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.

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.

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

Incorporation of Producer Company Through SPICe

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.

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

• In case of company not having share capital

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

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.

Income Tax Under Public Limited Company

Following rates are applicable in case of a Public Limited Company