Producer Company Registration

A Producer Company is a hybrid legal entity, blending characteristics of both a private limited company and a cooperative society, specifically created for farmers and producers. It's a company incorporated under the Companies Act, predominantly centered on the production, harvesting, marketing, and export of its members' primary produce.
This framework enables farmers to collaborate on diverse activities linked to their produce, enhancing their income and overall economic prosperity.

How is a Producer Company Different from a Cooperative Society?
A Producer Company and a Cooperative Society are both people-centric organizations in India aimed at collective upliftment, but they differ significantly in their legal structure, operational framework, and governance.
Here's a comparison between a Producer Company and a Cooperative Society in India:

Feature                                                             Producer Company                                                                                                 Cooperative Society

Governing Law                Companies Act, 2013 (specifically Sections 378A to 378ZU)                                              Cooperative Societies Acts (State-specific) or Multi-State                                                                                                                                                                                               Cooperative Societies Act, 2002

Registration                           Registered with the Registrar of Companies (RoC)                                                        Registered with the Registrar of Cooperative Societies

Primary Focus             Combines corporate efficiency with cooperative principles; business-oriented                          Welfare-oriented, based on mutual aid and democratic                                                                                                                                                                                                   control

Membership                  Only primary producers (e.g., farmers, fishermen, artisans) or producer institutions                Open to individuals or other   cooperatives                                                                                                                                                                                                            
Minimum Members                10 individuals or 2 producer institutions                                                                             Varies by state; generally 10 individuals
 
Voting Right                            Primarily "one member, one vote." Articles of Association may allow for                           "One member, one vote" principle strictly                                                                           linking votes to patronage, but the one-vote principle is standard.                                        followed, regardless of shareholding                                                                                                                                                                                                                                  
Share Transfer            Shares are generally non-tradable but can be transferred to other producer members.                Shares are typically non-tradable and non-                                                                                                                                                                                                                          transferable.

Management          Governed by a Board of Directors, similar to a private limited company, with professional management.          Managed by an elected managing                                                                                                                                                                                                                           committee; often less professional management.

Government Control       Minimal, limited to statutory requirements under the Companies Act.                                             Often subject to significant government supervision                                                                                                                                                                                                                and control.

Area of Operation                  Can operate throughout India (if permitted by MOA).                                                           Generally restricted to a specific geographical area.
Capital Raising          More flexibility in raising capital, including access to institutional funding and grants.                      Limited in capital raising, primarily through member                                                                                                                                                                                                        contributions and loans.
Profits/Surplus Distribution     Distributed based on patronage (volume of business with the company) rather than just shareholding.       Allocated for reserves, common                                                                                                                                                                                                                    services, and sometimes a limited dividend on                                                                                                                                                                                                                           shares.

Compliance            More stringent compliance requirements, similar to private limited companies (e.g., regular filings with RoC).     Generally simpler compliance, governed by                                                                                                                                                                                                                        cooperative laws.

Taxation           Taxed as a company under the Income Tax Act, 1961. Agricultural income is generally exempt under Section 10(1).       Taxed under a separate slab system,                                                                                                                                                                                        with  deductions available under Section 80P for certain activities.

Objective                To enhance farmers' income and economic well-being through collective business activities.                     To promote the economic and social welfare of its                                                                                                                                                                                                          members through cooperation.

Producer Company Governing Laws - Companies Act, 2013

A Producer Company in India is governed by Part IXA of the Companies Act, 2013, which essentially carries over provisions from the former Companies Act, 1956. This implies that even though producer companies are registered under the 2013 Act, the specific regulations dictating their establishment, administration, and functioning are largely derived from the previous legislation.
Formation: Producer companies can be formed by 10 or more individuals, 2 or more producer institutions, or a combination of both.
Objects: Their primary objective is to advance the interests of their members, who are involved in producing primary agricultural produce.
Activities: Producer companies are authorized to engage in various activities such as the production, harvesting, processing, marketing, and export of primary produce, along with offering technical and other support services to their members.
Membership: Membership is restricted to active producers, with a minimum of two-thirds of the members actively involved in primary production activities.
Management: They are managed by a board of directors elected by the members, ensuring a democratic governance structure.
Limited Liability: Members' liability is limited to the amount unpaid on the shares they hold.
Conversion: Existing cooperative societies have the option to convert into producer companies.

