Producer Company Registration in India: A Comprehensive Guide

Published Sun, 12 May 2024 | Updated Sun, 12 May 2024

Starting a business in the agricultural sector, specifically in the production, export, and trading of primary agricultural products in India, requires a clear understanding of the legal requirements and regulations. One of the most accessible and affordable ways to enter this industry is through the registration of a Producer Company. This article serves as a comprehensive guide to understanding the process and benefits of Producer Company Registration in India.

What is a Producer Company?

A Producer Company is a unique form of business entity that combines the features of a company and a cooperative society. It aims to create a pool of small producers who become its members. The primary objective of a Producer Company is to engage in activities such as production, procurement, harvesting, grading, pooling, marketing, and trading of primary agricultural products. It also provides financial assistance to its members for these activities, including the extension of credit facilities. However, a Producer Company can only deal with its members and cannot engage in direct business transactions with the public.

Objects of a Producer Company

A Producer Company follows the rules laid out in Section 465 of the Companies Act, 2013, which are adapted from Part IX A of the Companies Act, 1956. Its goals must match the activities listed in Section 581B of the Companies Act, 1956. The primary objectives of a Producer Company generally revolve around facilitating the activities and welfare of its producer members. Here are some common main objects of a Producer Company:

1. Production and Marketing: To engage in the production, procurement, processing, and marketing of agricultural produce, forest produce, handicrafts, handlooms, or any other produce of its members.
2. Pooling Resources: To pool the resources of its members and strive for collective bargaining power in the market to obtain better prices for their produce.
3. Enhancing Efficiency: To promote efficient and sustainable agricultural or other production practices among its members through training, education, and technological advancements.
4. Value Addition: To add value to the products of its members through processing, packaging, branding, and other means, thereby increasing their marketability and profitability.
5. Supply Chain Management: To establish and manage supply chains, storage facilities, cold storage units, warehouses, transportation, and logistics networks for efficient handling and distribution of produce.
6. Quality Assurance: To ensure adherence to quality standards, certifications, and regulatory requirements in the production, processing, and marketing of goods.
7. Research and Development: To undertake research and development activities aimed at improving productivity, quality, and sustainability of agricultural or other production processes.
8. Financial Assistance: To provide financial assistance, credit facilities, insurance, and other financial services to its members to support their production activities.
9. Social Welfare: To undertake social welfare activities for the benefit of its members, their families, and the communities in which they operate.
10. Promotion of Cooperation: To promote cooperation, collaboration, and mutual assistance among its members for their collective development and empowerment.

Key Features of a Producer Company

1. A Producer Company is like a Private Limited Company.
2. Members are not personally responsible for the company's debts beyond their invested amount.
3. Normally, a private company can't have more than 50 members, but a Producer Company can exceed this limit.
4. A Producer Company cannot change its status to become a Public Limited Company (or any Deemed Public Company)

Advantages of a Producer Company

Registering a Producer Company offers several advantages for entrepreneurs in the agricultural sector:

1. Memberships Limited to Producers: Producer Companies can only engage with their members, who are primarily “Agricultural Producers” or "Producer Institutions,". This limitation ensures that the company's operations remain focused on supporting and benefiting its core stakeholders.
2. Income Tax Exemption: One significant advantage of a Producer Company is its exemption from paying income tax. This exemption provides financial relief to the company and its members, allowing them to allocate resources more efficiently.
3. Deposit Acceptance: Producer Companies are eligible to accept deposits in the form of fixed deposits (FD) and recurring deposits (RD). This flexibility in accepting deposits contributes to the financial stability of the company and enables it to provide additional support to its members.
4. Separate Legal Entity: A registered Producer Company has a distinct legal identity, separate from its members. This separation ensures that the company's liabilities and obligations do not affect its members individually, providing them with a shield of limited liability.
5. Access to Financial Assistance: Producer Companies can extend financial assistance, such as credit facilities and loans, to their members. This support enables small producers to access capital and resources to enhance their agricultural activities. Producer Companies have the authority to lend funds to their members against various forms of security, including gold, property, fixed deposits, and government securities. This provision ensures that members can access loans based on their assets, thereby promoting financial growth and stability.
6. Enhanced Market Opportunities: By pooling resources and engaging in collective marketing and trading activities, Producer Companies can explore larger market opportunities. This collaborative approach allows members to negotiate better deals and access a wider customer base.
7. Improved Access to Inputs and Services: Through a Producer Company, members can collectively procure inputs such as seeds, fertilizers, machinery, and other essential resources at competitive prices. This ensures that members have access to high-quality inputs and necessary services to optimize their agricultural production.
8. Professional Management: Producer Companies require professional management, ensuring that agricultural operations are efficiently run and guided by experienced individuals. This professional approach enhances productivity and fosters the sustainable growth of the company.

Criteria for Registering a Producer Company in India

Here's a checklist based on the requirements mentioned for incorporating a Producer Company under the Companies Act, 2013:

1. Membership Criteria:
   • At least 10 producer individuals or at least 2 producer institutions or or a combination of both, totaling at least ten individuals and two institutions.as members
2. Director Requirement:
   • At least 5 directors.
   • Maximum 15 Directors - In the case of an inter-State co-operative society formed as a Producer Company, then such a company may have more than fifteen directors for a period of one year starting from the date of its formation as a Producer Company.
3. Minimum Capital:
   • A minimum authorized capital of Rs. 5 Lakhs and a minimum paid up capital of Rs. 1 Lakh.
4. Name Requirement:
   • The company name should end with "Producer Limited Company".
   • Ensure the name is unique and not already in use. Check the availability of the name through the Ministry of Corporate Affairs (MCA) website or seek professional assistance.
5. Registered Address:
   • Have a registered address for the principal place of business or the main office ready.
   • Ensure the address is valid and can be used for official communications.

