Producer Company Registration

What is a Producer Company?

The economy of India is an agricultural centric economy. Around 60% of the population depends on agricultural activities for their livelihood. But, the primary producers and farmers have had a long struggle in India. In order to address these problems, the Government of India set up an expert committee, led by Y.K. Alagh (an economist) to look into the matter. In the year 2002, they introduced the Producer companies concept to the Indian economy. Since then, they have helped primary producers gain access to input, credit, production technology, market etc.

A producer company can be defined as a legally recognized body of farmers/ agriculturists with the aim to improve the standard of their living and ensure a good status of their available support, incomes and profitability. Under Companies Act 1956, a Producer Company can be formed by 10 individuals (or more) or 2 institutions (or more) or by a combination of both (10 individuals and 2 institutions) having their business objective as one of the following:

• Procurement
• Production
• Harvesting
• Grading
• Pooling
• Handling
• Marketing
• Selling, or
• Export

of the primary produce of the Members or import of goods or services for their benefit.

The main objective of the producer company is to facilitate the formation of co-operative business as companies and to make it possible to convert the existing co-operative business into companies.

The objects given under section 581B are as follows:

“The objects of the Producer Company shall relate to all or any of the following matters, namely: (as given in the law)

1. Production, harvesting, procurement, grading, pooling, handling, marketing, selling, the export of primary production of the Members or import of goods or services for their benefit, provided that the Producer Company may carry on any of the activities specified in this clause either by itself or through other institution.
2. Processing including preserving, drying, distilling, brewing, vinting, canning, and packaging of the produce of its Members
3. Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
4. Providing education on the mutual assistance principles, to its Members and others.
5. Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its Members.
6. Generation, transmission, and distribution of power, revitalization of land and water resources, their use, conservation and communication relatable to primary produce.
7. Insurance of producers or their primary produce.
8. Promoting techniques of mutuality and mutual assistance.
9. Welfare measures or facilities for the benefit of Members as may be decided by the Board.
10. Any other activity, ancillary or incidental to any of the activities referred to in clauses (a) to (i) or other activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner.
11. Financing of procurement, processing, marketing or other activities specified in clauses (a) to (j) which include extending of credit facilities or any other financial services to its Members.”

Authorized activities for Producer companies

The Producer Company is required to deal with the produce of its members and is authorized to carry on any of the following activities:

• Processing (processing also includes, preserving, brewing, vinting,  drying, distilling, canning and packaging) of the produce of its members;
• Manufacture, sale or supply of equipment, machinery or consumables to its producer members;
• To provide education on the mutual assistance principles to the producer members of the producer company and others;
• To render consultancy services, technical services, training, R&D and all other required activities for promoting the interests of producer members;
• Generation, transmission and distribution of power, conservation and communication relatable to primary produce, revitalisation of land and water resources,
• Insurance of the primary produce and its producer;
• To promote the techniques of mutuality and mutual assistance;
• The welfare of members as may be decided by the Board;
• Financing of procurement, marketing, processing or other activities such as extending of credit facilities or any other financial assistance to its producer members.
• Any other activity (ancillary or incidental to the main objectives of the producer company) in order to promote the mutual assistance amongst the producer members and the lines of principles of mutuality.

Note: Primary produce has been defined under the Companies Act 1956 as a produce arising from agriculture by a farmer which includes animal husbandry, floriculture, horticulture, viticulture, pisciculture, re-vegetation, bee raising, forestry, forest products and farming plantation products, produce of hand-loom, handicraft and other cottage industries.

Documents Required for Producer Company Registration

In India, Producer company registration cannot be done without proper identity and address proof. These documents will be needed for all the directors and the shareholders of the company to be incorporated. Listed below are the documents that are accepted by MCA for the online company registration process.

Identity And Address Proof

• Scanned copy of PAN Card. Foreign nationals must provide a valid passport (Shareholders and Directors) 
• Scanned copy of Voter’s ID/Passport/Driver’s License/Aadhar (Shareholders and Directors)
• Scanned copy of the latest bank statement/telephone or mobile bill/electricity or gas bill (Shareholders and Directors)
• Latest Passport size Color photograph of all the promoters (Shareholders and Directors)

For the foreign nationals, an apostilled or notarized copy of the passport has to be submitted mandatorily. All documents submitted should be valid. The residence proof documents like the bank statement or the electricity bill must be less than 2 months old.

