This article has been written by Ms.Taranjot Kaur, a 1^st year law student of Panjab University,Chandigarh.

Introduction 

The Companies Act defines producer as “Any person engaged in any activity connected with or relatable to any primary produce” where primary produce means 

• Produce of the farmers which arise from any agriculture or other activity which promotes the interest of farmers and producers such as horticulture,animal husbandry,forestry etc.
• Produce generated from ancillary activity that would promote the interest of farmers.
• Produce generated through cottage industries etc.

It can be defined as a legally recognized body of farmers with the aim of improving the standard of their living and to ensure a good income as well as profitability and having their business objective as one of the following – 

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

Activities for producer companies 

A producer company is a body corporate registered as producer company under Companies Act,2013 and shall carry on following activities : 

1. Production,harvesting,processing,procurement ,grading,pooling,marketing,selling,export of primary produce of the members or import of goods or services for their benefit.
2. Rendering technical services,consultancy services,training,education,research and development,and all other activities for the interest of the members.
3. Promoting welfare measures and other financial services.
4. Conservation of land and water resources,transmission and distribution of power etc.
5. Providing farmers a stable platform to pool their resources and sell their produce at a higher price.
6. Insurance of producers or their primary produce.
7. Promoting techniques of mutuality and mutual assistance.

Incorporation of Company 

• Any 10 or more producers can join together to form a production company but there is no upper limit on the number of members.
• Any 2 or more producer institutions can form a producer company.
• There should be minimum 5 directors in a producer company.
• There should be maximum 15 directors in a producer company.
• There must be some minimum paid up capital to incorporate a producer company.
• The name of producer company must end with the words “Producer Limited Company.”

          Procedure of registration of Producer Company 

• Digital signature certificate (DSC) and Director Identification  Number (DIN) are obtained for the proposed first directors of the company.
• Than, an application is filed for the reservation of name under the Registrar of Companies. 
• The reserved name must end with “Producer Limited Company”.
• Than, an application for incorporation is filed in the prescribed format of incorporation of the producer company.
• The file is confirmed by the registrar and is approved and provided the Certificate of Incorporation.

Documentation required for Incorporation of Producer Company

• Obtain a digital signature certificate (DSC) from all the directors which requires a 

• Pan card of the director.
• Aadhar card of the director.
• Photograph
• Email ID
• Contact Number 

• Than Director Identification Number (DIN) is obtained by filling DIR form along with self attested photograph,address and identity proof.
• The name of producer company is reserved and approved by Registrar Of Companies .
• Afterwards the following documents are prepared – 

• The Memorandum of Association is drafted.
• The Articles of Association is drafted which contains all the  by laws of the company.
• An affidavit is signed by the all the subscribers of the company declaring their legal competency to act as the subscribers.
• A utility bill and NOC have to be taken from the owner whose address is to be used as the registered office of the company.

• All the drafted documents will be uploaded to ROC website and than on proper verification ROC will issue a Certificate of Incorporation.
• The company can start its business operations.

 Benefits of Producer Companies 

1. The members of the producer companies will be entitled to bonus shares.
2. The surplus may be given as pastronage bonus to the members of the company.
3. The members of producer company initially receive the value for the produce pooled and supplied as determined by the directors.
4. Getting financial incentives such as loans and opportunities for investment.
5. Benefits related to tax deduction and redemptions.

Main Aim – The main aim of producer companies is to form a cooperative business in order to help poor farmers to market their produce in a wider space at beneficial rates.

Loans and Credit facility – 

Individuals in producer companies with time to time can need financial support .Hence, a special provision under the act was passed for giving loans to producer companies. A producer company can provide support to its members through – 

Credit Facility – This is available to any member for a period not exceeding six months.

Loans and Advances – These are provided to the producer members against security,repayable within a period not exceeding seven years from the date of disbursement of such loans and advances.

NABARD – NABARD is National Bank for Agriculture and Rural Development and is an apex regulatory body for overall regulation of Regional Rural Banks. NABARD provides support and financial assistance to meet the needs of producer companies.In 2011 NABARD  sets up a Rs. 50 Crore Producer Organisation Development Fund ( PODF), out of its operating surplus.

Share capital and voting rights 

• The share capital of a producer company consist only of equity shares.
• The transfer of shares is allowed in members.
• The minimum paid up authorized capital is of Rs. 5 lakh.
• When membership is only of individuals than voting rights shall be based on single vote for every member.
• When membership is only of producer institutions than voting rights are on the basis of their participation.
• When there is combination of both than voting right is based on a single vote for every member.

Producer companies and Government  

• There has been a legal tussle between farmers and Indian Government  because of the low benefit costs that producer companies suffer from. However,the government has set up expert committees to help the producer companies as much as they can.Such expert companies prove to be beneficial for the producer companies as they allow them to access credit facilities,help with the supply chain governance or help the producer companies invest in sustainable technology.
• Producer companies are also registered as legal entities to facilitate a 100 % tax deduction and it is applicable to those producer companies which have a 100 crore turnover in the Indian market. This 100% tax deduction can help the marginalized farmers to a great extent. 
• Small farmers Agri-business Consortium (SFAC) was mandated by Department of Agriculture and Cooperation,Ministry of Agriculture,Government of India, to support the state governments in the formation of farmer Producer Organisation (FPOs). 
• 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 separate provision for promotion of Farmer Producer Organisations.
• Under Equity Grant Scheme , a grant of upto Rs.10 lakh is provided to each registered Farmer Producer Company which is registered under the special provision of the Companies Act.
• Credit Guarantee Fund (CGF) also offer a cover of 85% to loans extended by banks to Farmer Producer Companies without collateral,upto a maximum of Rs. 1 crore.

  Conclusion – 

Producer companies are working for the benefit of poor and marginalized farmers in order to provide them with better living conditions through better income and profitability.These firms are also providing an extreme up growth in Indian Agriculture system.They pull the farmers and their products together to a single place which provides them a market with better conditions and hence increase the crop productivity.Buying and selling of produce is done by agriculture specialists which reduce fraud and make this system more legal and trustworthy.Moreover,the schemes provided by government is also a big factor in emergence of producer companies and through this the development of India is also increasing.

References – 

Aishwarya Says:

Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems to aishwarya@aishwaryasandeep.com

Join our  Whatsapp Group for latest Job Opening