Producer Company

Overview of Farmer Producer Company

  • India is an agricultural-based country where people are dependent upon farm activities. Most of the farmers in India are small or marginal scale farmers . Producer Company aims at promotes all the small and marginal scale farmers so that their economies can be built up and they could also opt the latest and new technologies to perform better and improved lives.
  • Producer Company is a company registered for farming and agriculture by those involved in agricultural activities which has the objective of production, harvesting, procurement, grading, pooling, handling, marketing, selling and export of primary produce of the Members or import of goods or services for their benefit.
  • As per the Companies Act, 1956, primary production is the product arising from the agricultural land of a farmer such as floriculture, horticulture, animal husbandry, re-vegetation, viticulture, pisciculture, bee raising, forest products, forestry, and farming products.
Overview of Producer Company
What is Producer Company

What is Producer Company?

  • Producer company can be formed with the any of the following combination :
    1. Ten or more individuals, each of them being a producer; or
    2. Two or more producer institutions; or
    3. A combination of ten or more individuals and producer institutions
  • The term "Producer Company" indicates that only certain categories of persons who are known as "primary producer', can become shareholders in the Producer Company. Primary Producer means those persons who are engaged in primary agriculture activities such as:
    1. Animal Husbandry: breeding or caring of animals in the farm.
    2. Horticulture: Producing, growing plants, fruits or vegetables.
    3. Floriculture: Growing Flowers.
    4. Pisciculture: Fish farming.
    5. Viticulture: Producing grapes.
    6. Forestry: Preserving forest.
    7. Re-vegetation: Rebuilding or replanting disturbed land.
    8. Bee raising: keep bees to collect honey.
    9. There are some other business like handloom, handicraft etc. which can be activities of producer company.

Types of Producer Company

  • Production Businesses - Producer companies are engaged in production, procurement or manufacture of any primary produce for its members (for further sale) and to others.
  • Marketing Businesses - Even a business involved in the marketing or promotion of primary produce or provision of educational services to members and others is also be treated as a producer company.
  • Technical Service Businesses - Any Businesses providing technical assistance, training and educational services to producers or conducting research and development for them, can be register as a producer company.
  • Financing Businesses - Any business who are helping in financing in procurement, processing, marketing or other activities which include extending of credit facilities or any other financial services to its Members/producers can register itself as a producer company.
  • Infrastructure Businesses - Businesses involved in providing infrastructure like electricity, water resources, irrigation techniques, land utilisation, or consultation with respect to same to producers, may register themselves as a producer company.
Types of Producer Company
Features of Producer Company

Features of Producer Company

  • The name of the proposed company must contain "Producer Company Limited" at the end of their name and is deemed as the private limited company as per the provisions of the Companies Act. Further, the company cannot be registered or considered as a Public Limited Company though the name of a Producer Company ends with the words “Producer Limited Company”.
  • Producer Company shall function similar to a private limited company subject to certain provisions. However, unlike a Private Limited, there is no limit for the maximum number of members in a producer company.
  • It can never be converted into a public company however it can be converted into a multi-state co-operative society.
  • The company can only possess equity share capital and The liabilities of the producer company members are limited to the amount of their unpaid share.

Minimum Requirement for Producer Company

  • Minimum ten or more individuals, each of them being a producer; or two or more producer institutions; or combination of the above two.
  • Minimum 5 Directors & (maximum of 15) (The directors and shareholders can be same person).
  • DSC (Digital Signature Certificate) for all the Directors (for applying of DIN).
  • The tenure of Directorship in Producer Company is minimum 1 year while the maximum period of Directorship is 5 years.
  • The minimum paid-up capital should be Rs 5 lakhs or more to register a company
  • There is no limit for the maximum number of members in a producer company
Minimum Requirement
Process