Registered Office Proof

• Latest & Clear Telephone Bill/Electricity Bill/ /Water/Gas Bill of the registered office address
• No Objection Certificate from the owner(s) of the premises of the registered office.

Note: Your registered office need not be a commercial space; it can be your residence too.

Advantages of a Producer Company

Producer Companies avail the following benefits:

• Every member of the Company will receive a value for the product or products pooled and supplied as determined by the Director. The amount will be distributed in cash or by allotment of equity shares. This may be subject to the conditions of the Board. 

• Members can get bonus shares in proportion to the amount held.

• The additional amount that may be remaining after making provision for payment of limited return and reserves can be distributed as patronage bonus. This will be in proportion to their participation in business activities either in cash or through equity shares.

• Members of Producer Company are also eligible to get financial assistance by way of credit facility for a period not exceeding 6 months.

• Loans and advances against security as specified in articles, upon the condition of repayment within a period of 3 months and not more than 7 years. 

Producer Company Registration Process

Company Registration in India will boost the progress of startups and provide an additional edge over those who have not registered. The Ministry of Corporate Affairs governs the company registration process with rules and regulations framed following the law.

• Step 1: Application for DSC (Digital Signature Certificate).
• Step 2: Application for the name availability.
• Step 3: Filing of the eMoa and eAoA to register a private limited company along with ESI-PF, PAN & TAN application 
• Step 4: Issued certificate of incorporation by RoC with PAN and TAN

Government schemes for Farmer Producer Companies

Small Farmers Agri-business Consortium (SFAC) was mandated by Department of Agriculture and Cooperation, Ministry of Agriculture, Govt. of India, to support the State Governments in the formation of Farmer Producer Organizations (FPOs). The initiative which started in 2011-12 under the two Central Sector Schemes of Vegetable Initiative for Urban Clusters (VIUC) and Integrated Development of 60,000 Pulses Villages in Rainfed Areas has expanded in its scope and covers special FPO projects taken up by some State Governments under general Rashtriya Krishi Vikas Yojana (RKVY) funds as well as under the National Demonstration Project under the National Food Security Mission (NFSM) and Mission for Integrated Development of Horticulture (MIDH).

In many of the Central Sector Schemes like National Vegetable Initiative for Urban Clusters (VIUC), Mission for Integrated Development of Horticulture (MIDH) and National Food Security Mission (NFSM) under which funds are allocated to States, there is a provision for promotion of Farmer Producer Organizations (FPOs)’. After Central allocations are made under these programmes to the States in a particular financial year, States prepare the Annual Action Plans for approval by the State Level Sanctioning Committee (SLSC) chaired by the Chief Secretary. In doing so, many of the States provide for adequate outlay for the FPO promotion component also, amongst others. After approval of the Action Plan by the SLSC, many of the States approach SFAC and transfer requisite funds to it for implementation of the FPO promotion work.

In order to support the FPOs in terms of strengthening their capital base, SFAC has launched a new Central Sector Scheme “Equity Grant and Credit Guarantee Fund Scheme for Farmers Producer Companies” on 1st January, 2014. The Scheme has two major components:

a) Equity Grant Scheme: A grant of up to Rs.10.00 lakh is provided to each registered Farmer Producer Company (which is registered under the special provision of the Companies Act) to match the member equity raised by the institution. This will enhance the equity base of the FPC and enable it to approach financial institutions for raising working capital.

b) Credit Guarentee Fund (CGF): The CGF will offer a cover of 85% to loans extended by banks to Farmers Producer Companies without collateral, up to a maximum of Rs.1.00 crore.

Why Legalguard.in

20 Business Days

Producer Company Registration takes anywhere around 32-35 business days (subject to government authorisation). Every month we handle 400 requests for registrations, so let us in about your business and we’ll get the process initiated as soon as we can.

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We make your interaction with government as smooth as is possible by doing all the paperwork for you. We will also give you absolute clarity on the process to set realistic expectations.

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Our team of experienced business advisors are a phone call away, should you have any queries about the process. But we'll try to ensure that your doubts are cleared before they even arise.