PRODUCER COMPANY

In the Companies Act 2013, a Producer Company is defined as a

company that is formed and registered under the Companies Act,
with the objective of production, harvesting, procurement, grading,
pooling, handling, marketing, selling, and export of primary produce
of its members or import of goods or services for their benefit. The
primary produce includes the products of farmers or agriculture,
horticulture, animal husbandry, fisheries, dairy, beekeeping, or any
other primary produce that is specified by the central government.
 A Producer Company is formed by a minimum of 10
individuals or two or more institutions, with at least 5
directors, and it is a separate legal entity.
 Members of the Producer Company have limited liability,
and the liability of the company is limited to the extent of its
assets.
 The Producer Company is managed by the board of
directors, which is elected by the members of the company.
The board of directors has the power to make decisions and
take actions in the best interest of the company and its
members.
 The Companies Act 2013 provides for the registration,
incorporation, management, and winding up of Producer
Companies. It also provides for the rules and regulations
that govern the functioning of the Producer Companies.
 Some more details about Producer Companies under the
Companies Act 2013:
1. Objectives: The primary objective of a Producer
Company is to benefit its members by promoting their

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interests in terms of production, marketing, selling, and
export of their primary produce. The company can import
goods or services that are required by its members for their
benefit.
2. Membership: A Producer Company can have only active
members who are engaged in the production of primary
produce, and at least 2/3rd of the total number of members
should be engaged in primary production activities. The
maximum number of members in a Producer Company can
be 15,000, and each member has one vote irrespective of
their shareholding.
3. Governance: A Producer Company is managed by a
board of directors, which is elected by the members of the
company. The board of directors should have at least 5
directors, and they should be elected in a general meeting
of the members. The directors are elected for a term of five
years, and they can be re-elected for a maximum of two
terms.
4. Liability: Members of a Producer Company have limited
liability, and their liability is limited to the extent of their
shareholding in the company. This means that in case of
any losses or debts incurred by the company, the members
are not personally liable beyond their investment in the
company.
5. Audit and Reporting: A Producer Company is required
to maintain proper books of accounts and get them audited
annually. The audited financial statements and annual
reports of the company should be presented to the

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members in the annual general meeting. The company
must also file its financial statements and annual report
with the Registrar of Companies.
6. Conversion: An existing cooperative society that is
engaged in the production of primary production can be
converted into a Producer Company under the Companies
Act 2013.
7. Taxation: A Producer Company is taxed as a regular
company under the Income Tax Act, and it is eligible for
various tax benefits that are available to companies
engaged in agricultural activities.
8. Share Capital: The minimum authorized and paid-up
share capital for a Producer Company is Rs. 5 lahks and Rs.
1 lakh, respectively. The company can raise additional
capital by issuing shares to its members, subject to the
provisions of the Companies Act.
9. Incorporation: A Producer Company can be
incorporated as a private limited or public limited company,
and it must include the words ‘Producer Company’ in its
name. The registration process is similar to that of any
other company, and the registration fee is lower than that
for a regular company.
10. Objects Clause: The objects clause of a Producer
Company must state that the company is formed for the
production, harvesting, procurement, grading, pooling,
handling, marketing, selling, and export of primary produce
of its members or import of goods or services for their
benefit.

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11. Governance Structure: A Producer Company is
governed by the board of directors, which is elected by the
members of the company. The board of directors is
responsible for the management of the company and has
the power to make decisions in the best interest of the
company and its members.
12. Dividend: A Producer Company can distribute dividends
to its members in proportion to their shareholding in the
company. However, the dividend rate should not exceed
20% of the profit earned by the company during the
financial year.
13. Prohibition on Speculation: A Producer Company is
prohibited from engaging in any speculative activities or
entering into contracts that are not related to its primary
production activities.
14. Conversion into a Regular Company: A Producer
Company can be converted into a regular company if it no
longer satisfies the conditions for being a Producer
Company or if its members decide to convert it into a
regular company.
15. Winding Up: A Producer Company can be wound up
voluntarily or by an order of the National Company Law
Tribunal (NCLT) if it is unable to pay its debts or if the
members decide to wind up the company. The winding-up
process is similar to that of any other company.
16. Restrictions on Voting Rights: Members of a
Producer Company cannot exercise their voting rights by
proxy, and they cannot vote on any resolution that is not

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related to the primary production activities of the company.
17. Board Meetings: A Producer Company must hold at
least four board meetings in a year, with a maximum gap of
120 days between two consecutive meetings. The quorum
for a board meeting is one-third of the total number of
directors or two directors, whichever is higher.
18. Statutory Reserve: A Producer Company is required to
set aside 10% of its net profit as a statutory reserve until
the reserve equals the paid-up share capital of the
company. The statutory account can be used only for
certain specified purposes, such as making dividend
payments or writing off losses.
19. Professional Management: A Producer Company can
appoint professional managers to manage its affairs, subject
to the approval of the board of directors and the members.
Professional managers can be paid a salary or a
commission, as per the terms of their appointment.
20. Registration with NABARD: A Producer Company can
register with the National Bank for Agriculture and Rural
Development (NABARD) to avail of various financial and
technical assistance programs for the promotion of
agricultural activities.
21. Branches: A Producer Company can open branches in
different locations to carry out its primary production
activities. However, the branches should be managed by
the central office of the company and should comply with
the provisions of the Companies Act.
22. Annual Return: A Producer Company is required to file

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an annual return with the Registrar of Companies, which
contains details of its members, directors, share capital, and
financial performance during the year. In conclusion,
Producer Companies provide a legal structure for farmers to
collaborate and engage in collective production, marketing,
and selling of their primary produce. The Companies Act
2013 provides for the registration, governance, and
regulation of Producer Companies, and they are subject to
similar compliance requirements as regular companies.
These provisions aim to promote agricultural activities and
rural development in India.