A producer company is a hybrid between a private limited company and a cooperative society.
It combines the goodness of a cooperative enterprise and the vibrancy and efficiency of a company.
It accommodates the unique elements of cooperative business with a regulatory framework similar to that of a private limited company.
Concept of Producer Company – Introduced
Introduced in 2002 by incorporating a new Part IXA (section 581A to 581ZT) into the Companies Act,1956
Based on recommendations given by expert committee led by economist, Y. K. Alagh
The proviso toSection 465 (1) of the Companies Act, 2013 provides that 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1956 shall be applicable mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies.
Minimum 10 individuals or two or more producer institutions or combination of 10 or more individuals and Producer institutions may form a producer company. If the Registrar is satisfied that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, he shall, within thirty days of the receipt of the documents required for registration, register the memorandum, the articles and other documents, if any, and issue a certificate of incorporation under this Act.
The liability of the members is limited as prevailing for the private companies. The Producer Company is akin to the private company except to the requirement of number of members. The Producer Company cannot be a public company. After incorporation it will be a body corporate. If a person is having conflict with the business of the company he cannot continue to be a member of the company.
Name of the company
Name of the company shall end with the words “Producer Company Limited”
Objects of the Producer Company:
a. Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import of goods or services for their benefit. Provided that the Producer Company may carry on any of the activities specified in this clause either by itself or through other institution;
b. Processing including preserving, drying, distilling, brewing, vinting, canning and packaging of produce of its Members;
c. Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
d. Providing education on the mutual assistance principles to its members and others.
e. Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its members.
f. Generation, transmission and distribution of power, revitalization of land and water resources, their use, conservation and communications relatable to primary produce.
g. Insurance of producers or their primary produce.
h. Promoting techniques of mutuality and mutual assistance.
i. Welfare measures or facilities for the benefit of members as may be decided by the Board.
j. Any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) or other activities which may promote the principles of mutuality and mutual assistance amongst the members in any other manner.
k. Financing of procurement, processing, marketing or other activities specified in clauses (a) to (j) which include extending of credit facilities or any other financial services to its Members.
- Produce of farmers, arising from agriculture (including animal husbandry, horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising and farming plantation products), or from any other primary activity or service which promotes the interest of the farmers or consumers ; or
- Produce of persons engaged in handloom, handicraft and other cottage industries ;
- Any product resulting from any of the above activities, including by-products of such products ;
- Any product resulting from an ancillary activity that would assist or promote any of the aforesaid activities or anything ancillary thereto
- Any activity which is intended to increase the production of anything referred to above to improve the quality thereof
If the producer company consists of individual members then each member will have a single vote irrespective of the shares held by them. If the company consists of institutions as members then the vote shall be determined on the participation in the business in the previous year. If the company consists of individuals and institutions then voting rights shall be computed on the basis of a single vote for every member. If authorized by articles the voting rights of a member may be restricted.
Benefits to Members
The following are the benefits available to the members of the Producer Company:
- Every member shall receive the value in proportion to the produce supplied to the company during the Financial year ;
- Bonus shares may be issued to the members;
- Surplus may be paid in cash or in equity shares proportion to the participation
The Memorandum of the Company shall state the name of the Company ending with ‘Producer Company’, state in which the main office is registered, main objects, names and addresses of the members subscribed to the memorandum, details of share capital, details of first directors, liability of members etc.,
Articles of Association
The Articles of association provides for the constitution of the Board of the company, functioning of the Board, the procedure for conducting the meeting of the Board etc., The Articles of Association may be amended by means of a special resolution. The amended articles of association duly signed by two directors along with special resolutions are to be submitted to the Registrar within 30 days of passing of the special resolution. The amendment in relation to the change of registered office from one State to another State is to be confirmed by Company Law Board.
Option to Inter State Co-operative Societies
Any interstate co-operative society may make an application to the Registrar for registration as Producer Company. The application shall accompany with the special resolution of the members and the details of directors and executives and also a list of members. A statement is to be filed declaring that the society is having objects as to that of Producer Company. On satisfaction of the Registrar that the provisions for registration have been complied with, he will issue a certificate of registration within 30 days of the receipt of the application.
Every stakeholder of the interstate co-operative society after incorporation as Producer Company will become the members of the producer company. All the assets and liabilities of the society will vest on the newly formed Producer Company. All the legal cases pending will be dealt with by the newly registered Producer Company. Whatever the concessions and privileges available to the Producer Company shall be extended to the newly formed Producer Company from society.
Provisions are there for reconversion of a Producer Company into an Inter State Co-operative Society.