Registration

Special Entity

Producer Company

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Definition

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Object of Producer Company:

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

Benefits of Registration:

The following are the benefits enjoyed by a Producer Company:

  1. The members of the producer company initially will receive the value for the produce pooled and supplied as determined by the directors. This amount will be given out later in the form of cash/ kind/ equity shares.
  2. The members of the producer company will be entitled to get bonus shares in the same proportion to the shares held by them.
  3. The surplus (after providing provision for payment of limited return and reserves) may be given as patronage bonus* to the members of the producer company.

    4. * Patronage bonus signifies a distribution of the surplus income to the members of the producer company in proportion to their respective patronage. Patronage, on contrary, is the participation by members in their business activities by using the services offered by producer company.

  4. Loans and Investments

    5. As mentioned above the Producer Company consist of individuals who are primary producers, and thus, are in need of financial support from time to time. Hence, a special provision under the companies acts 1956 was passed for giving loans to producer members.
    NABARD Loan: provides support and financial assistance to meet the needs of Producer Companies. In 2011, NABARD set up a Rs. 50 crore Producer Organisation Development Fund (PODF), out of its operating surplus.

  5. Tax Benefit (Taxability of Producer Company)

    6. The Income Tax Act, 1961 under section 10(1) exempts the agricultural income. However, the exemption provided under section 10(1) for the agricultural income sometimes varies on the basis of the agricultural activity carried out.

    The Income Tax Act does not specify any specific tax benefit which essentially provides special tax benefits or exemptions to producer companies by its definition. But subject to the agricultural activity carried out by the producer company, certain tax benefits and exemption can be availed.

    For example, income derived from selling the grown green tea leaves is an agricultural income under the Income Tax Act and it is 100 % tax-free. However, if the tea leaves are further processed for the manufacturing of tea, only 60% of such income will be considered as agricultural income and 40% of such income will be taxed.

    Thus, it is apparent that the tax benefit and exemption to a producer company is totally depending upon the activity it carries on.


Minimum Legal requirement For Nidhi Company

  1. To register a Producer Company in India, the following members in any of the combination is necessary
    • Ten or more individuals, each of them being a producer; or
    • Two or more producer institutions; or
    • A combination of ten or more individuals and producer institutions
  2. Only persons engaged in an activity connected with, or related to, primary produce can participate in the ownership.
  3. The members have necessarily to be primary producers.
  4. Minimum 5 Directors and maximum 15 directors.

Procedure and Steps Taken for Register a Producer Company:

  • Step 1 - Application DSC (Digital Signature Certificate)
  • Step 2 - Search for the Company Name availability.
  • Step 3 - Application for the Name availability
  • Step 4 - Drafting of Memorandum of Association (MOA) & Articles of Association (AOA)
  • Step 5 - Filing of e-forms with RoC (Registrar of Companies)
  • Step 6 - Payment of RoC Fees & Stamp Duty
  • Step 7 - Verification of documents / forms by RoC
  • Step 8 - Issue of Certificate of Incorporation by RoC

The following documents must be submitted in order to get a company registered as a Producer Company:

  1. Ownership documents or a rent/lease agreement has to be provided as a proof of address of the registered place of business
  2. No Objection Certificate (NOC) duly signed by the landlord or the owner of the place where the business is registered
  3. Producer Certificates
  4. Identity proofs
  5. Address proofs of the members of the company
  6. Photographs of the members of the company
  7. Digital Signature Certificate (DSC) of the company
  8. Copies of PAN cards of the members
  9. Certified copy of the updated Memorandum of Association (MoA) of the company
  10. Certified copy of the updated Articles of Association (AoA) of the company