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Producer Company
Producer Company Registration
Empower agricultural communities through collective strength. Producer Company registration unites farmers and agricultural producers into a corporate entity, enhancing bargaining power, ensuring fair prices, and transforming rural livelihoods through cooperative entrepreneurship.
Service Overview
Producer Company Registration
A Producer Company is a unique corporate entity designed specifically for primary producers, such as farmers and artisans, to help them with the collective management of their produce and business activities. It's a hybrid of a private limited company and a cooperative society, combining the benefits of limited liability with the democratic principles of 'one member, one vote.
Producer Company
The Producer Company model provides a strong legal structure for rural and agricultural communities to organize, access credit, and collectively grow their businesses, thereby empowering them economically. A Producer Company is a unique corporate entity designed specifically for primary producers, such as farmers, artisans, and others involved in the production of goods and services. It combines the benefits of a private limited company with the cooperative principles of mutual assistance
The company is owned exclusively by its members, who are the producers themselves. Each member has equal voting rights, irrespective of the number of shares they hold, which ensures a democratic governance structure. Similar to other limited companies, the members' liability is limited to their share contribution. The company's name must end with "Producer Limited Company
A Producer Company is primarily governed by the Companies Act, 2013, specifically through sections that were carried over from the Companies Act, 1956. This legal framework was established to provide a formal corporate structure for farmer-owned businesses and other primary producers.
Advantages & Disadvantages
Advantages
High Compliance Burden
As a company registered under the Companies Act, 2013, a Producer Company is subject to stringent legal and regulatory compliances. This includes mandatory annual audits, regular board and general meetings, and filing of various forms with the Ministry of Corporate Affairs (MCA). This can be a significant administrative and financial burden, especially for small-scale farmer groups.
Lack of Professional Management
A common challenge is the lack of professional management expertise among the members. While the company can hire professionals, the members themselves often lack the knowledge to effectively run a corporate entity, including managing finances, marketing, and legal compliance.
Difficulty in Raising Capital
While a Producer Company can raise capital from its members, it is prohibited from raising funds from the general public**. This limitation can be a major hurdle for scaling up operations, especially when large investments in infrastructure or technology are needed.
Risk of Internal Conflicts
With a large number of members, differing opinions on management, profit distribution, and business strategies can lead to internal conflicts. These disputes can undermine the company\'s unity and operational efficiency.
Restrictions on Share Transfer
The shares of a Producer Company are not freely transferable. This lack of liquidity can make it difficult for members to exit the company or for external investors to participate, which limits the company\'s ability to grow.
Limited Awareness and Trust
In many rural areas, there is a lack of awareness about the Producer Company model, and skepticism among farmers can make it difficult to attract and retain members. It can take time to build trust and demonstrate the tangible benefits of the company to the producer community. ###
Disadvantages
High Compliance Burden
As a company registered under the Companies Act, 2013, a Producer Company is subject to stringent legal and regulatory compliances. This includes mandatory annual audits, regular board and general meetings, and filing of various forms with the Ministry of Corporate Affairs (MCA). This can be a significant administrative and financial burden, especially for small-scale farmer groups.
Lack of Professional Management
A common challenge is the lack of professional management expertise among the members. While the company can hire professionals, the members themselves often lack the knowledge to effectively run a corporate entity, including managing finances, marketing, and legal compliance.
Difficulty in Raising Capital
While a Producer Company can raise capital from its members, it is prohibited from raising funds from the general public**. This limitation can be a major hurdle for scaling up operations, especially when large investments in infrastructure or technology are needed.
Risk of Internal Conflicts
With a large number of members, differing opinions on management, profit distribution, and business strategies can lead to internal conflicts. These disputes can undermine the company\'s unity and operational efficiency.
Restrictions on Share Transfer
The shares of a Producer Company are not freely transferable. This lack of liquidity can make it difficult for members to exit the company or for external investors to participate, which limits the company\'s ability to grow.
