India has always been a predominantly agricultural based economy due to its geographical location, richness of natural resources and fertile soil. Due to this reason, even after decades of being an independent country, nearly 60 % of its population still relies on agriculture for their means of livelihood. However, lack of organization and the presence of middlemen who notoriously deceive poor and illiterate farmers, have made the farmers struggle to get adequate profits and benefits of government schemes. To resolve this matter, the Government of India came up with the idea of “Producer Company Registration” in the year 2002, to promote better organization and to provide upliftment of Indian farmers and agriculturists, who shall be known as “Producers” in pursuance of the giving producers a new structure of company.
What is Producer Company
Section 465(1) of the company contains the provisions related to Producer companies. “Producer Company” has been defined as a body corporate having such objects and engaged in such activities as specified under section 581B of the Act and further gets itself registered Under section 581B.
Such company shall primarily comprise agriculturists or producers, who shall be engaged in activities associated or related with primary produce with an intent to deal with the produce of its active members with an intent to perform and carry out such activities specified under section 581B of the Act.
A producer company can have any one or all of the following as their primary business objective-
Features of a producer company include the following-
Members of a producer company can undertake any or all of the following activities either through themselves or other entities which includes-
- Activities such as Processing, including preserving, drying, brewing, distilling, vinting, canning, and packaging.
- Manufacture/Sale of agro- related equipment’s & machinery.
- Offering training & education related to agricultural activities to its members on the basis of mutual assistance.
- Offering services such as technical assistance, consultancy, training, R&D, and such other activities with an intent to promote interests of its members.
- Activities such as Power Generation, transmission, and distribution services, improvisation of land and water resources, their sustainable consumption and conservation and such other matters in relation to primary production matters.
- Services related to insurance of primary produce and related services.
- Promoting techniques of mutuality and taking welfare measures for the benefit of the members of the company as approved by the board of directors.
- Such other activities as may be necessary to promote values of mutuality among members of the company.
- Financing of activities related to primary produce and specified in above clauses which also includes extension of credit facilities or any other financial assistance for the members of the company.
Producer Company Registration with Legalmart
A producer company may seem like a public limited company, but it is registered as a private limited company which is a simple process requiring knowledge and experience in dealing with the same, as any mistake/error while filling the same could lead to rejection of the application and ultimately leading to greater costs and time for incorporation and licensing process. Therefore, at Legalmart, we have a strong and professionally qualified team to undertake and complete the registration of a producer company in a simple, quick and efficient manner at the comfort of your convenience. For which, Legalmart that holds a professional team of experts holding knowledge and experience for company registration under one roof.
Benefits of Producer Company
- Enhanced Credibility– Though there are still some agriculturists and producers who sell their primary produce as a proprietor. However, the Producer Company being a body corporate licensed to practice its objects from the Ministry of Corporate Affairs offers better credibility and transparency in its activities that helps to gain consumer trust. Further, the members are allowed to benefit in the form of tax exemptions, technical and financial assistance through government schemes and better growth prospects for the business.
- Body Corporate– As above-mentioned, a producer company is registered in the same manner like a private limited company. Therefore, it is a separate legal entity having distinct and separate existence from its members. It can enter contracts in its own name, purchase and sell property, can sue or could be sued in its own name. Similarly, it offers the benefit of limited liability for its members as their contribution shall be limited to the contributions made by them towards the capital of the company and cannot be forced to apply their personal assets for the debts and liabilities of the company.
- Flexibility in Management- Unlike any other form of entity, it is comparatively easier for a producer company to make decisions regarding changes in the board of directors and intimate them to the concerned Registrar of Companies through submission of certain specified forms to ROC.
- Acceptance of Deposits – A registered producer company is permitted to accept deposits from its members in the form of fixed or recurring deposits and further to lend them to primary producers in need of funds at reasonable rates of interest for the benefit of primary producers.
- Tax Benefits– Though there is no special tax-exemption allowed to the profits/incomes earned by a producer company. However, under the provisions of the Indian Income Tax Act 1961, income earned from the sale of agricultural produce is eligible for tax relief. For instance, income earned from the sale of green tea leaves grown and sold directly is allowed 100% exemption. However, if green tea leaves are subjected to further processing and sold, then only 40% of such income is subject to taxation and the rest is allowed tax exemption.
