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written by | May 9, 2022

What You Need to Know About Producer Companies in India

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A producer company is a legally governed organisation composed of farmers and agriculturalists. The government created it to increase the standard of life, income and profitability of Indian farmers and agriculturalists. Producer companies work as private corporations and are subject to the laws of the Companies Act 1956.

One should register company with a specific purpose defined in the law. Production, harvesting and selling are the main activities of the company. A farmer/agriculturist can incorporate a producer company with ten or more producers and five directors with a minimum capital of ₹5,00,000.

Today, we'll understand the producer company registration process, terms and everything that comes in the way.

Did you know?

Agriculture is a vital sector of the Indian Economy, and it accounts for around 18% of the nation's whole GDP. Besides that, it offers employment to over 50% of the country's workforce. In 2003 producer company was enacted as a legal entity under the Indian Companies Act's section IX-A.

Also Read: Who are the Biggest Ethanol Producers in India

What Is a Producer Company?

Understanding the producer company meaning isn't tough. The producer company primarily deals with post-harvest processing and agriculture. It is licenced for the primary purpose of purchasing, grading, pooling, handling, selling, harvesting, production, marketing and export of the primary product of its members. A producer company needs ten or more producers (individuals) and two or more producers organisations.

Members must produce primary products. Producer Companies must include at minimum five directors or less than 15 directors.

85% of the farmers in India are small and marginal farmers who have areas of under 2 acres. The fragmentation of farms and farmers causes disorganisation, and it's not feasible for Indian farmers to use modern technology in the long run.

The lives of farmers could be better socially and economically. There's just a need to organise these farmers into producer companies.

This is why the producer company concept aims to boost farmers by forming agricultural clusters that one can organise as a producer company.

Each member gets an allowance to vote only once in the producer company. The member can contribute various amounts of capital stock to the company. You cannot transfer the shares of producer company members to other members of the membership.

Two producer entities or a combination of these two entities can constitute a producer company. Because of the equal voting rights for every member, the problem of managing control for small and marginal producers requires identification in the form of a producer company.

Do you know about the various activities the producer company carries out? Want to know the complete information? Check out the next section. 

What Are the Various Activities That a Producer Company Carries Out?

The producer company has to handle the production of its members. Their functions include:

  • To offer education on the mutual assistance principle to members of the producer's corporation;
  • Processing (processing also involves preserving and preserving distilling, drying, brewing, vinting, canning and packing) of its members' products.
  • Manufacturing, sales or the supply of machinery, equipment or other consumables to its members;
  • To provide consulting services, technical support, R&D, training and other activities to advance the interests of members of the producer;
  • Transmission, generation and distribution of electricity, communication relating to primary products, revitalisation of the water and land resources.
  • The board determines the welfare of the members. 
  • Marketing, financing processing or other tasks like extending credit facilities or additional financial assistance offered to its member producers.
  • Insurance of the primary product and the producer;
  • To encourage the use of methods of mutuality and mutual assistance.
  • Other activities (ancillary or related to the primary goals for the corporation that produces) encourage cooperation among producer members.

Reasons to Complete a Producer Company Registration

Here are some major reasons why you should complete the producer company registration:

Easy Management

The Board of Management of a producer company is easily modified by filing simple paperwork with the Registrar of Companies. A producer company's Board of Management of a producer company oversees the activities of the producer company. Also, be sure to use Salary Calculator to manage your employees' salary distribution easily.

Separate Legal Entity

Producer companies are legal entities and have legal status by the Act. Thus, a producer corporation has the broad legal power and may own property and have debts. The shareholders (Directors) of an organisation have no obligation to the creditors of a producer company.

Owning Property

Producer companies, as juristic, can purchase, own, or otherwise dispose of property that is owned under its name. The member cannot make any claim on the property belonging to the producer corporation as it's operating as a business.

Better Credibility

Producer companies have more credibility than unregistered producer associations. Producer organisations are monitored and registered with the authorities of the Central government. Also, the State government's producer monitors organisations.

Uninterrupted Existence

A producer's company is a 'perpetual succession.' It means that it has continuous or uninterrupted existence up to its legal dissolution. Since they are distinct legal entities, producer companies are not affected by the demise or removal of any member. However, it remains active regardless of changes in the membership.

Basic Requirements for Producer Company Registration

As per subsection paragraph (1) from section 581C of Companies Act, 1956, any of the following combinations works to incorporate the producer company:

  • More than two establishments are necessary to form a producer company
  • More than ten people are required to form the producer company
  • A mixture of individuals and institutions is needed to register a private company.

In addition, the following are the conditions that you must meet from the perspective:

  • A minimum of 5 directors or a maximum of 15 directors is necessary to form the producer company.
  • The producer company has to organise at least four board meetings during the Financial Year. Furthermore, the maximum gap between two sessions should be more than three months.
  • A minimum of ₹5 lakhs is necessary to be the capital of the paid-up shares.
  • It is essential to have an all-time CEO (Chief Executive Officer) to oversee the operations and management of the business.
  • A producer company can be deemed to have just equity share capital.

Also Read: The 10 Best Cosmetics Manufacturers in India

The Procedure for Producer Company Registration

The process of registering a producer company is quite similar to registering a Private Limited Company. In addition, to register a producer company, an application requires submission to the ROC (Registrar of Companies) in the necessary format along with all the required documents. 

Upon receiving the application, the Registrar must scrutinise all documents and issue a COI (Certificate of Incorporation). The following are the steps to follow in the process of obtaining registration for a producer company:

Application for the Name Approval in Producer Company Incorporation

To reserve an organisation's name as a producer company, the company members have to submit the RUN (Reserve Unique Name) form and the ROC. Once you submit the form, the ROC will verify the company's members' names' validity. After ROC approves the business's name, you must file the certificate of incorporation within twenty days.

Obtain DSC and DIN

The first stage in the process is to acquire DIN (Director Identification Number) and DSC (Digital Signature Certificate). Furthermore, DSC requires verification of the documents electronically or digitally, and the Certifying Authority issues that. Additionally, DIN is compulsory for directors who join the business. You can obtain it by filing the SPICe form because it is unnecessary to submit a separate form.

Drafting of MOA and AOA

Once you have obtained the name approval, you need to apply for incorporation in the SPICe form and the vital documents. These may include: 

  • AOA (Article of Association)
  • MOA (Memorandum of Association)
  • An affidavit signed by the entire membership and the statement confirming the legal capacity to be legal subscribers of the company,
  • Appropriate ROC (Registrar of Companies).

Certificate of Incorporation

After verifying the documents and requesting incorporation, ROC will issue a Certificate of Incorporation (COI), which takes nothing over seven days.

Conclusion

When it is time to register, the producer company shall become a corporatised body in the same way as a private limited. The provisions of the Companies Act apply.

Under no circumstances the producer company must follow the way to be a public limited company as per this Act. The conclusion is that a producer company in India will not become an open (or classified as a publicly) private limited corporation.
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FAQs

Q: How many members are there in FPO?

Ans:

In the case of plain areas, the minimum number of members per FPO will be 300, while in the Hilly Region and North-Eastern, it will be 100.

Q: Why is FPO important?

Ans:

The main target of FPO is to enrich the producers with better income through their organisation.

Q: When did FPO start in India?

Ans:

On February 19, 2020, Prime Minister Narendra Modi launched FPO to promote over ten thousand FPOs in the upcoming five years.

Q: Which state has the longest list of producer companies in India?

Ans:

Maharashtra has the maximum number of producer companies currently, with 1950 entries.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.