Incorporation of Producer Company Through SPICe

Overview of Web forms A new Web based Form named 'SPICe+' (pronounced as 'SPICe Plus') is an integrated Web based form offering multiple services like 'name reservation', incorporation, 'DIN allotment', mandatory issue of PAN, TAN, EPFO, ESIC, Profession Tax (Maharashtra), and 'Opening of Bank Account' & GST (Optional).
Name Reservation Company has two option available either first reserve the name in Spice+ Part-A and then apply in Spice+ Part-B or directly apply name with incorporation form then challan will not be required. In case company reserves the name first then challan needs to be paid of Rs. 1000 and SRN will be generated.
Filling Part B of Spice+ • All first subscribers of SPICe+ MOA (INC-33) must have DSC, if they are less than 7 then it will be signed in the form itself no annexure will be required & in case if more than 7 then separate attachment of MOA will be annexed without DSC.
• Articles of Association is entrenched with brief description about the clause (Make sure the article number matches with form SPICe+ AOA (INC-34) )-Select the particular table which is applicable and make the appropriate changes and incorporate first directors name and in case subscribers are more than 7 then AOA will attached separately (as there are only 7 member so DSC slot available in the form)
• Declaration by the subscribers and the first directors in INC – 9 shall be auto-generated in PDF format and submitted electronically.
• The object clause should be relevant and company must be engaged in that business only.
• There is no separate application to be filed for allotment for DIN .it will be allotted with the details filled in the form in the tab directors not having DIN.
• After filling all the details stamp duty fees need to be paid which can be done through MCA or without MCA portal.
• Application for PAN number and TAN number also will be processed with spice e Plus form by selecting respective area code, AO type, Range code & AO No. After completion of these form, it should be acknowledge by DSC of CS/CA/CWA.
• Spice + AGILE PRO form is mandatory for all companies which includes following registration that is GST Registration which is optional, ESIC(Employee State Insurance Corporation) Employees' Provident Fund organization (EPFO) Registration (Mandatory) and Profession Tax Registration in case if company is of Maharashtra and Opening of Bank Account is compulsory.
• After filling up Part B, we have to carry out a ‘pre-scrutiny’ check. Once the ‘pre-scrutiny; is successful, click on ‘submit’. A confirmation is displayed upon successful submission of the form.
• After submission of these form, it should be acknowledge by DSC of CS/CA/CWA.A Service Request Number is generated for making a payment towards company incorporation. Once the payment is made successfully, the forms would be processed.
• In case form is need to be resubmitted due to any error or omission, then form will be resubmitted in the same manner.
Certificate of Incorporation After completion of process and successful approval of form, certificate of incorporation, Tan allotment letter, PAN card of Company and DIN of directors will be issued. Along with GST Registration certificate, ESIC and EPFO certificate, Professional tax registration (For Maharashtra), Opening Bank account.

Documents Required for Producer Company

  • PAN card and address Aadhar card of directors and shareholders are mandatory.
  • All the members need to be producer .
  • ID Proof: Self attested Passport / Voter-ID / Driving License (any one)
  • Address Proof: Self attested Latest Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement with latest entries(any one)
  • Passport size Photograph for each Director/ Shareholder.
  • Email and contact details of each director
  • Registered office Address proof :
    1st Taken on Rent by Company- Property Tax receipt in the name of Lender/Electricity bill not older than 2 month + Rent Agreement(After Name Approval with the proposed name of Company) + Rent Receipt of latest month.
    2nd Owned by any of the Directors- Property Tax receipt/Electricity bill not older than 2 month in the name of owner.
Documents Required
Forms to be Filed

E-Forms to be Filed for Producer Company

  • Spice+ (INC 32)
  • Spice+ AOA (INC -34)
  • Spice+ MOA (INC-33)
  • Spice+ AGILE PRO (INC-35)

Government Fees for Producer Company

Spice form Fees
• In case of company having share capital

Nominal Share Capital Fee applicable
Up to 15,00,000 N/A
More than 15,00,000 Rupees 500

• In case of company not having share capital

Number of members Fee applicable
Up to 20 members N/A
More than 20 members Rupees 500

Stamp duty for MOA and AOA is Rs. 7550 (For Madhya Pradesh)
Pan and Tan Fees is Rs. 131
Name Reservation Fees: In case applied separately in Part A for Name Reservation than Rs 1000