Producer Company registration offers numerous significant benefits for Indian farmers, empowering them to overcome common challenges and improve their economic well-being.
Enhanced Bargaining Power: By pooling their produce and resources through a Producer Company, farmers can collectively negotiate better prices for their inputs (like seeds, fertilizers, and machinery). They can also achieve higher prices for their output by directly accessing larger markets.
Access to Larger Markets and Supply Chain Optimization: Producer Companies enable farmers to bypass multiple layers of intermediaries, directly connecting with wholesalers, retailers, food processors, and even exporters.
This streamlines the supply chain, reduces wastage, lowers transaction costs, and ensures a larger share of the consumer price reaches the farmers. They can also meet the volume and quality demands of large buyers.
Improved Access to Finance and Credit: Producer Companies have greater credibility and better creditworthiness compared to individual farmers. This makes it easier for them to secure loans, grants, and subsidies. They can get these from banks (including priority sector lending), financial institutions, and government schemes like those from NABARD and SFAC.
Professional Management and Governance: Operating under the Companies Act, Producer Companies benefit from a structured and professional management framework with a democratically elected Board of Directors.
This ensures efficient operations, transparent accounting, and adherence to statutory compliance, leading to better decision-making and sustainable growth.
Economies of Scale and Cost Efficiency: By aggregating demand for inputs, farmers can achieve bulk purchasing discounts. Similarly, by consolidating logistics, packaging, and marketing efforts, they can significantly reduce per-unit costs for their produce.
This allows for investment in shared infrastructure like warehouses, cold storage, and processing units, which would be unaffordable for individual farmers.
Value Addition and Diversification: Producer Companies can engage in activities like grading, processing, packaging, and even branding of agricultural produce.
This adds value to the raw produce, allowing farmers to sell finished or semi-processed goods at higher prices and diversify their income streams.
Limited Liability Protection: As a separate legal entity, a Producer Company provides limited liability to its members. This means that the personal assets of the farmers are protected from the company's debts or losses, mitigating financial risk.
Access to Technology and Training: Producer Companies can facilitate access to modern farming techniques, improved seeds, and new technologies.
They can also organize training programs and workshops for members on various aspects of agriculture, business management, and market dynamics, enhancing their skills and productivity.
Government Support and Incentives: The Indian government actively promotes Producer Companies through various schemes, financial assistance, and tax benefits. Agricultural income derived by Producer Companies is often exempt from income tax under Section 10(1) of the Income Tax Act, 1961, though specific exemptions can vary based on the agricultural activity.
Perpetual Succession: Like other companies, a Producer Company has perpetual succession, meaning its existence is not affected by the death, retirement, or insolvency of its members. This ensures long-term stability and continuity of operations

Document Required for Producer Company Registration
Registering a Producer Company in India requires a comprehensive set of documents from both the prospective directors and members, as well as details about the company's registered office.
It's crucial to have all documentation to ensure a smooth and efficient registration process with the Registrar of Companies (RoC).
Documents from All Directors and Members
For each proposed Director and Member (who is an individual), the following documents are typically required:

Identity Proof:

PAN Card (Mandatory for Indian Nationals): A self-attested copy of the Permanent Account Number (PAN) card is essential for all Indian directors and members.
Aadhaar Card: A self-attested copy of the Aadhaar card is also a common requirement for Indian nationals.
Passport: For foreign nationals, a copy of the passport is mandatory.
Address Proof: (Any one of the following, not older than 2 months from the date of application)

Voter's ID Card
Driving License
Utility Bills (Electricity Bill, Telephone Bill, Mobile Bill, Gas Bill)
Bank Statement / Passbook
Rental Agreement (if applicable, with utility bill of the landlord)
Photographs: Recent passport-sized photographs of all directors and members.
Digital Signature Certificate (DSC): A valid Digital Signature Certificate is required for at least one proposed director to sign the electronic forms for registration.
Director Identification Number (DIN): Each proposed director must have a DIN. If a director does not have one, it can be applied for along with the company registration application.
Consent to Act as Director (DIR-2): A signed declaration from each proposed director expressing their consent to act as a director of the company.
Declaration of not being disqualified (DIR-8): A declaration from each director stating that they are not disqualified from being a director under the Companies Act.
Documents for the Company's Registered Office Address
The Producer Company must have a registered office address within India from the date of its incorporation. The following documents are required for this purpose:

Proof of Address Ownership:

Sale Deed/Property Deed: If the premises are owned by a director or a relative.
Latest Electricity Bill/Gas Bill/Water Bill/Telephone Bill: Must be in the name of the owner of the premises, not older than 2 months.
No Objection Certificate (NOC): If the premises are rented or owned by someone other than the director, a No Objection Certificate (NOC) from the owner of the premises is required, allowing the company to use the address as its registered office. This NOC should clearly state that the owner has no objection to the company being registered at that address.
Rent Agreement/Lease Deed: If the premises are rented, a copy of the valid Rent Agreement or Lease Deed is necessary.

Farmer Certificate

While no single "Farmer Certificate" exists, members must declare they are producers. They may also be asked to provide supporting evidence, such as land records or lease agreements.
Declaration of being a Producer: Each member is required to provide a declaration stating that they are a "producer" as defined by the Companies Act, i.e., engaged in activities related to primary produce.
Supporting Evidence (Optional but Recommended): While not always strictly mandated at the time of incorporation for every single member, it is good practice, and regulatory bodies might request evidence to support the claim of being a producer. This could include:
Land Ownership Documents: Copies of land records (e.g., Khasra, Khatauni) if the member owns agricultural land.
Lease Agreements: If farming on leased land.
Proof of Agricultural Income: While sensitive, sometimes income certificates or bank statements showing transactions related to agricultural produce can serve as supplementary evidence.

• ​Members: Minimum 10 individual producers, or 2 producer institutions, or a mix.
• Producers: Individuals/institutions engaged in farming, animal husbandry, horticulture, fisheries, forestry, etc..
• Directors: Minimum 5, maximum 15; at least 2/3rds must be active producers.
• Capital: Minimum paid-up capital of ₹5 Lakhs.
• Objective: Production, procurement, processing, marketing, sale, or providing education/technical help for primary produce. 

• Type: Treated like a Private Limited Company but with specific rules.
• Name: Must end with "Producer Company Limited".
• Documents: DSCs for directors, MoA/AoA (in sync with Companies Act), proof of registered office, member IDs (PAN, Aadhaar).
• Process: Name approval (MCA portal), DSC acquisition, filing e-forms (SPICe+), obtaining PAN/TAN, etc..