Meaning of a Producer Company
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:
Producer Company Aims at
The producer company primarily deals with the production of its active members. It is allowed to carry on any of the following activities by itself or through other entities on behalf of the members.
- Processing includes preserving, drying, distilling, brewing, vinting, canning, and packaging its members’ produce.
- Manufacture, sale, or supply of machinery, equipment, or consumables mainly to its members
- Provide education to the mutual assistance principle to its members and others
- Render technical services, consultancy services, training, research and development, and all other activities to promote its members’ interests.
- Activities for the promotion of the interest of its members
- Generating, transmitting, and distributing power, revitalizing land and water resources, using conservation and communication, are relatable to primary produce.
- Insurance of producers or their primary produce
- Promoting techniques of mutuality and mutual assistance
- Welfare measures or facilities for the benefit of members as decided by the board
- Any other activity, ancillary or identical to any of the actions which promote the principles of mutual assistance among the members in any different manner
- Financing of procurement, processing, marketing, or other activities which include extending of the credit facilities or any other financial services to its members.
The objects of the Producer Company shall relate to all or any of the following matters, namely: (as given in the law)
- Production, harvesting, procurement, grading, pooling, handling, marketing, selling, 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.
- Processing including preserving, drying, distilling, brewing, vinting, canning, and packaging of the produce of its Members.
- Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
- Providing education on the mutual assistance principles, to its Members and others.
- Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its Members.
- Generation, transmission, and distribution of power, revitalization of land and water resources, their use, conservation and communication relatable to primary produce.
- Insurance of producers or their primary produce.
- Promoting techniques of mutuality and mutual assistance.
- Welfare measures or facilities for the benefit of Members as may be decided by the Board.
- 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.
- 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 of 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 mutual assistance amongst the producer members and the lines of principles of mutuality.
Pre-Incorporation Checklist
- Any 10 or more producers (individuals) can join together to form a production company but there is no upper limit on the number of members.
- Or, any 2 or more producer institutions can form a producer company.
- A minimum capital of Rs. 500,000 is required to incorporate a producer company.
- There should be a minimum of 5 directors (maximum of 15) in a producer company.
- It can never be converted into a public company however it can be converted into a multi-state co-operative society.
Documents Required for Producer Company Registration
For Directors and Shareholders
- Scanned Copy of PAN Card
- Scanned copy of Voter’s Id/ Passport/ Driver’s license
- Scanned copy of the latest bank statement/ Telephone or mobile bill/ electricity or gas bill
- Passport size photograph
For the Registered Office
- Scanned copy of the Latest Bank Statement/ Telephone bill or Gas bill
- Scanned copy of the notarized rental agreement
- Scanned copy of the NOC from the property owner
- Scanned copy of sale deed or property deed
Types of Producer Companies
- Production Businesses Production, Procurement manufacture of its members and others’ primary producer is the producer companies’ primary function.
- Marketing Businesses A business involved in the marketing or promoting the primary produce or provision of education services to members and others can also constitute itself as a Producer company.
- Technical Service Any business that offers technical assistance to the producers, Provides training and educational services, or conducting research and development can register as a Producer in India.
- Finance Business A business financing producing activities then be it production, or marketing r development it can register itself as a producer company.
- Infrastructure business The business involved in providing infrastructure to the producers, whether in the form of electricity, water resources, irrigation techniques, or consultation regarding the same, may also constitute themself as a Producer company.
NABARD Loan for Producer Companies
Producer Companies were introduced to allow farmers cooperatives to function as a corporate entity under the MCA. Here we are going to talk about the loan provided by NABARD for a producer company in India.
Producer Organization Development Fund
NABARD set up an Rs. 50 crore Producer Organization Development for supporting producer organizations and adopting a flexible approach to meet the producers’ needs.
This scheme grants financial support in the form of loans or grants provided for any registered Producer Company. MACS, Industrial Cooperative Societies, and other registered federations set up by the producers.
This PODF Producer Organization Development Fund will support the producers’ organization or producer companies by providing credit support, improving capacity, and building market linkage.
In this scheme, activities fall within the agriculture, allied, and non-farm sectors. Various activities like harvesting, storage, processing, packaging, and or marketing of the produce/ product are eligible for support under the PDOF fund.
The Producer Company should be formed by the primary producers of agriculture and the non-farm sector. The producer organization or company must only for the benefit of the producers.
Further, the producer company’s shares cannot be sold to non-producers and if an existing member wants to leave the producer company.
Shares can only be purchased either by existing producers or by enrolling a new primary producer.
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