Govt Fees
Advantages

Advantages of Producer Company

  • Increased credibility: Increased level of surety as compared to cooperative society and the privilege that only producer can be a member.
  • Limited liability and separate legal entity: Producer company is treated as separate legal entity from members of the company. Members are not liable to their estate as the company have separate legal entity.
  • Member's Benefit: The members will initially receive the value for the produce or products pooled and supplied as the directors may determine. This amount is given out later either in cash or in kind or by allotment of equity shares.
    Members will be eligible to receive bonus shares in proportion to the shares held by them.
    The surplus after provision for payment of limited return and reserves may be given out as patronage bonus, among the Members. Patronage bonus means payment out of surplus income to members in proportion to their respective patronage. Patronage, on the other hand, is the use of services offered by producer companies to their members by participation in their business activities.
  • Loans & Investments: The Board may, subject to the provisions made in articles, provide financial assistance to the Members of the Producer Company by way of –
    (a) Credit facility : This is available to any member for a period not exceeding six months (such facility must be in connection with the business of the Company).
    (b) loans and advances: It is provided to the producer member against security specified in articles to any Member, repayable within a period not exceeding seven years from the date of disbursement of such loan or advances Provided that any loan or advance to any director or his relative shall be granted only after the approval by the Members in general meeting.
  • NABARD Loan: NABARD stands for National Bank for Agriculture & Rural Development that helps to meet the financial requirements of small and regional scale farmers. NABARD provided the special assistance and loan for producer company or producer Organisation. The members of Producer Company can obtain loans under the NABARD loan scheme. In 2011, NABARD set up a Rs. 50 crore Producer Organisation Development Fund (PODF), out of its operating surplus.

Tax Benefits for Producer Company

The Indian Income Tax Act, 1961 specifically exempts tax on agricultural income under section 10(1). 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.

However, the exemption for such agricultural income shall sometimes differ on the basis of the kind of agricultural activity undertakes.

Tax Benefits
Income Tax

Income Tax Under Public Limited Company

Following rates are applicable in case of a Public Limited Company

Type of company Rate of tax applicable Surcharge SHEC
Domestic company 25% (less than 400 crores Turnover of PY2017-18) 1Cr. to 10cr. -7%
More than 10 cr.-12%
4%
Domestic company opting deduction under special scheme 15%(small scale industries with certain conditions)
22%(Companies who are currently using the 25% scheme can one time switch to this scheme )
Applicable surcharge rate
Mandatory surcharge of 10%
4%
Domestic company who does not categories in any special scheme 30% 1Cr.-10cr. -7%
More than 10 cr.-12%
4%

What is Producer Company?

Producer Company is a company registered for farming and agriculture by those involved in agricultural activities which has the objective of production, harvesting, procurement, grading, pooling, handling, marketing, selling and export of primary produce of the Members or import of goods or services for their benefit.

As per the Companies Act, 1956, primary production is the product arising from the agricultural land of a farmer such as floriculture, horticulture, animal husbandry, re-vegetation, viticulture, pisciculture, bee raising, forest products, forestry, and farming products.

What are the types of Producer Company?

  • Production Businesses - Producer companies are engaged in production, procurement or manufacture of any primary produce for its members (for further sale) and to others.
  • Marketing Businesses - Even a business involved in the marketing or promotion of primary produce or provision of educational services to members and others is also be treated as a producer company.
  • Technical Service Businesses - Any Businesses providing technical assistance, training and educational services to producers or conducting research and development for them, can be register as a producer company.
  • Financing Businesses - Any business who are helping in financing in procurement, processing, marketing or other activities which include extending of credit facilities or any other financial services to its Members/producers can register itself as a producer company.
  • Infrastructure Businesses - Businesses involved in providing infrastructure like electricity, water resources, irrigation techniques, land utilisation, or consultation with respect to same to producers, may register themselves as a producer company.

What are the steps for registration of Producer Company?

  • STEP 1: Name search: We will check the availability of the company names suggested.
  • STEP 2: Digital Signature Certificate: We will obtain digital signature certificate for all proposed directors.
  • STEP 3: Reserve Unique Name: We will file RUN E-Form for name reservation.
  • STEP 4: File SPICe Form: We will file company incorporation form SPICe with all required attachments.
  • STEP 5: Certificate of Incorporation: After successful approval of form COI, PAN, DIN, TAN, GST are provided.

What are the documents required for registration of Producer Company?

  • PAN card and address Aadhar card of directors and shareholders are mandatory.
  • All the members need to be producer .
  • ID Proof: Self attested Passport / Voter-ID / Driving License (any one)
  • Address Proof: Self attested Latest Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement with latest entries(any one)
  • Passport size Photograph for each Director/ Shareholder.
  • Email and contact details of each director
  • Registered office Address proof :
    1st Taken on Rent by Company- Property Tax receipt in the name of Lender/Electricity bill not older than 2 month + Rent Agreement(After Name Approval with the proposed name of Company) + Rent Receipt of latest month.
    2nd Owned by any of the Directors- Property Tax receipt/Electricity bill not older than 2 month in the name of owner.

What is DIN (Director Identification Number)?

DIN means an Identification Number which the Central Government may allot to any individual, intending to be appointed as director or to any existing director of a company, for the purpose of his identification as such. It is an 8 digit unique identification number which has lifetime validity. DIN is required for all existing and new (proposed) directors of a company.

