Producer Company: Agriculture Business in Corporate Structure

Producer Company is corporate structuring for agricultural activities which support its members to increase the productivity by mutually resolving issues like funds for machinery, seed, fertilizer, marketing and distribution, storage, export, import etc.

Part IX A of Companies Act,1956 (“Act”) deals with formation and working of producer companies which is now repealed by Companies Act,2013.However on considering Companies Act, 2013, Section 465 states as below:

“The provisions of Part IX A of the Companies Act, 1956 shall be applicable mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies”

Thus Government is under consideration to enact such law which focuses specifically on producer companies, till then provisions of producer companies as given in Companies Act, 1956 will be taken as legal and valid.

What Objects a Producer Company can pursue?

Producer Company are not authorised to carry any object it wants to undertake at its own wish, Act has given provisions as to what objects a producer company should undertake.

Section 581B states the producer company can undertake objects which is given as below or relates to such objects:

  1. Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import of goods or services for their benefit;
  2. Processing including preserving, drying, distilling, brewing, vinting, canning and packaging of produce of its Members;
  3. Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members;
  4. Providing education on the mutual assistance principles to its Members and others;
  5. Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its Members;
  6. Generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce;
  7. Insurance of producers or their primary produce;
  8. Promoting techniques of mutuality and mutual assistance;
  9. Welfare measures or facilities for the benefit of Members as may be decided by the Board;
  10. Any other activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner;
  11. Financing of procurement, processing, marketing or other activities specified in clauses (1) to (9) which include extending of credit facilities or any other financial services to its Members.

Who can form a Producer Company?

While forming Producer Company, certain aspects needs to be considered as to whom are eligible to form a producer company which is mentioned in section 581C of the Act as depicted below.

Producer Company is Private or Public Company?

As per section 581F of the Act states that every producer Company shall state “the name of the company with “Producer Company Limited” as the last words of the name of such Company;”

Thus it seems that Producer Company is formed as public limited company as the word “Limited” is used instead of “Private Limited”

But the catch is given in section 581C(5) which states that “On registration the Producer Company shall become a body corporate as if it is a private limited company to which the provisions contained in this Part apply, without, however, any limit to the number of Members thereof, and the Producer Company shall not, under any circumstance, whatsoever, become or be deemed to become a public limited company under this Act.”

This section clearly states that a Producer Company is a Private Limited Company and cannot be Public Limited Company.

What is Maximum Number of Member for Producer Companies?

The above said section clearly states that however the formation of producer company is done as private limited company but the provisions of maximum number of members as applicable on private company does not apply in case of producer company

To summarise there is no maximum limit on number of members of Producer Company.

What is Minimum and Maximum Number of Directors for Producer Companies?

Minimum Director: 5

Maximum Director: 15

What is the process to incorporate a Producer Company?

Persons willing to incorporate a Producer Company must follow below given procedure

  1. Apply for Digital Signature of proposed members and directors of the Company, generally class 2 DSC serves the purpose for filing forms at the portal of Ministry of Corporate Affairs.
  2. Ascertain name of the Company and check the availability of the same in accordance with section 4 of the Act and Rule 8 of the Companies (Incorporation) Rules 2014.
  3. File name application in PART A of web based form SPICE+, applicant can file two proposed name in this web based form, after approval of name, file incorporation documents in E form Spice.
  4. Proposed directors of the Company can also apply for DIN in same form is they are not holding DIN prior to application. Maximum three directors can apply for DIN allotment at the time of application.
  5. Applicants needs to submit below given documents with E Form Spice.
    • Memorandum of Association
    • Articles of Association
    • Proof for Registered Office
    • Declarations in prescribed format for engagement in agriculture activity
    • Id and Address proof for subscribers and directors etc.
  6. After scrutiny by the Registrar at Central Registration Centre, in case of any deficiency the Registrar may call for additional documents or clarification after providing a chance to resubmit form in 15 days, however if all the documents and details are appropriate than Registrar will issue Certificate of incorporation in form INC-11.
  7. After incorporation, Company is require to file a declaration in form INC-20 A within 180 days of incorporation. This declaration will state that that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him and Company has verified its Registered Office.

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