A Producer Company (PC) is a relatively new legal entity that includes only certain categories of persons viz., agricultural produce, forest produce, artisan products, or any other local produce, where the members are primary producers. It is as a legal entity was enacted in 2003 as per section IX-A of the Indian Companies Act 1956.
Formally, a company registered as a Producer Company under the Companies Act, 1956 shall relate to any of the following activities classified broadly:-
- Production, harvesting, processing, procurement, grading, Pooling, handling, marketing, selling, export of primary produce of the Members or goods or services for their benefit.
- Rendering technical services, consultancy services, training, education, research and development, and all other activities for the interest of the members
- Generation, transmission, and distribution of power, revitalization of land and water resources, their use, conservation and communications related to primary produce.
- Promoting mutual assistance, welfare measures, financial services, insurance of producers or their primary produce.
Basic requirements for the Incorporation of a Producer company
Any of the following combinations of producers can incorporate a producer company:
- Ten or more producers (individuals); or
- Two or more producer institutions; or
- A combination of the above (10+2)
- Only persons who are engaged in or connected to primary production activity can be members and owners of a Producer Company.
- These companies are termed “Companies with Limited Liability” and the liability of the members will be restricted to the amount, if any, unpaid on the shares.
- The name of the company has to end with “Producer Company Limited”
- For the objective of implementation of law and administration of the company, it is treated as a Private Limited Company.
Read more: Benefits for Producer Companies
Features of the Producer company
- All Producer companies are private limited companies.
- Though it is private limited companies, its members can be more than 50 members.
- Minimum 10 or more individuals, being a producer, or any two or more producer companies, or combination thereof, are required to form Producer Company.
- All Producer Company shall have at least 5 directors but not more than 15 directors.
- Conversion is not possible into any other business structure such as Private Limited company, Public Limited Company, LLP etc.
- Every Producer Company must contain words like “Producer Company Limited” at the end of its name. For example: Vanilla India Producer Company Limited.
- Minimum Paid-up capital must be Rs. 5 lakh.
- Voting rights in this kind of companies are aligned with the principle of “one man-one vote”, regardless of shareholding in the producer Companies.
Share Capital and Voting Rights
- The share capital of a Producer Company shall consist of equity shares only.
- Members’ equity is not allowed to be publicly traded but only transferred.
- The minimum paid-up authorized capital is of Rs. 5 lakh.
- Voting when membership is:
- Only of individuals then voting rights shall be based on a single vote for every member.
- Only of producer institutions then voting rights on the basis of their participation.
- The combination of both of the above, then voting right is based on a single vote for every member.
- The minimum of 5 directors is required. The maximum number of directors is 15.
- A full-time chief executive should be appointed by the board and shall be entrusted with substantial powers of management as the board may determine.
Why choose Producer company?
- Because producer companies can take the advantages of various central and state government schemes like “Rashtriya Krishi Vikas Yojana funds, National Food Security Mission” and so on.
- Equity Grant Scheme: To raise the capital base, a grant of up to Rs. 10 lakh is provided to each Producer Company.
- Credit Guarantee Fund (CGF): It covers 85% of the loans given by banks to Producer Companies.
The process of incorporating a Producer Company can be time-consuming and tedious. Take assistance from LegalRaasta to easily start up your own Company. Give us a call at 8750008585 and feel free to send your query on Email: email@example.com.