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EVERYTHING ABOUT PRODUCER COMPANY | Company Vakil

A Producer Company is a body corporate registered under the Companies Act with the object of harvesting, production. Procurement, grading, pooling, marketing, handling, selling or export of the primary produce of the members or import of goods or services for their benefit. It is a legal body consisting of farmers, agriculturists so that their standard of living is improved and thus to ensure they have a good status of support, income and profitability. 

Provisions of Part IX A of the Companies Act, 1956 apply to a Producer Company with necessary changes in a manner as if the Companies Act, 1956 has not been repealed. 

INCORPORATION AND OTHER MATTERS

OBJECTS:

Section 581B of the 1956 Act deals with the objects of a Producer Company which is as follows:

  1. Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members of 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;

  1. Processing, including preserving, drying, distilling, brewing, venting, canning and packaging of produce of it members;
  2. Manufacture, sale or supply of machinery, equipment or consumables mainly to its members;
  3. Providing education on the mutual assistance principles to its members and others;
  4. Rendering technical services, consultancy services, training, research & development and all other activities for the promotion of the interest of its members;
  5. Generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce;
  6. Insurance of producers or their primary produce;
  7. Promoting techniques of mutuality and mutual assistance;
  8. Welfare measures or facilities for the benefit of Members as may be decided by the Board;
  9. Any other activity, ancillary or incidental to any of the activities or other activities which may promote the principles of mutuality and mutual assistance amongst the members in any other manner;
  10. 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 of its members.

Every Producer Company shall deal primarily with the produce of its active members for carrying out any of its objects specified herein.

FORMATION AND REGISTRATION

  1. Any ten (10) or more individuals, each one of them being a producer or any two (2) or more producer institutions, desirous of forming a Producer Company having its objects specified and otherwise complying with the requirements of the provisions of the Act in respect of the registration, may form an incorporated company as a Producer Company under this Act.
  2. If the Registrar is satisfied that all the requirements of the Act have been complied with in respect of registration and matters precedent and incidental thereto, he, within thirty (30) days of the receipt of the documents required for registration, registers the memorandum, the articles and other documents, if any, and issues a certificate of incorporation under the Act.
  3. A Producer Company so formed has the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them and is termed a company limited by shares.
  4. The Producer Company may reimburse to its promoters all other direct costs associated with the promotion and registration of the company including registration, legal fees, printing of memorandum and articles and the payment thereof shall be subject to the approval at its first general meeting of the members.
  5. On registration, the Producer Company shall become a body corporate as if it is a private limited company to which the provisions of the Act apply, without, however, any limit to the number of members thereof, and the Producer Company shall not, under any circumstance, become or be deemed to become a Public Limited Company under the Act.

MEMBERSHIP AND VOTING RIGHTS

  1. In case where the membership consists solely of individual members, the voting rights are based on single vote for every member, irrespective of his shareholding or patronage of the Producer Company.

In case where the membership consists of producer institutions only, the voting rights of such producer institutions are determined on the basis of their participation in the business of the Producer Company in the previous year.

In case where the membership consists of individuals and producer institutions, the voting rights are computed on the basis of single vote for every member.

  1. The articles of any Producer Company may provide for the conditions, subject to which a member may continue to retain his membership, and the manner in which voting rights shall be exercised by the members,
  2. Any Producer Company may, if so authorised by its articles, restrict the voting rights to active members, in any special or general meeting.
  3. No person, who has any business interest which is in conflict with the business of the Producer Company, shall become a member of the company.
  4. A member, who acquires any business interest which is in conflict with the business of the Producer Company, shall cease to be a member of the company and be removed as a member in accordance with articles.

BENEFITS TO MEMBERS

  1. Subject to the provisions made in the articles, every member shall initially receive only such value for the produce or products pooled and supplied as the Board of Producer Company may determine, and withheld price may be disbursed later in cash or in kind or by allotment of equity shares, in proportion to the produce supplied to the Producer Company during the financial year to such extent and in such manner and subject to such conditions as may be decided by the Board.
  2. Every member shall receive only a limited return on the share capital contributed

Provided that every such member may be allotted bonus shares in accordance with the provisions of contained in Section 581ZJ.

  1. The surplus, if any, remaining after making provision for payment of limited return and reserves may be disbursed as patronage bonus, amongst the members, in proportion to their participation in the business of the Producer Company, either in cash or by way of allotment of equity shares, or both, as may be decided by the members at the general meeting.

MEMORANDUM OF ASSOCIATION

The Memorandum of Association (MOA) of every Producer Company shall state:

  1. The name of the company with “Producer Company Limited” as the last words of the name of such company;
  2. The State in which the registered office of the company is to situate;
  3. The main objects of the company shall be one or more of the objects specified above;
  4. The names and addresses of the persons who have subscribed to the memorandum;
  5. The amount of share capital with which the company is to be registered and division thereof into shares of a fixed amount;
  6. The names, addressed and occupations of the subscribers being producers, who shall act as first directors;
  7. The limited liability of its members;
  8. Opposite to the subscriber’s name, the number of shares each subscriber takes;
  9. In case the objects of the Producer Company are not confined to one State, the States to whose territories the objects extend.

