Producer Company

Overview

A Producer Company is a type of company formed under the Companies Act, 1956 (now under Companies Act, 2013) in India. It is specifically designed for producers of agricultural, dairy, fisheries, or any other products related to primary producers. It provides a platform for collective business activities to help producers improve their income, access markets, and gain better bargaining power.

Key Features of a Producer Company:

1.     Purpose:

o    Formed by a group of producers (farmers, artisans, or similar producers) to benefit collectively in terms of production, processing, marketing, and distribution of goods and services.

2.     Legal Entity:

o    A Producer Company is a separate legal entity with its own rights and obligations, distinct from its members.

3.     Ownership:

o    Members are the producers who hold shares in the company. The shares are transferable, but members must be producers themselves.

4.     Limited Liability:

o    Members have limited liability, meaning they are only liable to the extent of their shareholding in the company.

5.     Number of Members:

o    A Producer Company requires a minimum of 10 producers (individuals or cooperatives) for its formation.

6.     Governance Structure:

o    Managed by a Board of Directors, who are elected from among the members. The Board is responsible for decision-making and managing day-to-day operations.

7.     Profit Distribution:

o    Profits are distributed to members based on their contribution (e.g., quantity of produce) rather than on the number of shares held.

8.     Object of Formation:

o    The main objective is to promote the interests of producers by improving their access to markets, providing common facilities, or enhancing the value of their produce.

9.     Tax Benefits:

o    Eligible for certain tax exemptions under the Income Tax Act, especially for income generated from the agricultural, farming, or primary sector.

10.  Regulations:

o    Governed by the provisions of the Companies Act, 2013 and additional regulations set by the Ministry of Corporate Affairs and other authorities.

11.    Capital Formation:

o    Funded through the contribution of capital by the members, with the option of raising funds through shares or loans.

12.   Profitability and Sustainability:

o    Aims to improve the profitability and sustainability of its members by pooling resources for collective action, enabling better market access, and reducing costs.

13.    Activities of a Producer Company:

o    Processing, grading, marketing, export, or providing technical or financial services to members.

o    Procurement of inputs (seeds, fertilizers) for members at lower prices.

o    Establishment of retail chains, warehouses, or collection centers for collective marketing of members' products.

Advantages of a Producer Company:

1.     Better Market Access: Enables small producers to access larger markets.

2.     Increased Bargaining Power: Collective bargaining improves the terms of trade for members.

3.     Shared Resources: Pooling of resources for mutual benefits like processing facilities or storage.

4.     Support and Guidance: Producers receive technical, financial, and infrastructural support.

5.     Limited Liability: Shareholders' liability is limited to the extent of their shareholding.

Compliance Requirements for a Producer Company

A Producer Company must adhere to several legal and regulatory compliances as per the Companies Act, 2013, and other relevant laws in India. Below are the key compliance requirements for a Producer Company:

1. Registration with the Registrar of Companies (RoC):

• A Producer Company must be registered with the Registrar of Companies (RoC) under the Companies Act, 2013. It needs to submit necessary documents like the Memorandum of Association (MoA), Articles of Association (AoA), and details of the initial directors.

2. Annual General Meeting (AGM):

• Mandatory AGM: A Producer Company must hold an Annual General Meeting every year within six months from the end of the financial year.
• Financial Statements: In the AGM, financial statements like the balance sheet and profit and loss account must be approved.

3. Filing of Annual Return:

• Every Producer Company must file an Annual Return with the Registrar of Companies within 60 days from the date of the AGM.
• The Form MGT-7 must be filed, along with a copy of the audited financial statement.

4. Financial Statements and Audits:

• Audit: A Producer Company must appoint an auditor who will conduct an audit of the company’s accounts.
• Financial Statements: The audited financial statements, including the balance sheet, profit and loss account, and cash flow statement, must be submitted to the RoC.

5. Compliance with the Companies Act:

• Producer Companies must comply with the general provisions of the Companies Act, 2013, including holding board meetings, maintaining registers (e.g., register of members, directors), and ensuring proper governance and documentation.

