaid share
- The name of the proposed company must contain “Producer Company Limited” at the end of their name.
- The proposed Producer Company is deemed as the private limited company as per the provisions of the Companies Act.
Registration Procedure of Producer Company
Just like a Private limited company, Producer Company is also registered as per the rules and regulations of the ministry of corporate affairs. The process is similar and starts with obtaining a Digital Signature Certificate or DSC and Director’s identification number or DIN for all the proposed directors of the company. After that, the applicant has to apply for the reservation of name through the RUN form with the registrar of companies (RoC). The name must end with “Producer Limited Company” and should be unique and non-offensive.
Once the name is approved, the applicant can apply for the incorporation certificate. The application is filed in a prescribed format along with the required documents and MOA and AOA. If all goes well and the registrar is satisfied with the documents and application the company would receive the incorporation certificate.
Following are the documents that an applicant would require at each step of the process:
- Obtain a Digital Signature Certificate or DSC
All the directors have to obtain a DSC, and for this, they require below given documents:
- PAN card of all the directors
- Aadhar card of all the directors containing the same information as per the PAN card.
- Passport size photograph of the directors
- Working Email address and Contact number
- Obtain the Director’s Identification Number
All the designated directors of the company have to obtain their DIN. As per the new rule it can be obtained during the incorporation of the company through SPICe form without applying for an extra DIR-3 form.
- Reserving the Name of the Company
Name is reserved through the RUN (Reserve Unique Name) form with the respective Registrar of Companies. The name should end with “Producer Limited Company” and must be unique. The applicant can apply for the incorporation within the 20 days of name reservation.
- Preparation of MOA and AOA along with other documents
Once the name has been approved, the applicant must start the incorporation process by preparing the below-given documents:
- Memorandum of Association or MOA: it is drafted as per the objectives of the company.
- Article of Association or AOA: it is drafted as per by-laws of the proposed company.
- A declaration drafted by a professional
- An affidavit signed by all the proposed subscribers declaring their competency to act as legal subscribers of the company
- A utility bill such as electricity, gas or water bill along with a No Objection Certificate from the owner as a residential proof of the corresponding office of the company. In the case of rented property, a lease agreement should be attached to other documents.
- Incorporation Application
All the drafted documents such as AOA, MOA, Affidavit, and declaration would be attached along with the SPICe form with the relative registrar of companies. After that, all the documents and application are verified by the higher authorities.
It would take around 7-15 days for the verification of documents. If all is as per the requirements of ROC, the incorporation certificate would be issued to the company.
Tax Exemptions for the Registered Producer Companies
Registered Producer Company enjoys tax benefits such as exemption from agricultural income under section 10(1) of the income tax act, 1961. The exemption varies based on activities carried out by the farmers such as the agricultural income is 100% exempted from the income tax while the income earned from the production of green tea is 60% exempted as per the law.
All these benefits make Producer Company Registration more advantageous for all the farmers in India. This could help them in more production and better credit facilities, thus resulting in more profits for their produce. All in all producer company is bliss for all the farmers in India.
Frequently Asked Questions
It generally takes 30 business days to incorporate a Producer Company.
Yes, they are transferrable — members of the producer company transfer shares along with the special rights.
Producer Company is considered as Public Limited Company as per the Section 581C of the Companies Act, 1956.
The members of the company need to nominate a person in a specified manner within 3 months of becoming a member of the Producer Company.
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.
- 10 or more individual members
- 2 or more producers
- A combination both of the above
A minimum of 5 and a maximum of 15 Directors is required in a Producer Company.
The minimum period is 1 year while the maximum period of Directorship is 5 years.
The are several benefits of incorporating a Producer Company such as limited liability and better management.
35-40 working days.
The minimum number of Board meeting required is 4 and there should be a gap of 3 months in between the two meetings.