What is the minimum requirement for Producer company?

  • Minimum ten or more individuals, each of them being a producer; or two or more producer institutions; or combination of the above two.
  • Minimum 5 Directors & (maximum of 15) (The directors and shareholders can be same person).
  • DSC (Digital Signature Certificate) for all the Directors (for applying of DIN).
  • The tenure of Directorship in Producer Company is minimum 1 year while the maximum period of Directorship is 5 years.
  • The minimum paid-up capital should be Rs 5 lakhs or more to register a company
  • There is no limit for the maximum number of members in a producer company

What is DSC (Digital Signature Certificate)?

A Digital Signature is the electronic signature duly issued by certifying authority that shows the authority of the person signing the same. It is an electronic equivalent of a written signature. Every user who required to sign an e-form for submission with MCA is required to obtain a Digital Signature Certificate.

Who is ROC (Registrar of Companies)?

The Registrar of Companies is the government authority under the Ministry of Corporate Affairs which deals with registration, administration and regulation of Limited Liability Partnership (LLP) and Companies registered under Companies Act,2013 and Companies Act,1956.

What are the advantages of Producer Company?

  • Increased credibility: Increased level of surety as compared to cooperative society and the privilege that only producer can be a member.
  • Limited liability and separate legal entity: Producer company is treated as separate legal entity from members of the company. Members are not liable to their estate as the company have separate legal entity.
  • Member's Benefit: The members will initially receive the value for the produce or products pooled and supplied as the directors may determine. This amount is given out later either in cash or in kind or by allotment of equity shares.
    Members will be eligible to receive bonus shares in proportion to the shares held by them.
    The surplus after provision for payment of limited return and reserves may be given out as patronage bonus, among the Members. Patronage bonus means payment out of surplus income to members in proportion to their respective patronage. Patronage, on the other hand, is the use of services offered by producer companies to their members by participation in their business activities.
  • Loans & Investments: The Board may, subject to the provisions made in articles, provide financial assistance to the Members of the Producer Company by way of –
    (a) Credit facility : This is available to any member for a period not exceeding six months (such facility must be in connection with the business of the Company).
    (b) loans and advances: It is provided to the producer member against security specified in articles to any Member, repayable within a period not exceeding seven years from the date of disbursement of such loan or advances Provided that any loan or advance to any director or his relative shall be granted only after the approval by the Members in general meeting.
  • NABARD Loan: NABARD stands for National Bank for Agriculture & Rural Development that helps to meet the financial requirements of small and regional scale farmers. NABARD provided the special assistance and loan for producer company or producer Organisation. The members of Producer Company can obtain loans under the NABARD loan scheme. In 2011, NABARD set up a Rs. 50 crore Producer Organisation Development Fund (PODF), out of its operating surplus.

What is a Patronage Bonus?

Patronage bonus means payment out of surplus income to members in proportion to their respective patronage. Patronage, on the other hand, is the use of services offered by producer companies to their members by participation in their business activities.

What is the Tax benefit for Producer Company?

The Indian Income Tax Act, 1961 specifically exempts tax on agricultural income under section 10(1). 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.

However, the exemption for such agricultural income shall sometimes differ on the basis of the kind of agricultural activity undertakes.

What is MOA (Memorandum of Association) and AOA (Articles of Association)?

The MOA is a document which sets out the constitution of a company and is therefore the foundation on which the structure of the company is built. It defines the scope of the company’s activities and its relations with the outside world.

The articles of association of a company are its bye-laws or rules and regulations that govern the management of its internal affairs and the conduct of its business. It deals with the rights of the members of the company inter se. They are subordinate to and are controlled by the MOA.

What is difference between Producer Company and different form of organisation?

We have prepared a detailed and easy to understand comparative table showing availability of features and advantages of one form of business to that of others. The same can be found at the end of this page.

Difference in Different Form of Business

What is a Government fee for registration of Producer Company?

Spice form Fees
• In case of company having share capital

Nominal Share Capital Fee applicable
Up to 15,00,000 N/A
More than 15,00,000 Rupees 500

• In case of company not having share capital

Number of members Fee applicable
Up to 20 members N/A
More than 20 members Rupees 500

Stamp duty for MOA and AOA is Rs. 7550 (For Madhya Pradesh)
Pan and Tan Fees is Rs. 131
Name Reservation Fees: In case applied separately in Part A for Name Reservation than Rs 1000

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