ARTICLES OF ASSOCIATION

  1. There shall be presented, for registration to the Registrar of the State to which the registered office of the Producer Company is to be situate:
  1. Memorandum of the Producer Company;
  2. Its Articles duly signed by the subscribers to the memorandum;
  3. The Articles shall contain the following mutual assistance principles, namely:
  1. The membership shall be voluntary and available, to all the eligible persons who can participate or avail the facilities of services of the Producer Company, and are willing to accept the duties of membership;
  2. Each member shall have only a single vote irrespective of the share holding;
  3. The Producer Company shall be administered by a Board consisting of persons elected or appointed as directors in the manner consistent with the provisions of the Act and the Board shall be accountable to the members;
  4. The Producer Company shall actively co-operate with other Producer Companies (and other organizations following similar principles) at local, national or international level so as to best serve the interest of their members and the communities it purports to serve.
  5. Without prejudice to the generality of the foregoing provisions of sub-sections (1) and (2), the Articles shall contain the following provisions, namely: – 
  1. The qualifications for membership, the conditions for continuance or cancellation of membership and the terms, conditions and procedure for transfer of shares; 
  2. The manner of ascertaining the patronage and voting right based on patronage; 
  3. Subject to the provisions contained in sub-section (1) of section 581N, the manner of constitution of the Board, its powers and duties, the minimum and maximum number of directors, manner of election and appointment of directors and retirement by rotation, qualifications for being elected or continuance as such and the terms of office of the said directors, their powers and duties, conditions for election or co-option of directors, method of removal of directors and the filling up of vacancies on the Board, and the manner and the terms of appointment of the Chief Executive; 
  4. The election of the Chairman, term of office of directors and the Chairman, manner of voting at the general or special meetings of members, procedure for voting, by directors at meetings of the Board, powers of the Chairman and the circumstances under which the Chairman may exercise a casting vote;
  5. The circumstances under which, and the manner in which, the withheld price is to be determined and distributed; 
  6. The manner of disbursement of patronage bonus in cash or by issue of equity shares, or both;
  7. The contribution to be shared and related matters; 
  8. The matters relating to issue of bonus shares out of general reserves;
  9. The basis and manner of allotment of equity shares of the Producer Company in lieu of the whole or part of the sale proceeds of produce or products supplied by the members ;
  10. The amount of reserves, sources from which funds may be raised, limitation on raising of funds, restriction on the use of such funds and the extent of debt that may be contracted and the conditions thereof;
  11. The credit, loans or advances which may be granted to a member and the conditions for the grant of the same;
  12. The right of any member to obtain information relating to general business of the company;
  13. The basis and manner of distribution and disposal of funds available after meeting liabilities in the event of dissolution or liquidation of the Producer Company; 
  14. The authorization for division, amalgamation, merger, creation of subsidiaries and the entering into joint ventures and other matters connected there with;
  15. Laying of the memorandum and articles of the Producer Company before a special general meeting to be held within ninety (90) days of its registration; 
  16. Any other provision, which the members may, by special resolution recommend to be included in articles.

MANAGEMENT OF PRODUCER COMPANY

NUMBER OF DIRECTORS:

Every Producer Company shall have at least five (5) and not more than fifteen (15) directors:

Provided that in the case of an inter-state co-operative society incorporated as a Producer Company, such company may have more than fifteen directors for a period of one (1) year from the date of its incorporation as a Producer Company.

APPOINTMENT OF DIRECTORS:

  • The election of directors shall be conducted within a period on ninety (90) days of the registration of the Producer Company.
  • Every person shall hold office of a director for a period not less than one (1) year but not exceeding five (5) years as may be specified in the articles.
  • Every director who retires in accordance with the articles shall be eligible for re-appointment as a director;
  • The Board may co-opt 1 or more expert directors or an additional director not exceeding 1/5th of the total number of directors for such period as the Board may deem fit.

SHARE CAPITAL AND MEMBERS RIGHTS

  1. The share capital of a Producer Company shall consist of equity shares only. 
  2. The shares held by a member in a Producer Company, shall as far as may be, be in proportion to the patronage of that company.

CONCLUSION

As a legal entity, Producer Company was enacted in 2003 as per Chapter IX A of the Companies Act, 1956 and has been considered as one of the organizational form which has the potential to empower, improve and strengthen the incomes, quality of life and standard of living of farmers, agriculturist and producers in India. As of March 31, 2019 a total of 7,374 producer companies have been registered in India and almost all the States and Union Territories have a Producer Company.

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