Producer Company Incorporation

What is a Producer Company?

A Producer Company in India is a type of organization formed to empower farmers and producers by working collaboratively for mutual benefits. It focuses on activities like farming, processing, selling agricultural goods, promoting cooperation, offering financial support, and enhancing members' economic well-being.

• Primary Focus: Primary production activities supporting the interests of farmers and producers.
• Formation: Can be formed by 10 or more individuals, 2 or more institutions, or a combination of both. Requires at least 5 directors.
• Governance: Operates democratically, with equal voting rights for all members regardless of shareholding.

Authorized Activities of Producer Companies

• Processing: Preserving, drying, brewing, canning, and packaging produce.
• Manufacturing and Supply: Producing and supplying machinery or consumables to members.
• Education: Educating members on mutual assistance principles.
• Consultancy: Providing technical support, training, and consultancy.
• Resource Management: Managing power, land, and water for primary produce.
• Insurance: Offering insurance for members and their produce.
• Mutual Assistance: Encouraging cooperation among members.
• Member Welfare: Supporting welfare activities.
• Financial Support: Providing loans and credit.
• Ancillary Activities: Additional activities promoting members' mutual benefits.

Legal and Regulatory Framework:

A Producer Company operates under the provisions of the Companies Act, 1956 (Part IXA), which was later replaced by the Companies Act, 2013, and is regulated by the Ministry of Corporate Affairs (MCA).

• Companies Act, 2013: The Companies Act 2013 provides for the registration, incorporation, management, and winding up of Producer Companies. It also provides for the rules and regulations that govern the functioning of the Producer Companies.
• Ministry of Corporate Affairs (MCA): Regulates Producer Companies and ensures compliance with statutory requirements.
• Cooperative Principles: Producer Companies operate on cooperative principles to support mutual benefit and economic development of members.

Reasons to Choose a Producer Company

• Easy Formation: Setting up a Producer Company is simpler compared to cooperatives and requires fewer formalities.
• Low-Cost Registration: The registration process for a Producer Company is cost-effective and more accessible for farmers and producers.
• Fully Electronic Process: The entire incorporation process is done online, making it more convenient.
• No Minimum Capital Requirement: A Producer Company does not require a minimum paid-up capital; it can be formed even with minimum capital (e.g., Rs. 10).
• Tax Exemptions: Producer Companies enjoy various tax exemptions, helping reduce their financial burden and ensuring smoother operations.
• Focus on Member Benefits: The company works solely for the benefit of its members, providing loans, resources, and better market access.
• Simpler Compliance: Producer Companies enjoy relaxed regulatory requirements, making operations smoother.
• Mutual Benefits: Members gain from shared resources, better pricing for produce, and collective decision-making.

Minimum Requirements

• Directors: Minimum of 5 directors required, with one resident director.
• Members: A minimum of 10 individual producers or 2 producer institutions, or a combination thereof, are required to start the company.
• Company Name: Must be unique and include the suffix “Producer Company.”
• Registered Office: Must have a local registered office in the country.

Documents Required

• PAN Card, Aadhaar, and address proof (for directors and members).
• Passport-sized photographs of all directors and members.
• Proof of registered office (e.g., electricity bill, rent agreement).
• Digital Signature Certificate (DSC) for directors.
• Farmer/Producer Certificate from all members.

Advantages After Incorporation

• Promotes Collective Growth: Producer Companies help improve the economic conditions of members through shared resources and market access.
• Low-Cost Loans: Provides loans to members at low interest, enabling better financial support.
• Limited Liability Protection: Members' liability is limited to the extent of their shareholding in the company.
• Perpetual Succession: The company continues to exist despite changes in shareholders or management.
• Simplified Financing: Producer Companies can access various financial options like NABARD loans, government schemes, and bank credit facilities with simplified processes, lower interest rates, and flexible repayment options.
• No Outside Interference: The company’s operations are focused on its members, with no involvement from external parties.
• No RBI Approval Required: Since Producer Companies work exclusively with their members, no RBI approval is required.

Compliance Requirements

• Annual General Meeting (AGM): Held within 6 months of financial year-end.
• Annual Returns (Form MGT-7): Filed within 60 days of AGM.
• Auditor Appointment (Form ADT-1): Appoint auditor within 30 days of incorporation.
• Board Meetings: Minimum 4 per year.
• Director KYC (Form DIR-3 KYC): Annually for all directors.
• Director’s Report: Submitted with financial statements.
• Financial Statements (Form AOC-4): Filed annually.
• GST Filings (if applicable): Regular filings for GST returns.
• Income Tax Filing (ITR-6): Annual filing.
• Statutory Registers: Maintain mandatory registers for members, directors, and loans.