Documents Required for Registering a Producer Company

To register a producer company in India, following documents are required:

1. PAN Card & Photograph:
   • Required for each director and shareholder.
2. Identity Proof: (Any one of the following document)
   • Aadhar Card
   • Voter ID
   • Driving License
   • Passport (Mandatory in case of foreign National)
3. Address Proof: (Latest Copy of any one of the following document)
   • Bank Statement
   • Mobile Bill
   • Electricity Bill
   • Landline Bill
4. Producer Proof:
   • Khasra - Khatuni (Land records indicating ownership or tenancy)
   • Income Tax Return (ITR) showing agriculture income
   • Sarpanch Letter (Letter from the village head confirming producer status)
   • Any other proof that establishes the individual as a producer

Producer Company Registration Process

The process of registering a Producer Company involves several steps, and it is advisable to seek professional assistance to navigate through the complexities. Here is an overview of the registration process:

The procedure for incorporating a Producer Company is as follows:

1. Documentation: Collect all necessary legal documents required for registration, including identity proofs, address proofs, PAN card copies of directors and shareholders, and passport-sized photographs of directors and shareholders.
2. Name Selection and Reservation: Choose a distinctive name for the Producer Limited Company that complies with the requirements laid down in the Companies Act, Company (Incorporation) Rules, Trademark Act, and Names and Emblems Act. Ensure the name is not already in use by another company, LLP, or registered trademark. File two names in order of preference in PART A of the SPICe+ application for name reservation
3. Obtain DSC: It is mandatory to obtain DSC of all directors and shareholders before filing of relevant forms.
4. Supporting Documents: Prepare all the necessary supporting documents including MOA and AOA, affidavits and declarations to be signed by all the directors and Shareholders
5. Filing of Incorporation Application: File and Submit Spice+ Part B form along with all necessary documents to the ROC
6. Additional Services: Form INC-35(AGILE-PRO-S) form is used to apply for various registrations, including:

• Goods and Services Tax Identification Number (GSTIN)
• Employees' State Insurance Corporation (ESIC) registration
• Employees' Provident Fund Organization (EPFO) registration
• Profession Tax registration
• Opening of bank account
• Shops and Establishment registration
• Permanent Account Number (PAN)
• Tax deduction and collection account number (TAN)

1. Issuance of Certificate of Incorporation: Once the ROC is satisfied with the authenticity of the details and documents, they register the Producer Limited Company and issue a Certificate of Incorporation. This certificate serves as conclusive proof of registration and includes a Corporate Identification Number (CIN) as the unique identity of the company.Top of Form

Annual Compliance for a Producer Company

Once a Producer Company is registered, it must adhere to certain compliance requirements. These compliances ensure that the company operates within the legal framework and maintains transparency. Here are some essential compliances for Producer Companies:

1. Annual General Meeting (AGM): AGM must be convened within six months from the end of the financial year. The first AGM should be held within 90 days from incorporation in which the members will appoint the Board of Directors.
2. Board Meetings: Conduct a minimum of four board meetings annually, with a gap not exceeding 3 months between two consecutive meetings.
3. Appointment of Chief Executive Officer: Every producer company must have a full time Chief Executive Officer (CEO). The Board of Directors is responsible for appointing the CEO, who must be chosen from individuals who are not members of the company.
4. Appointment of Nominee:  Within three months of becoming a Member in the Producer Company, every member is required to nominate a person, as specified in the company's articles, to whom their shares in the Producer Company will be transferred in the event of their death. Upon the death of the member, the nominated person or nominee shall inherit all the rights of the deceased member, and the Board of the Company shall facilitate the transfer of shares to the nominated individual. However, if the nominated person is not a producer, the Board is obligated to direct the surrender of shares along with any special rights transferred to the nominee.
5. General Reserve: Maintaining a general reserve each year apart from other reserves as prescribed in the Articles. Members contribute to such reserve if there are insufficient funds for transfer to the reserve.
6. Internal Audit: Conducting of internal audits as specified in the company's articles by a Chartered Accountant.
7. Filing of Forms and Returns: File various forms and returns including AOC-4 (Annual Financial Statements), MGT-7/MGT-7A (Annual Return), MBP-1 (Director's Interest Disclosure), DIR-8 (Director's Non-Disqualification Disclosure), DIR-3 KYC (Director KYC), DPT-3 (Return of Deposits), ADT-1 (Appointment of Auditor), BEN-2 (Disclosure of Significant Beneficial Owner), and MSME-1 (Pending Payment to MSME Vendors).
8. Income Tax Return: File income tax return using Form ITR-6 by the 31st of October of the assessment year.

Conclusion

Starting a business in the agricultural sector requires careful planning and compliance with legal and regulatory frameworks. Producer Company Registration offers an accessible and affordable option for entrepreneurs looking to engage in activities related to agricultural production, procurement, and trading. By forming a Producer Company, individuals can unlock numerous benefits, including increased market opportunities, enhanced bargaining power, and access to financial assistance. With this comprehensive guide, aspiring entrepreneurs can embark on their journey to establish a successful Producer Company in India. At Companies next we provide you professional assistance to navigate through the process of registering a Producer Company smoothly and avoid any potential pitfalls.