Detailed Study of Producer Company under Companies Act, 2013 in Jaipur

Producer refers to any person who is engaged in an activity related to any “Primary Produce” which means produce of farmers arising from agriculture or any other primary activity, producer engaged in any handloom, handicraft and cottage industry, producer who assist or promote any of these primary activities or involve in an activity which is intended to increase the production of aforementioned activities.

Producer Company refers to a Body Corporate having objectives as mentioned in Section 378B of Companies Act, 2013 and registered as a Producer Company under this Act or under Companies Act, 1956. The provisions of Producer Company have been inserted by Companies (Amendment) Act, 2020 and such amendment become effective on 11th February 2021.

Table of Contents

Objectives of Producer Company under Companies Act, 2013

There are various objects for which Producer Companies are formed such as:

  • production, harvesting, procurement, grading, marketing, selling, export and import of primary produce of the Members or goods or services for the benefits of the members. The activities specified in this clause may be carried by the Producer Company either by itself or through other institution;
  • processing activities which include preserving, drying, distilling, brewing, vinting, canning and packaging of produce of its members;
  • manufacturing, selling or supplying of machineries, equipment’s or consumables mainly to its members;
  • educating on the principles of mutual assistance to its members and others;
  • technical and consultancy services shall be rendered and providing training, research and development and all other activities for the promotion of the interests of its members;
  • techniques of mutuality and mutual assistance shall be provided.
  • welfare measures or facilities are adopted for the benefit of Members.
  • Ancillary, incidental or other activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner;
  • extending of credit facilities or any other financial services to its members for the activities specified above.

Formation of Producer Company and its Registration requirements

Any ten or more individual who are producer or any two or more Producer institution or a combination of ten or more Producer and Producer institution may incorporate a Company as a Producer Company, desirous of pursuing an object specified in Section 378B and comply with the provision of this Chapter.

If the registration requirements are complied with and registrar is satisfied with the same then he shall register the Memorandum and Article of Association and other documents of the Company and issue certificate of Incorporation within 30 days of receipt of documents. The cost associated with the registration of Producer Company shall be reimburse to its promoters subject to the approval at first General Meeting of members.

Producer Company on incorporation shall become a Body corporate as a Private Limited Company and such Producer Company shall not become or deemed to become a Public Limited Company under this Act.

Provisions related to Members of Producer Company and their rights

Every Member of a Producer Company shall have one vote irrespective of the shareholdings of member. Whereas voting rights of Producer Company shall be determined on the basis of their participation in the business of Producer Company in the previous Year. The voting rights of every individual shall be computed on the basis of single vote for every member.

A member may retain his membership and manner has been specified in which voting rights shall be exercised by the member subject to the conditions specified in the articles of Producer Company. In any special or general meeting, voting rights of any member of Producer Company shall be restricted by the articles.

Memorandum of Association and Articles of Association of Producer Company and provisions related to their amendment

Memorandum of Producer Company shall contain following:

  • Name of the Company with ‘Producer Company Limited’ as the last name.
  • State in which registered office of Producer Company shall be situated.
  • Objects of Producer Company in accordance with Section 378B.
  • Names and addresses of the subscribers to memorandum.
  • Names, addresses and occupation of the subscribers who shall act as the first directors.
  • Amount of Share capital and division thereof into shares and number of shares each subscriber takes and minimum of one share is compulsory for every subscriber to take.
  • Liability of member is limited.

Amendment in Memorandum

  • A Producer Company may by special resolution alter its objects specified in memorandum but it shall not be inconsistent with Section 378B. The copy of such amended memorandum and copy of special resolution certified by two directors shall be filed with Registrar within 30 days of adoption of same.
  • Any alteration in the provision of memorandum which relates to a change of place of registered office shall be altered if it is approved by Central Government in such form and manner.

Article of association of Producer Company shall be signed by the subscribers to the memorandum and shall contain following:

  • The membership of Producer Company shall be voluntary and available to the eligible member willing to accept the duties of membership.
  • Every Member of a Producer Company shall have one vote irrespective of the shareholdings of member.
  • Provisions related to appointment of Directors, retirement by rotation, terms of office of directors, their removal, powers and duties and the manner and the terms of appointment of the Chief Executive.
  • 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, etc.
  • Manner in which surplus arising out of operations of Producer Company shall be distributed.
  • Any other provision, which the Members may, by special resolution recommend to be included in the articles.

