Farmer Producer Company
"Producer Company" means a body corporate
- registered under amended Companies Act, 1956,
- the terms of section 465 of the Companies Act, 2013, the provisions of the Part IX A of the Companies Act, 1956 shall be applicable mutatis mutandis to a producer company
- the objects of producer company shall confirm to the activities included in
581B of the Companies Act, 1956
Members of a Producer Company and their position in a company
- In a producer company, only primary producers or producer organisations can become members
- Membership is acquired by purchase of shares in a Producer Company
- A Producer Company can act only through its members
- Members create the company
- Members can also wind up the company
- Members act through their General Meetings
Minimum share capital for a producer company
- The minimum Authorized Capital of Producer Company is Rs.5 lakh.
- The Authorized Capital of the company can be more than Rs. 5 lakh as indicated in the Memorandum of Association.
- The authorized share capital should be sufficient for carrying out the objects
mentioned in the memorandum.
- The authorized share capital should be realistic.
- The minimum paid up capital for Producer Company is Rs. 1 Lakh.
Registration and incorporation of a Producer Company (PC)
The preparatory steps to be followed for the incorporation of a PC are
- Identify a cluster where the PO can be formed.
- Conduct Baseline and Feasibility Studies to ensure that a viable PO can formed in the cluster. Plan for business activities that are possible to improve the incomes.
- Meet the villagers (primary producers) and introduce the concept of Producer
Company to them.
- Explore the need for a Producer Company (PC) with the primary producers. The primary producers should understand the benefits and feel the need for it.
- Take the interested primary producers on an exposure visit to a functioning Producer Company and enable meaningful interaction among them.
- Create a critical group of primary producers, who are very enthusiastic about the idea of Producer Company and empower them further with the concept and details and benefits of a producer company.
- Use the critical group for canvassing among other eligible members about the need, urgency and benefits of a Producer Company.
- Allow enough time to the prospective primary Producer Company members to understand the idea. Make frequent visits to them and clarify all their doubts. The objective should be that the prospective members have right understanding, and willing to participate and work together for their mutual benefit. It may take typically 3 to 6 month time for this kind of social mobilisation.
- Have focused group meeting and motivate eligible members to become shareholders.
- Hold a meeting with the prospective shareholders and discuss objectives and possible business ideas for the company.
- Revise the business plan for the company taking into account the views of the prospective members.
- Once the primary producers are willing to form a Producer Company and are ready to contribute to the share capital
a. Identify Promoter Directors.
b. Prepare a draft Articles of Association (AoA).
c. Prepare a draft Memorandum of Association (MoA). Hire the services of a
consultant to get the AoA and MOA drafted, if necessary.
d. Call first informal meeting of the shareholders to approve
i. Articles of Association
ii. Memorandum of Association
iii. Selection of Promoter
iv. Authorized capital and cost of each share
- Collect the capital and savings also if possible.
Legal formalities for formation of a Producer Company
- Obtain Digital Signature of the Nominated Director, who will be affixing DSC on all the documents to be submitted to RoC online, on behalf of the company.
- Chose maximum 4 names for the Producer Company in order of preference.
- Apply for the name availability in Form – INC1.
- Once name is available, a letter is received from RoC indicating it. The documents to be submitted to ROC thereafter are:
- Articles of Association (AoA).
- Memorandum of Association (MoA).
- Form No. INC-22 for Registered Office.
- Form No. DIR-12 for Directors’ Appointment.
- Apply on-line for Directors Identification Number (DIN) for the proposed Directors.
- INC-7 – Affidavits by subscribers to Memorandum of Association to be filed, in case, if they have signed in Hindi.
- Power of Attorney in favour of a consultant to authorize him to make necessary
changes in MoA and AoA as required by the RoC.
- Submit the documents to RoC for Incorporation of Producer Company.
- Obtain Certificate of Commencement in INC-21
Advantages of a Producer Company
A Producer Company is a hybrid between a Private Limited Company and a
- Cooperative Society, thus enjoying the benefits of professional management of a Private Limited Company as well as mutual benefits derived from a Cooperative Society.
- Ownership and membership of a Producer Company is held only by “primary
producers” or “Producer Institution/s” and member’s equity cannot be traded. Hence, nobody can take over the company or deprive the primary producers of their organisation.
- The clauses of Private Limited Company shall be applicable to the producer companies except the clauses specified in Producer Company Act from 581-A to 581-ZL which make it different from a normal private or limited company (refer the Producer Company Act for details). This enables a professional framework for a Producer Company.
- The liability of the members is limited to the unpaid amount of the shares held by them. Hence, the private assets of the members are safe from company losses.
- The minimum paid-up Capital being Rs. 1 Lakh and minimum authorized capital being Rs.5 lakh for a PC, it easy to mobilise the small amount.
- Minimum number of producers required to form a PC is 10 while there is no limit for maximum number of members and the membership can be increased as per feasibility and need. This helps even 10 individuals start a Producer Company which is easy.
- There cannot be any government or private equity stake in the Producer Companies, which implies that PC cannot become a public or deemed public limited company. Hence, any Government or other corporate threat is non-existent in professional functioning of the company.
- The area of operation for a PC is the entire country giving flexibility to expand and do business in a free and professional manner.