Producer Company: Benefits and Registration Process

Producer Company Registration - Benefits & scope of work


Producer Company Registration

The agricultural industry is the backbone of the 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 the 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 into 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:

  • Production
  • Harvesting
  • Procurement
  • Grading
  • Pooling
  • Handling
  • Marketing
  • Export
  • Selling

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 for 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 a separate legal entity that can purchase or sell land under its own name.

  • More Credibility

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)

  • Limited Liability

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 Shareholders

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 a copy of the 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 fulfill 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

Credit facilities would be given to the members of the producer company for a period of 6 months or less than that.

  • NABARD Loan

NABARD stands for National Bank for Agriculture & Rural Development which 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, the 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 the processing of crops which involves 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 high-tech machines. They further supply and sell 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 the mutual assistance principle is provided to the members of the 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 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.

Pre-Incorporation Requirements

Before incorporation, the farmer producer company has to fulfill the 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 to 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 the name.
  • The proposed Producer Company is deemed as a private limited company as per the provisions of the Companies Act. 

Registration Procedure of Producer Company


Just like a Private limited company, a 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 a Director’s identification number or DIN for all the proposed directors of the company.

The incorporation 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 the below-given documents:

  • PAN card of all the directors
  • The aadhar card of all the directors contains 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 the SPICe+ form without applying for an extra DIR-3 form.

  • 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.


FAQs


Q. How much time does it take to incorporate a Producer Company?

It generally takes 30 business days to incorporate a Producer Company.


Q. Are the shares of Producer Company transferrable?

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


Q. What are the conditions for forming a Producer Company?

  • 10 or more individual members
  • 2 or more producers
  • A combination both of the above



Q. How is a Nominee appointed by the members in a Producer Company?

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.


Q. What kind of Company is Producer Company?

Producer Company is considered as Public Limited Company as per the Section 581C of the Companies Act, 1956.


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Posted by Pooja

Team Taxaj