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Producer Company

Producer Company in India

The concept of Producer Company in India was introduced to allow cooperatives to function as a corporate entity under the Ministry of Corporate Affairs. In this article, we look at the procedure for registering a Producer Company in India, under the Companies Act, 2013.

Producer Company Overview

The Companies Act defines Producer as any person engaged in any activity connected with or relatable to any primary produce (Produce: “things that have been produced or grown, especially by farming”). A Producer Company is thus a body corporate having an object that is one or all of the following:

  • production, harvesting, procurement, grading, pooling, handling, marketing, selling, the export of primary produce of the Members or import of goods or services for their benefit.

Further, the Producer Company must deal primarily with the produce of its active Members and must allow to carry on any of the following activities by itself or through other entities – on behalf of the members.

  1. processing including preserving, drying, distilling, brewing, vinting, canning and packaging of the produce of its Members;
  2. manufacture, sale or supply of machinery, equipment or consumables mainly to its Members;
  3. providing education on the mutual assistance principles to its members and others;
  4. rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its Members;
  5. generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communication relatable to primary produce;
  6. insurance of producers or their primary produce;
  7. promoting techniques of mutuality and mutual assistance;
  8. welfare measures or facilities for the benefit of Members as may be decided by the Board;
  9. any other activity, ancillary or incidental to any of the activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner;
  10. financing of procurement, processing, marketing or other activities which include extending of credit facilities or any other financial services to its Members.

Advantages of a Producer Company

Limited Liability

All businesses can run the risk of not being able to repay their liabilities. It is a necessary evil. In this event, a sole proprietor (or individual producer) would be personally liable for all the debts of the business. The members of a producer company, on the other hand, have unlimited liability as the company is an entity in itself. Therefore, only the amount invested in the business would be lost; the personal property of the directors would be safe.

Economies Of Scale

Only 15% of India's farmers own over two acres of land. The majority of farmers are, therefore, unable to safely unlock the advantages that come with economies of scale. With a producer company, multiple farmers can work as a collective and lower costs, reduce risk and even get access to better credit facilities. This enables better planning and bargaining power with buyers.

Better Management

Rather than a single farmer managing the entire business, work within a producer company can be divided between its directors. The entity is managed by the Board of Management, which has a tenure of five years. Also, a Producer company has a separate legal existence, which means that it isn't affected by the death of any of its members.

Producer Company Registration

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

The registration process for a Producer Company is then similar to that of a Private Limited Company. Firstly obtain the DSC and DIN for the proposed first Directors of the Producer Company. After obtaining the DSC and DIN, the application for name reservation can be filed with the Registrar of Companies (ROC). The name of a producer company must end with the words “Producer Limited Company”. After getting the name approval from the ROC, file the application for incorporation in the prescribed format for incorporating the Producer Company.

If the Registrar is satisfied with the application for incorporation of Producer Company, then he/she will approve the same and issue Certificate of Incorporation. Once, a producer company is incorporated, it shall function similar to a private limited company subject to certain provisions. However, unlike a Private Limited Company, a Producer Company does not have a limit on the number of members. Further, though the name of a Producer Company ends with the words “Producer Limited Company”, it shall under no circumstance become or be deemed to become a public limited company.


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FAQ about Producer-Company

Any primary producer of the producer company may be admitted as a member of the company if he/she is ready to accept the responsibilities of the membership and chooses to become a member on a voluntary basis. However, any individual shall not be allowed to join a producer company if they have any commercial interests that compete with those of the producer company. In proportion to their level of support, members hold equity in the producer company. The Board of Directors shall order such members to return their shares in the producer company if they are no longer producers or do not continue to meet the requirements for membership.

A producer company should have at least five directors on its board with an upper limit of up to 15 directors. The company can also have additional or expert directors whose number, however, shall not exceed one-fifth of the total strength of the number of directors on the Board.

A director shall be appointed for a minimum of one year but not more than five years. Also, every retired director is eligible to be re-elected by the members as a director.

Suppose the producer company’s members consist only of individual members. In that case, the voting rights are exercised as a single vote for each member, irrespective of his equity or patronage in the company If the producer company’s members consist only of producer institutions, then voting rights are determined on the basis of their respective participation in the producer company in the previous financial year. However, in the initial year of registration of the company, the rights are determined based on shareholding in the producer company If the producer company consists of both individual and producer institutions, the rights to vote are distributed as a single vote for each member.

At least ten producers or two producing institutions are required to form a farmer producer company. There is only a minimum requirement and no upper limit for the number of members in a producer company.