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A producer company is a special type of company primarily formed to handle the production activities related to farming and other agricultural sectors. Its main objectives include not only the production but also the selling and exporting of goods produced by its members. The provisions for the incorporation of a producer company are governed by Part IXA of the Companies Act, 1956, until a specific Act is created for such companies.
A producer company must have a minimum of ten members who are producers, or at least two producer institutions, or a combination of both. Like other companies, the liability of members is limited to the amount of unpaid share capital. Although considered a private limited company under the Act, the producer company is not bound by the usual member limits that apply to regular private companies.
The active members of a producer company may be granted special user rights, as specified in the company’s Articles of Association (AoA). These rights can be reflected through appropriate instruments issued to the active members. Special user rights generally pertain to privileges related to the supply of additional produce by the active member or any other rights associated with their produce.
Each member of the producer company initially receives only the value of the produce, as determined by the Board. Any withheld amount may be paid later in cash or through the allotment of equity shares. While members are entitled to a limited return, they may also receive bonus shares. Additionally, the surplus generated by the company can be distributed as a patronage bonus to the members.
Like any other company, a producer company possesses a separate legal identity. Its assets, liabilities, rights, debts, and privileges are held by the company itself. The company can operate in its own name, manage properties, and conduct business. Changes in the members or directors do not affect the company’s existence, nor do they impact its assets, liabilities, rights, or obligations.
The members and producer institutions have limited liability for the company’s debts and obligations. This means their personal assets are protected in case of losses or during winding up. With this assurance of limited liability, producers can confidently invest in the business with reduced risk.
To register as a Producer Company under Section 581B of the Companies Act, 1956:
The company must have a main object as defined in the Act.
It must have at least 10 individual producers or 2 producer institutions as shareholders.
A minimum of 5 directors is required, with at least one being an Indian citizen and resident.
The registered office must be located in India.
There is no minimum capital requirement for a charitable company.
Promoters can introduce an amount sufficient to start and operate the business.
The company name must follow the prescribed naming guidelines.
Name reservation is done through the web form “RUN,” allowing up to two unique name options.
If the proposed names don’t meet the criteria, the registrar may request a resubmission with new names.
No physical presence of promoters is required, as the registration process is entirely online.
All documents and details can be submitted via email or uploaded through our portal.
Yes, an NRI or Foreign National can become a Director after obtaining a Director Identification Number (DIN).
However, at least one Director on the Board must be an Indian citizen and resident.