- Loans and Investments –Producer companies are allowed to invite deposits from its members and further lend them as loans at lesser rates of interests for the purpose of inviting deposits from its members against security for such duration as specified in the articles of association of the company which could be for a minimum period of 3 months and not more than 7 years. Further, the members of a producer company can avail the financial assistance through a credit facility for such time-period not exceeding six months.
- Profit Sharing among members- A producer company is registered for the purpose of promotion of agriculture, providing education and financial assistance to primary producers and helping them to achieve better prices for their produce. The biggest benefit of registering a producer company lies in the fact that it allows the members to receive the right value for their primary produce as determined by the board of directors of the company. Such value could be provided either through allotment of cash or through issue of equity shares of the company.
Not only this, a producer company allows flexibility for the members to receive bonus shares in the proportions of shares held by them and a patronage bonus where any amount is left after making provisions for payments of limited returns.
Disadvantages of Producer Company
- Capital issues – This is one of the main issues faced by a producer company. As the members of the company are not capitalists holding funds or sources to generate funds. The company and its members suffer from lack of funds which affects their production. Further, the principle of one-man-one-vote and the problem of limited dividends also reduce the enthusiasm of members and disables the entity to reach its ultimate objectives.
- Motivational Factor – Lack of dividends and inability to meet appropriate allocation of funds often results in lack of motivation among members of the company. Further, there is lesser recognition towards efforts and benefits received on the basis of efforts, as funds are allocated impartially without any recognition to any individual efforts.
- Lack of knowledge and competence – It is a sad fact that despite India being an agro-major economy, most of the population is illiterate and is still dependent on traditional techniques of farming. Due to this problem the organization is suffering and is unable to meet larger corporations with established businesses.
- Inefficient management – Due to the problems such as lack of capital, lack of competence and accordingly inefficient management which lacks to make decisions, capture contracts and tenders, lack of knowledge of latest technologies etc. makes them unable to compete with larger corporations Thus, lack of knowledge and proper skills results in poor functioning of the organisation and difficulty in reaching organisational goals.
- Negligence of duties – Since a producer company comprises mostly of small farmers and producers having lesser knowledge and competence. There is greater room for conflicts and disputes among members due to the negligence of duties by one towards the other which affects business functioning adversely.
- Lack of confidentiality – A producer company is registered as a private company and needs to intimate any changes or its reports and statements to the Registrar of Companies, which leaves lesser room for any confidentiality and forces the company to maintain complete transparency about its business operations.
Eligibility criteria of Producer Company Registration
- Only a person engaged in activities related to agriculture or primary produce is eligible to start a “Producer Company”.
- A producer company can either be formed either through-
- Ten or more individuals.
- Two or more institutions.
- A combination of the abovementioned.
- However, below-mentioned are some criterions that should be mandatorily fulfilled before incorporation of a “Producer company” including-
- A person who is either engaged in the activities either connected with or related with primary produce can become a member in the company.
- Such proposed company shall have at least five directors and at least ten members as the initial subscribers to the memorandum of the company for the purpose of incorporation.
- Such company shall have at least Rs. Five lakhs The minimum paid-up capital should be Rs 5 lakhs or more to register a company.
- Such proposed company shall mandatorily contain “Producer Company Limited” at the end of their name.
- There is no upper limit for the number of members in a producer company.
- Such a company must have only one type of capital i.e. equity share capital.
Documents required for Producer Company Registration
For Directors & Initial subscribers to Memorandum
- Copy of Identification proof such as Voter Id, PAN card etc.
- Copy of bills such as Bank Statement/Mobile or Telephone Bill.
- Scanned passport size photographs.
For Proposed Registered Office
- Copy of any Utility bill (Electricity Bill/Water Bill etc.
- Scanned copy of proof of registered address of the proposed business where such property has been taken on rent or through lease(i.e. rent agreement or lease deed).
- A copy of NOC from the owner, where the property has been taken on rent.
- Where the property is owned by the company, proof of such ownership through Sale deed or any other relevant document.
Documents required for GSTIN Registration under AGILE-PRO
- Document/s evidencing the proposed principal place of business.
