Concept of Producer Companies in India

A new amendment in the Companies Act, 1956 came into existence with the insertion of Part IX A. This inclusion was introduced in the form of Producer Companies.

This new concept leads to the empowerment of primary producers, thus opening for them ways to achieve ample profits. The birthplace producer companies roots back to the committee meeting chaired by renowned economist Y.K Alagh.

The main purpose behind this meeting was to work out a legal framework that could integrate cooperatives in the form of companies.

Objects of producer companies as per section 581B

  1. The objects of the Producer Company shall relate to all or any of the following matters, namely:-
  • Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import of goods or services for their benefit.
    Provided that the Producer Company may carry on any of the activities specified in this clause either by itself or through other institution;
  • 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 the interests of its Members;
  • Generation, transmission and distribution of power, revitalization 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 clauses (a) to (i) or other activities 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 clauses (a) to (j) which include extending of credit facilities or any other financial services to its Members.
  1. Every Producer Company shall deal primarily with the produce of its active Members for carrying out any of its objects specified in this section.

Formation of producer companies and registration as per section 581C

  1. Any ten or more individuals, each of them being a producer or any two or more Producer institutions, or a combination of ten or more individuals and Producer institutions, desirous of forming a Producer Company having its objects specified in section 581B and otherwise complying with the requirements of this Part and the provisions of this Act in respect of registration, may form an incorporated Company as a Producer Company under this Act.
  2. If the Registrar is satisfied that all the requirements of this Act have been complied with in respect of registration and matters precedent and incidental thereto, he shall, within thirty days of the receipt of the documents required for registration, register the memorandum, the articles and other documents, if any, and issue a certificate of incorporation under this Act.
  3. A Producer Company so formed shall have the liability of its Members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them and be termed a company limited by shares.
  4. The Producer Company may reimburse to its promoters all other direct costs associated with the promotion and registration of the company including registration, legal fees, printing of a memorandum and articles and the payment thereof shall be subject to the approval at its first general meeting of the Members.
  5. On registration under sub-section (1), the Producer Company shall become a body corporate as if it is a private limited company to which the provisions contained in this Part apply, without, however, any limit to the number of Members thereof, and the Producer Company shall not, under any circumstance, whatsoever, become or be deemed to become a public limited company under this Act.

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