The formation and regulation of Producer Company is governed under the provisions of Sections 581A to 581ZL of Companies Act, 1956, read with Companies Act, 2013, i.e., powers of the same are given under Section 465 and the rules made there under.
A producer company is a Company that is incorporated under the provisions of the Companies Act, 2013 and shall carry on following activities that are mentioned as following:
- Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import goods for their benefit.
- Processing including preserving, drying, distilling, brewing, venting, canning and packaging of produce of its members.
- Manufacture, sale or supply of machinery, equipment or consumables mainly to its members.
- Providing education on the mutual assistance principles to its members and others.
- Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of interest of its members.
- Generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce
- Insurance of producers or their primary produce.
- Promoting techniques of mutuality and mutual assistance.
- Welfare measures or facilities for the benefit of Members as may be decided by the Board.
- Any other activity, ancillary or incidental to any of the activities referred to in above clauses which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner.
- Financing of procurement, processing, marketing or other activities specified in above clauses which include extending credit facilities or any other financial services to its members.
In this article, we shall study about the benefits, taxation, pre-requisites for incorporation, incorporation process and other frequently asked questions (FAQs) about the producer Company.
BENEFITS OF PRODUCER COMPANY:
1. MEMBER’S BENEFITS
- Producer Companies tends to promote techniques of mutual assistance among members.
- It promotes welfare measures or facilities for the benefit of members.
- It promotes extending credit facilities or any other financial services to its members thereby for the purpose of mutuality only.
2. Tax Benefits
It is to be noted that the Income Tax Act does not particularly give any special benefits to the producer Companies but depending upon the type of agricultural activities being carried on, certain tax exemption is there which are mentioned as following:
- The Income Tax Act, 1961, exempts tax on agricultural income however, such exemption shall sometimes vary depending upon the kind of agricultural activity being carried on.
- Dividend tax at the applicable rates is required to be paid by the Company at the time of patronage bonus, limited return distribution and the same is tax free in the hands of the members.
- Bonus shares does not attract any tax in the hands of the members at the time of allotment.
PER-REQUISITES FOR INCORPORATION:
1. As per section clause (1) of section 581C of the Companies Act, 1956, any one of the following combinations can form a Producer Company:
- Any ten or more individuals each of them being a producer
- Or any two or more Producer Institutions
- Or Combination of 10 or more individuals and Producer Institutions.
2. There should be a minimum of 5 and maximum of 15 directors in a producer Company.
3. A minimum capital of Rs. 500,000 is required to incorporate a producer company. However, it is always recommended to form the producer Company with an authorized capital of Rs. 15 lacs as the same falls under government scheme of nil stamp duty.
4. All the Subscribers should have Digital Signature in spite of the no of the Directors.
INCORPORATION PROCESS OF PRODUCER COMPANY:
1. Name Reservation
The name of the Company should be applied through SPICE Part A along with the fees of Rs. 1,000/- or directly applied with the Company. The name of the Company should end with PRODUCER COMPANY LIMITED.
2. Preparation of MOA and AOA:-
As there are minimum 10 subscribers therefore, MOA & AOA of Producer Company shall always be physical MOA & AOA and accordingly, the requirement of filing SPICE MOA and AOA is dispensed with while incorporation of the Producer Company.
3. Preparation of E-form SPICE
Applicant has to fill in the information in the e-form “Spice+” along with following attachments: –
- Consent to act as Directors along with copy of proof of identity and residential address.
- NOC from the owner of the property and proof of office address (Rent Agreement/Conveyance Deed, etc.) along with the copy of the utility bills (not older than two months).
4. Filing of forms with Ministry of Corporate Affairs: –
Once all the forms are ready, upload all three documents i.e., Spice+, Agile Pro and INC-9 as linked forms on MCA website and make the payment of the same.
If there is some error or mistake in the SPICE Forms, MCA allow correction in forms maximum 2 time.
5. Certificate of Incorporation
Incorporation certificate shall be generated with CIN, PAN & TAN details over it.
FREQUENTLY ASKED QUESTIONS: –
1. Whether Producer Company is a Private Company or Public Company?
On registration the Producer Company shall become a body corporate as a Private Company only and shall not under any circumstances deemed to be a Public Company.
2. Whether the limit of 200 members is applicable to Producer Company?
The Producer Company shall become a body corporate as a Private Company however any limit to the number of members i.e,. the limit of 200 members is not applicable to a Producer Company.
3. Who can be a member in a Producer Company?
A person being a “producer” or a “producer institution” (whether incorporated or not) can be accepted as a member of Producer Company.
4. What if a member of the producer company ceased to be a primary producer?
Where the Board of a Producer Company is satisfied that the member has ceased to be a primary producer then, the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board.
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{The author i.e., Kajal Goyal is a Company Secretary in Practice at Kajal Goyal and Associates and can be reached at (M) +91-9999952595 and (E) [email protected]}
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