Amendment in Articles

Any amendment in the articles shall be proposed by not less than two-thirds of the elected directors or by not less than one-third of the Members of the Producer Company, and members shall adopt the same by way of special resolution. The copy of such amended Article and copy of special resolution certified by two directors shall be filed with Registrar within 15 days of adoption of same.

Can an Inter-state Cooperative Society become Producer Company? If yes, then what are the provisions related to the same?

Any inter-State co-operative society may make an application to the Registrar for registration as Producer Company and such application shall be accompanied by-

  • A copy of Special Resolution passed by not less than 2/3rd of total members of inter-State co-operative society for its incorporation as Producer Company.
  • A statement depicting names and addresses, occupation of the directors and the Chief Executive, if any, and list of members of such inter-State co-operative society.
  • A declaration by two or more directors of the inter-State co-operative society certifying that particular given are correct.

Within a period of thirty days of the receipt of application, the registrar shall after satisfaction certify that the inter-State co-operative society applying for registration is registered and thereby incorporated as a Producer Company and hence, the words “Producer Company Limited” shall form part of its name.

Upon registration as a Producer Company, the Registrar of Companies who registers the company shall forthwith intimate the Registrar with whom the erstwhile inter-State co-operative society was earlier registered for deletion of the society from its register.

With effect from the date of transformation, all fiscal and other concessions, licences, benefits, privileges and exemptions granted to the inter-State co-operative society in connection with the affairs and business of the inter-State co-operative society shall be deemed to have been granted to the Producer Company.

Directors of Producer Company and other related provisions

Every Producer Company shall have at least five and not more than fifteen directors. Whereas in 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 year from the date of its incorporation as a Producer Company.

The directors shall be elected within a period of ninety days of the registration of the Producer Company. Director shall hold office for a period not less than one year but which shall not exceed five years and such Director shall be eligible for re-appointment as a Director. The Directors shall be appointed by the members in Annual General Meeting.

The office of Director shall become vacant if he is convicted by a court of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months or the Producer Company, in which he is a director, has made a default in repayment of any advances or loans taken from any Company or institution or any other person and such default continues for ninety days or he has made a default in repayment of any advances or loans taken from the Producer Company in which he is a director or has made default in holding election of Directors or calling of AGM or EOGM as per the Act.

Notice of every meeting of the  Board of directors shall be given in writing to every director at least seven days prior to the meeting by Chief Executive for the time being in India, and at his usual address in India to every other director and a meeting of the Board shall be held not less than once in every three months and at least four such meetings shall be held in every year.  The quorum for a meeting of the Board shall be one-third of the total strength of directors, subject to a minimum of three.

Every Producer Company shall have a full time Chief Executive, by whatever name called, to be appointed by the Board from amongst persons other than Members and shall be ex officio director of the Board and shall not retire by rotation and such Chief Executive shall possess the required qualification and experience and shall also entrusted with substantial powers of management as determined by the Board.

Every Producer Company having an average annual turnover exceeding five crore rupees or such other amount as may be prescribed in each of three consecutive financial years shall have a whole-time secretary and such secretary shall possess membership of Institute of Company secretaries of India.

Annual General Meetings of Producer Company

A Producer Company shall hold its first annual general meeting within a period of ninety days from the date of its incorporation and in such meeting, members shall adopt the Articles and appoint Board of Directors.

Prior notice of calling General meeting shall be given in writing by not less than fourteen days and it shall accompany with agenda, minutes of previous Annual General Meeting, Audited Balance Sheet, P&L account, etc. The notice shall indicate the date, time and place of the meeting and shall be sent to every Member and auditor of the Producer Company and such meeting shall be called during business hours and even on a day that is not a public holiday and shall be held at the registered office of the Producer Company or at some other place within the city, town or village in which the registered office of the Company is situated. The quorum for Annual General Meeting shall be 1/4th of total number of members.

Every Producer Company shall hold at least one Annual General meeting in a year in addition to any other General Meetings and not more than 15 months shall elapse between the date of two Annual General Meetings.

Wrapping up

The main intention of inserting the concept of Producer Company under Companies Act, 2013 is to ensure easier and more regulatory framework and it also combines the benefits of Co-operative society as well as Private Company. The Co-operative society and Producer Company serves common purpose to serve the members and work for their benefits and betterment.

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