Limited Awareness and Trust
In many rural areas, there is a lack of awareness about the Producer Company model, and skepticism among farmers can make it difficult to attract and retain members. It can take time to build trust and demonstrate the tangible benefits of the company to the producer community. ###
Eligibility Criteria
To register a Producer Company, you must meet specific criteria under
- the Companies Act, 2013, which are different from other company types. The eligibility is centered on the nature of the members and the company\'s structure.
Key Criteria
- Membership: The company must be formed by:
- A minimum of 10 individuals, each of whom is a primary producer.
- A minimum of two producer institutions (e.g., registered cooperatives, NGOs, or SHGs).
- A combination of both, totaling at least 10 individuals. There is no maximum limit on the number of members.
- Directors: A Producer Company must have a minimum of five directors and a maximum of 15. The directors must be primary producers themselves.
- Primary Producer Status: Members must be engaged in an activity related to \"primary produce,\" which includes farming, horticulture, animal husbandry, pisciculture, handloom, handicrafts, and other primary produce as defined in the Act. Proof of this status (e.g., land records or a letter from the village head) is required.
- Capital: While the Companies Act, 2013, removed the minimum capital requirement, it is often recommended to have an authorized capital of at least ₹5 lakh for better credibility with financial institutions and for covering initial expenses.
- Name: The company\'s name must be unique and end with the words \"Producer Limited Company.\"
- Registered Office: The company must have a registered office address in India.
Documents Required
For Registered Office
- Utility Bill
- NOC from the owner
Step-by-Step Registration Process
1
DSC & DIN
Obtain DSC and DIN for directors.
2
Name Approval
Reserve a unique name for the company.
3
Incorporation
File the incorporation form with the RoC.
Registration Fees
| Component | Approximate Fees (INR) | Remarks |
|---|---|---|
| Digital Signature Certificate (DSC) | ₹1,000 - ₹2,000 | Per director (minimum 5 directors required) |
| Director Identification Number (DIN) | ₹500 - ₹1,000 | Per director (one-time) |
| Name Approval (SPICe+ Part A) | ₹1,000 | For name reservation |
| Government/ROC Fees (SPICe+ Part B) | ₹2,500 - ₹5,000 | For authorized capital of ₹5 lakh or more |
| Stamp Duty | Varies by state | Based on ₹5 lakh minimum authorized capital (state-specific rates apply) |
| Professional Fees (CA/CS/Lawyer) | ₹20,000 - ₹40,000 | Includes documentation, proof of primary producer status verification, drafting MoA/AoA, and filing |
| Total Estimated Cost | ₹30,000 - ₹60,000 | Varies based on number of directors, state, and professional fees |
Frequently Asked Questions
Who is considered a 'primary producer' eligible to form a Producer Company?▼
A primary producer is any person engaged in an activity connected with primary produce, including production, harvesting, procurement, grading, pooling, handling, marketing, selling, and export. This includes farmers, agriculturalists, horticulturists, persons engaged in animal husbandry, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising, and artisans.
What is the minimum authorized capital required for a Producer Company?▼
The minimum authorized capital required is ₹5 lakh, which is higher than a regular private limited company. This ensures the company has adequate capital to support collective agricultural or producer activities.
Can a Producer Company distribute profits to its members?▼
Yes, a Producer Company can distribute profits as a limited return on equity capital and as a patronage bonus to members based on their participation (quantity or value of business done with the company). After making provisions for reserves, surplus can be distributed.
What are the tax benefits available to Producer Companies?▼
Under Section 80P(2)(a)(iii) of the Income Tax Act, income earned by a Producer Company from marketing agricultural produce grown by its members is exempt from income tax, subject to certain conditions. This makes it tax-efficient for farmer collectives.
What is the difference between a Producer Company and a Cooperative Society?▼
A Producer Company is registered under the Companies Act and offers limited liability, separate legal entity status, and professional management like a company. A Cooperative Society is registered under state cooperative laws with more democratic control but limited access to capital and professional management. Producer Company combines benefits of both structures.