6. Director’s Report:

• The Board of Directors must prepare an annual report (Director's Report) containing information on the performance of the Producer Company, business activities, and other statutory details required under the Companies Act.

7. Appointment of Directors:

• The Producer Company must have a minimum of 5 directors (and up to 15 directors). The directors are responsible for managing the company’s affairs.
• Nominee Directors: Some Producer Companies may have directors nominated by members or cooperatives.

8. Filing of Financial Statements (Form AOC-4):

• The financial statements must be filed with the Registrar of Companies using Form AOC-4 within 30 days of the AGM.

9. Maintain Shareholder Records:

• The Producer Company must maintain shareholder records and ensure that the share certificates are issued to the members.

10. Compliances with the Ministry of Corporate Affairs (MCA):

• The company must comply with the filing and disclosure requirements set out by the Ministry of Corporate Affairs, including:
• Filing of Form DIR-12 for changes in directors.
• Filing of Form SH-7 for changes in share capital.
• Filing of Form CHG-1 for charges on the company’s assets.

11. Compliance with the Income Tax Act:

• A Producer Company must comply with the provisions of the Income Tax Act, including the filing of Income Tax Returns.
• The tax is paid based on the profits of the company, and tax returns must be filed annually.
• Producer Companies may also be eligible for tax benefits under section 80P (of the Income Tax Act) if they meet specific requirements.

12. Payment of Dividend:

• Dividends must be declared according to the provisions in the Articles of Association of the Producer Company. Any declared dividend is to be distributed to the members based on their contributions to the company.

13. Compliance with Industry-Specific Regulations:

• Depending on the type of business (e.g., agriculture, dairy, fisheries), the Producer Company may need to comply with industry-specific regulations such as:
• Food Safety and Standards Act (for food-related businesses).
• FSSAI Registration (for food safety compliance).
• GST Registration and Filing (if applicable).

14. KYC Compliance:

• Ensure KYC (Know Your Customer) compliance for all directors, shareholders, and key persons in the company, as required by the RoC and other regulatory bodies.

15. Compliance with the Reserve Bank of India (RBI):

• If the Producer Company is involved in financial services (e.g., cooperative banking, credit facilities), it must comply with RBI regulations and guidelines.

Documents Required for Producer Company Incorporation

1. Proof of Identity of Directors/Shareholders:

• PAN Card of all proposed directors and shareholders.
• If the director/shareholder is a foreign national, a passport will be required as proof of identity.
• Voter ID, Aadhaar Card, or Driver's License can also be used as alternatives, provided they are government-issued and have the individual's photo.

2. Proof of Address of Directors/Shareholders:

• A residential address proof of all proposed directors and shareholders (not older than 2 months). This can be any of the following:
• Utility bills (e.g., electricity, water, or gas bill).
• Bank statement
• Telephone bill
• If the director is a foreign national, a passport or bank statement (in the foreign country) can be submitted as proof.

3. Proof of Registered Office:

• Address Proof of the registered office of the Producer Company. This includes:
• Rental agreement (if the office is rented) or ownership documents (if the office is owned).
• No Objection Certificate (NOC) from the property owner, if the office is rented.

4. Photographs of Directors:

• Passport-sized photographs of all proposed directors. These should be recent and clear.

5. Memorandum of Association (MoA):

• Memorandum of Association (MoA) outlining the objectives of the Producer Company. It should state the main activities of the company related to the production, marketing, or processing of primary produce like agriculture, dairy, etc.

6. Articles of Association (AoA):

• Articles of Association (AoA) detailing the internal management rules and regulations of the Producer Company. It includes the distribution of profits, management of the company, and election of directors.

7. Consent Letter from Directors:

• A consent letter from the proposed directors stating their willingness to act as directors of the Producer Company.
• This letter is usually accompanied by a declaration that they are not disqualified to be appointed as directors under the Companies Act, 2013.

8. DIN (Director Identification Number):

• If not already obtained, DIN (Director Identification Number) for each of the proposed directors. This can be applied online through the MCA portal.

