What is producing company?
An official company made up of farmers or other agriculturists is called a Producer Company, which is also known as a Farmer Producer Company. Enhancing members’ standard of life and ensuring the long-term stability of their revenue, inventory, and profitability are its main objectives. A farmer-producer business is incorporated under the enterprises Act of 2013 and functions as a cross between cooperative organisations and private limited enterprises. It operates according to democratic governance principles, guaranteeing that all producers or members, despite the quantity of shares they possess, retain equal input in decision-making.
This type of business blends aspects of cooperatives with private limited businesses. Its main objective is to facilitate the transformation of existing cooperatives into company structures and to promote the formation of cooperative enterprises as corporations.
Legal Structure of Farmer Producer Company
The legal framework of the amended Companies Act of 1956 establishes a Producer Company as a distinct entity: –
- Governed by the provisions laid out in Section 465 of the Companies Act, 2013, it is governed by the regulations set forth in Part IX A of the Companies Act, 1956, with necessary adaptations.
- The objectives of a Producer Company must correspond with the activities delineated in Section 581B of the Companies Act 1956.
Purpose of a Producer Company
A Producer Company works to advance the welfare of its members by assisting operations related to the manufacture, promotion, sale, and export of their main goods.
Advantages
Several advantages associated with a Producer Company
Listed below are the advantages of embarking on a Producer Company:
- Absence of Government or Private Equity Stake: – Producer businesses cannot have government or private equity stakes, prohibiting them from being public view or being categorised as public limited corporations.
- Requirement of Minimal Capital:- A minimum paid-up capital of Rs. 1 Lakh and a minimum authorized capital of Rs. 5 lakhs facilitate the mobilization of small capital for a Producer Company.
- Membership with Flexibility: A minimum of ten members is necessary to establish a Producer Company, with no upper limit of members.
- Mixed model: – A Producer Company offers the best of both worlds by incorporating the professional management of a Private Limited Company and the mutual benefits of a Cooperative Society.
- Ownership held by primary producers: – The ownership and membership of the organization are solely held by “primary producers” or “Producer Institutions,” ensuring a focus on benefiting those engaged in primary production. Member equity is not tradable, providing protection against takeovers or exploitation.
- Finite Liability: – Members of a Producer Company are only liable for their share contribution, thereby limiting their financial responsibility. This signifies that the company’s debts or financial setbacks do not pose a risk to the assets of its members, as their liability is confined to the amount they have invested in shares.
Share Capital Requirements at a Minimum
Below are the Share Capital Requirements for a Producer Company: –
- It is essential for the Authorized Share Capital to be based on realistic figures.
- The permitted share capital must effectively achieve the objectives outlined in the memorandum.
- The minimum required capital for a Producer Company is Rs. 5 lakhs. The Authorized Capital has the potential to go beyond Rs. 5 lakhs as outlined in the Memorandum of Association.
- Additionally, a Producer Company needs to have at least Rs. 1 lakh as paid-up capital.
Registration Process for a Producer Company
The stages are carefully outlined to ensure compliance with regulations and the correct founding of the company.
- Step 1. Get hold of a Digital Signature Certificate (DSC)
The primary step is to acquire a Digital Signature Certificate (DSC) for each of the proposed directors of the company. This electronic signature is utilized for securely submitting e-forms online. The necessary documents for obtaining a DSC include:
· Colored photograph in passport size.
· Pan Card
· Aadhar Card
· E-mail ID
· Contact Details. - Step 2. Procure a Director Identification Number (DIN)
After the acquisition of DSC, the subsequent step is to obtain the Director Identification Number (DIN) for each director. The DIN serves as a unique identifier for a director and is essential for their appointment in any company. This can be obtained by submitting the DIR-3 form or through the SPICe+ form, accompanied by the required documents.
· Self-verified proof of identity
· Proof of address
· Updated photograph - Step 3. Name Registration
The name of the Producer Company must be exclusive and must conclude with the words “Producer Company.” To reserve a name, the Form SPICe+ is submitted to the Registrar of Companies (ROC), suggesting two names in order of preference and explaining the significance behind them. The ROC will review the proposed names, considering their availability and adherence to naming standards, and select one for approval.
- Step 4. Document Preparation
Following the approval of the name, it is important to prepare the vital documents required for incorporation: –
· Verification of Registered Office: –
1. Provided that the registered office location is owned by a director, it is essential to provide a utility bill and a No Objection Certificate (NOC) from the owner.
2. For rented premises, attaching a lease agreement and a No Objection Certificate (NOC) from the landlord is mandatory.
· Exercise Power of Attorney:
By executing a Power of Attorney, delegate the authority to a consultant or authorized individual to make required changes in the Memorandum of Association and Articles of Association as specified by the Registrar of Companies.
· Acknowledging Affidavit:
In the event that any of the subscribers to the Memorandum of Association have signed in Hindi, it is required to file Form INC-7 containing the necessary affidavits. All subscribers to the proposed company are obliged to sign an affidavit affirming their legal competency to act as subscribers.
· Articles of Association (AoA):
The company’s operational guidelines are detailed in this document.1. Submit form INC-22 for the Registered Office.
2. To appoint directors, it is necessary to fill out Form DIR-12.
· Memorandum of Association (MoA):
The primary, ancillary/subsidiary, and other objects of the company are detailed in this document. - Step 5. Request for Incorporation Application Submission.
To initiate the incorporation procedure, it is imperative to submit the prepared documents and the application in Form SPICe+ to the ROC. The application must provide a detailed account of the company’s proposed structure, directors, and registered office, ensuring accuracy and precision.
- Step 6. ROC Validation and Incorporation Certificate.
The application and its accompanying documents will be thoroughly examined by the ROC to ensure compliance with legal regulations. Upon approval, the ROC will issue the Certificate of Incorporation, verifying the company’s legal formation. Following this, the company can initiate its business operations.
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FAQ’s for Producer Company Registration
A Producer Company is a group of farmers or agriculturists who come together to improve their quality of life, receive financial support, and increase their income. It brings together the best of private limited companies and cooperatives to promote cooperative businesses and transform existing cooperatives into company structures.
To register, one must secure Digital Signature Certificates (DSCs), Director Identification Numbers (DINs), reserve a company name, prepare essential documents, file incorporation applications with the Registrar of Companies (ROC), and obtain the Certificate of Incorporation.
The company needs to have a minimum authorized capital of Rs. 5 lakhs, but it can be higher if specified in the Memorandum of Association. To ensure the company has sufficient funding to pursue its objectives, a minimum paid-up capital of Rs. 1 lakh is required.
The management of the company is entrusted to a Board of Directors, elected by members in general meetings. The Board must have a minimum of five directors, and each director serves a term of five years. They can be re-elected for a maximum of two consecutive terms.
Experience the benefits of a hybrid system that mixes expert management with shared advantages, owned by primary producers, with limited liability, minimal capital requirements, flexible membership, and autonomy without government or private equity interference.
In accordance with Section 465 of the Companies Act, 2013, Producer Companies operate with modifications under Part IX A of the Companies Act, 1956. Their objectives are in harmony with the activities detailed in Section 581B of the Companies Act, 1956.
Of course! It’s possible to convert a Producer Company into various types of companies, such as a private limited company or a public limited company. However, this conversion is subject to the provisions outlined in the Companies Act, 2013, and the rules and regulations set by the government.
- Enhancing the quality of life for its members.
- Securing improved prices for their goods.
- Granting entry to top-notch resources, technology, and knowledge.
- Boosting the negotiating strength of farmers in the marketplace.
- Encouraging rural business ventures and economic growth.