Structured Biiz

PRODUCER COMPANY LIMITED

It is a Company where the members are primarily the producers like farmers, milk producers, fishermen, weavers, rural artisans, craftsmen, etc. It is formed by a group of producers (10 or more individuals or 2 or more producer institutions or combination of both) who are engaged in either farming or non-farming activities. The main aim to form such a Producer Company is to ensure better income for the Producers through an organisation of their own. Small producers do not produce the large volume individually. Hence, to get the benefit of economies of scale and to bypass the intermediaries, who are not transparent and fair, the Producers can form a consortium and can avail the benefit of economies of scale. They will have better bargaining power and will also be able to cater to bulk supplies of inputs.

Tax Benefits available to Farmer Producers

It is mainly opted by Farmer Producer Members.

Section 10(1) of the Income Tax Act, 1961 exempts agricultural income. However, the Income Tax Act has not specified any specific income tax exemption to the Producer Company. Farmers can incorporate a Producer Company in alignment with the main objects as specified under the Companies Act, 2013 and can avail the tax benefits and exemptions under the Income Tax Act, 1961.

Important thing that needs to be taken into consideration by the Farmer Producer Company is that the income derived from the selling the grown produce is considered as an agricultural income under the Income Tax Act, 1961 and it is 100% tax-free. Any further processing to the grown produce would be considered as a manufacturing activity and only 60% of such income will be considered as an agricultural income and the balance 40% of such income will be taxed.

Reduced customs duty on the import of agricultural equipment and their parts would benefit the Producer Companies engaged in agricultural activities.

Financial supports available to Farmer Producers

Details are available at http://sfacindia.com/.

SFAC operates a Credit Guarantee Fund to mitigate credit risks of financial institutions, which lends to the Farmers Producer Companies registered under the Companies Act, 2013 without collateral.

SFAC also provides matching equity grants up to Rs. 10 Lac to the Farmers Producer Companies to enhance their borrowing powers, and thus enables the entities to access bank finance.

Details are available at https://nabard.org/

NABARD provides credit support against collateral security for business operations. They also provide credit support without collateral security for business operations to Farmer Producer Companies which are eligible under the Credit Guarantee Scheme of SFAC.

Lending to Producer Companies for contribution towards share capital on a matching basis (1:1 ratio) to provide them access to higher credit from Banks. Maximum limit of such credit assistance is Rs. 25 Lac per Producer Company with a cap of Rs. 25,000/- per member.

Apart from financial support, NABARD also provides technical and managerial support.

Statutory requirements for being a Producer Company

As per Section 378B (2) of the Companies Act, 2013, every Producer Company shall deal primarily with the produce of its active members for carrying out any of its objects specified in Section 378B (1). Section 378B (1) states that the objects of the Producer Company shall relate to all or any of the following:

  • production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the members or import of goods or services for their benefit;
  • processing including preserving, drying, distilling, brewing, vinting, canning and packaging of 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, R & D and all other activities for the promotion of its members;
  • generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications 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, incidental or ancillary to above activities;
  • financing of procurement, processing, marketing or other activities as specified above including extending of credit facilities or any other financial services to its members

Though named as a Producer Company Limited, they can never be considered as a Public Limited Company and are subject to Private Limited Company provisions.

On registration, the Producer Company shall become a body corporate as if it’s a Private Limited Company to which the provisions applicable to the Producer Company shall apply. However, due to the above minimum limit on the number of members or under any circumstances, the Producer Company shall not become or deemed to become a Public Limited Company under the Companies Act, 2013.

A Producer Company can be termed as a Company limited by Shares.

Any 10 or more individuals, each of them being a Producer or any two or more producer institutions, or a combination of 10 or more individuals and producer institutions may incorporate a Producer Company.

Any Member who cease to be a Producer

1/4th of the total members shall constitute the quorum at a General Meeting, unless the articles of association require a larger number.

Minimum No. of Directors required in a Producer Company is 5 (Five). However, it can not have more than 15 (Fifteen) Directors.

Quorum shall be 1/3rd of total strength, subject to minimum 3.

A Producer Company having an average annual turnover exceeding Rs. 5 (Five) Crore in each of 3 consecutive financial years shall have a whole time Company Secretary.

Inter-state Co-operative Society can be converted into a Producer Company and vice-versa. However, a Producer Company can not be converted into a Private Limited Company, Public Limited Company, LLP, etc.

Every member shall have one vote and in the case of equality of votes, the Chairman or the person presiding shall have a casting vote, except in the case of election of the Chairman.

As per Section 378D(1)(a) of the Companies Act, 2013, in case of sole membership solely of individual members, the voting rights shall be based on a single vote for every member, irrespective of his shareholding or patronage of the Producer Company.

How are Producer Company Limited members paid?

  • Every member of the Producer Company shall receive such value for the produce or products pooled and supplied as the Board of Producer Company may determine, and withheld price may be later disbursed in the form of cash, or in kind, or by way of allotment of equity shares, in proportion to the produce supplied to the Producer Company during the financial year subject to such conditions as may be decided by the Board;
  • Every member will be entitled to receive a limited return in the form of bonus shares in the proportion to the share capital contributed by them;
  • Surplus, remaining after making provision 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.

Company Formation Package

Rs. 46,999/-*

All inclusive

  • Company Formation with INR 10 Lac Authorised Capital;
  • 10 Class III Digital Signatures for Directors & Subscribers;
  • Director Identification Number for 5 Directors;
  • Application for the availability of name of the Company;
  • Drafting of Memorandum & Articles of Association of the Company;
  • Preparation and filing of formation documents of the Company;
  • Payment of registration fees to the Registrar of Companies;
  • Obtaining Certificate of Incorporation from the Registrar of Companies;
  • PAN and TAN of the Company
  • GST Registration (Optional)
  • Employees Provident Fund Organisation Registration (Compliances will be applicable once the Company crosses the threshold no of employee i.e., currently 20 employee)
  • Employee State Insurance Corporation Registration – (Compliances will be applicable once the Company crosses the threshold Limit – 10 employees in other states & 20 in Maharashtra)
  • Shops & Establishment Certificate Registration
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Timeline: 30-40 Days
(*Inclusive of Govt. Fees on Form filing. Govt Fees is as applicable in Maharashtra. Govt Fees will vary as per the State and the Govt. Fee over and above mentioned herein shall be payable by the Client.)

Request you to provide 2 Unique Names of the Company. In case the name approval is not granted in the first instance, Govt Fee of Rs. 1,000/- and Our Fee of Rs. 999 shall be charged separately for re-application of name.

Post Formation Compliance Package

INR 19,999/-*

Inclusive of GST

  • Preparation of documents for opening a Current Account;
  • Filing of Certificate of Commencement of Business;
  • Holding its First Annual General Meeting within 90 days of incorporation;
  • Appointment of First Auditor & filing of document in regard to the same;
  • Obtaining Statutory Declaration from 5 Directors;
  • Filing of DIR-KYC of 5 Directors;
  • Preparation of Statutory Registers;
  • Preparation of Notice, Agenda and Minutes of the First Board Meeting;
  • Issue of Physical Share Certificates;
  • Post Formation Compliance Guidance!!
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*Excluding Govt. fee and reimbursements, if any. and any penalty levied due to delay from the Client's end