9. Digital Signature Certificate (DSC):

• Digital Signature Certificate for all proposed directors. This is required for submitting documents electronically and signing them digitally.

10. Other Documents (if applicable):

• If any of the members is a corporate entity (e.g., another company or cooperative society), a Board resolution from the corporate entity authorizing their participation in the Producer Company may be required.

• A list of members including their names, addresses, and the contributions they will make to the Producer Company.

Registration Procedure for a Producer Company

Step 1: Obtain Digital Signature Certificate (DSC) for Directors

• Every director of the Producer Company must have a Digital Signature Certificate (DSC). It is required to sign electronic documents during the registration process.
• You can obtain the DSC from government-recognized Certifying Authorities.

Step 2: Obtain Director Identification Number (DIN)

• All proposed directors of the Producer Company must have a Director Identification Number (DIN).
• This can be applied for by submitting an online application on the Ministry of Corporate Affairs (MCA) portal.
• If the proposed directors already have a DIN, this step is not required.

Step 3: Choose the Name of the Producer Company

• Choose a unique name for the Producer Company, adhering to the guidelines laid down by the Ministry of Corporate Affairs (MCA).
• The name should include “Producer Company Limited” at the end, to indicate its legal status.
• Conduct a name availability check on the MCA website to ensure the name is available and does not infringe on any existing trademark.
• You can submit two name options for approval through RUN (Reserve Unique Name) application on the MCA portal.

Step 4: Prepare the Memorandum and Articles of Association (MoA & AoA)

• Memorandum of Association (MoA): This document defines the objectives of the Producer Company, including the activities it will undertake to benefit its members (e.g., production, marketing, processing).
• Articles of Association (AoA): This document governs the internal management and functioning of the Producer Company, outlining the rules for decision-making, profit distribution, and governance.
• These documents must be signed by the founding members/directors.

Step 5: Apply for Registration

• After preparing the MoA and AoA, apply for the registration of the Producer Company by filing the SPICe+ (Simplified Proforma for Incorporating Company electronically) form on the MCA portal.
• The SPICe+ form includes multiple steps:
• Form SPICe+ (INC-32): This is the primary form for company incorporation.
• Form AGILE-PRO (INC-35): This form can be filed for obtaining GST registration and EPFO/ESIC registration for employees.
• Form INC-9: A declaration by the first directors of the Producer Company.
• Upload the MoA and AoA along with the forms and required documents.

Step 6: Submission of Documents

• Along with the application, you need to submit the following documents:

1.     Proof of Identity of all proposed directors (e.g., PAN card, passport, voter ID).

2.     Proof of Address of directors (e.g., utility bill, bank statement, etc.).

3.     Proof of Registered Office: This can be a rental agreement or property ownership document along with a No Objection Certificate (NOC) from the property owner.

4.     Passport-sized Photographs of all proposed directors.

Step 7: Verification and Approval

• The Registrar of Companies (RoC) will verify all the submitted documents and forms.
• If the documents and forms are found to be in order, the RoC will approve the registration and issue a Certificate of Incorporation.
• The Certificate of Incorporation will contain the CIN (Corporate Identification Number), which is the legal identity of the Producer Company.

Step 8: PAN and TAN Application

• Once the Producer Company is incorporated, you can apply for the Permanent Account Number (PAN) and Tax Deduction Account Number (TAN) through the same SPICe+ form.
• These are required for tax purposes and statutory compliance.

Step 9: Open a Bank Account

• After incorporation, open a bank account in the name of the Producer Company using the Certificate of Incorporation, PAN, TAN, and MoA & AoA.
• The bank account will be used for managing the company's finances and transactions.

Step 10: Comply with Other Regulatory Requirements

• Depending on the nature of business, the Producer Company may need to comply with specific regulatory requirements like:
• GST Registration if turnover exceeds the prescribed threshold.
• Labour Law Compliance such as EPF, ESIC registration for employees.
• FSSAI Registration for food-related businesses.