- Scanned copy of appointment of signatory on behalf of the company for GSTIN registration purposes and a copy of resolution approved and authorized by the Board of Directors).
- Identification documents related to identification authorised Signatory for the opening of a bank account.
- Documents related to address proof of Authorised director for bank business account purposes.
- Scanned copy of Signature of Authorised director for PF purposes.
How to Register Producer Company Online
The Ministry of Corporate Affairs has on notified CThe Ministry of Corporate Affairs has notified Companies (Incorporation) Sixth Amendment Rules, 2019 dated 7th June 2019 to ease the Incorporation process through a new web integrated form SPICe+ to be effective from 15th Feb 2021.
Accordingly, for the purpose of reservation of name of the company, an applicant needs to either first fill Part A of the SPICe+ and part B later for incorporation or fill both at same time for processing. After filling Part A of the form and submitting it for approval, the name so approved shall be displayed on the dashboard and the user will be able to continue filling Part B of the application through a link displayed on the application number of the new dashboard on the portal.
STEP 1- MAKE AN APPLICATION FOR NAME RESERVATION THROUGH SPICE+ “PART A”
- Log on to the MCA portal and click MCA Services and choose “SPICE+”
- Click “New Application” and choose “Spice+ Part A”
- SPICE+ Part A will require you to submit at least two names and other information such as proposed name, class of company, sub-category etc related to the producer company.
- On clicking submit button, the functionality will perform any auto-check for inspection of name and suggest changes on observing any discrepancy in the name.
- After filling two appropriate names and on payment of the applicable fee, SPICe+ Part “A” will allow reservation of a unique name for the company.
STEP 2- FILE & SUBMIT SPICe+”PART B”
SPICe+ “PART B” allows the proposed company to submit request for
- Reservation of unique name.
- Incorporation of a new company.
- Application for Allotment of DIN.
- Opening of Bank Account.
- Application for TAN, EPFO, ESIC, GSTIN etc.(wherever required).
Each part of the PART B functionality contains a ”save & continue” button to enable the user to check and validate the information before clicking final submit button to ensure proper checks and avoid any discrepancies.
Next, fill all necessary information and upload documents & attachments for the purpose of DIN allocation, company incorporation, PAN (Permanent Account Number)& TAN(Tax Deduction Account) application, GST Registration etc.
STEP 3- FILE & SUBMIT AGILE –PRO
SPICE+ has introduced one more functionality also known as AGILE, which is the acronym for “Application for Goods and Services Identification Numbers, Employee’s State Insurance Corporation Registration Plus Employees provident Fund Organization Registration”. The new AGILE-PRO form is a replacement for INC-35, which is requires to be filed for the following-
- Registration with Employee State Insurance Corporation (ESIC).
- Registration with Goods & Services Identification Number (GSTIN).
- Business Bank Account Number.
- Employee Provident Funds Organization (EPFO) Registration.
- Professional Tax Registration.
- e-MoA And e-AoA Form(Memorandum& Articles of the Company)
STEP 4- INC-9 PDF Generations
Every company is required to file declarations from initial subscribers and first directors that they have not been convicted of any criminal offence in previous five years. The new SPICe+ provides for auto-populated declaration in (INC-9) on which DSCs of the members and directors are required to be affixed.
STEP 5- FINAL SUBMISSION AND SRN GENERATION
Now, click on the pre-scrutiny functionality and after ensuring all information filed is correct click the submit button once pre-scrutiny is successful. Once the process is completed, you will get a message regarding confirmation of successful completion of form submission. Further, the system will generate a unique service request number(SRN) on successful completion of the upload process.
Why you Choose Legalmart
Therefore, the process of registration of a producer company is similar to that of a private company and offers multifarious benefits as compared to any other entity such as tax exemption (up to 100% in some cases). For agriculturists and primary producers, it opens to better accessibility to credit facilities with better profit prospects. Nevertheless, it is always advisable to rely on someone who has years of experience and knowledge of dealing in the same. At Legalmart, we have established credibility and expert knowledge and promise to provide-
- Quick, Hassle-free and a smooth experience of incorporation within 15-20 days.
- Expert guidance and end-to-end assistance in filling forms and submission.
- Constant assistance with 24*7 customer support.