A Producer Company can be described as a means to improve the standard of living of agricultural workers. A good co-operative company and a dynamic company are considered a good merger. Producing companies are not included in the Companies Act, 2013, which repeals the previous act. Producer Companies are nonetheless subject to Part IX A of the Companies Act, 1956 in a manner similar to that in which the Companies Act, 1956 remains in force until a special Act is enacted. Under the Companies Act 2013 (formerly the Companies Act 1956), a producer company undertakes the following activities:

  • Harvesting, procuring, grading, pooling, handling, marketing, selling, exporting of primary produce or importing goods for members
  • Produce is preserved, dried, evaporated, distilled, brewed, vented, canned, and packaged
  • Supply or manufacture of machinery, equipment or consumables mainly for its members.
  • Providing mutual assistance, financial services, and welfare measures to primary producers.

Registration and formation

The Companies Act, 1956 has an article 581C which provides that a company may be formed if it has ten or more producers that are members of it. The formation of a producer company involves the formation of two or more producer institutions or a combination of both of them. It is the registrar’s responsibility to issue a certificate to the company within 30 days after they are satisfied that all the documents which are needed for registration are submitted. There are a number of types of companies that are limited by shares, where the liability of its members is limited, and they are the producer companies. The number of shares they bought is limited.

The essentials

  • A producer company can be owned by an individual engaged in an activity related to primary produce.
  •  Primary producers are required to be members.
  •  They are also called “Companies with Limited Liability,” since the members are only responsible for the unpaid share amount.
  • ‘Producer Company Limited’ shall complete the name of the company.
  • As far as law and administration are concerned, the producer company formed on registration shall be deemed. In accordance with part IX-A of the Business Corporations Act.
  • The maximum number of members is not restricted, so there is no limit on the number of members
  • Apart from that, such companies are hybrids. Producing companies gained momentum ahead of cooperatives. It’s because co-operatives are welfare-oriented and not commercial. States also promote them, resulting in greater state intervention. Also, centrally regulated management is considered more liberal than government-run management.

A management approach

A board of directors may consist of up to fifteen members, according to the Act. It is possible to have more than five directors, but fewer than 15. It is important to note that when an interstate cooperative becomes a producer company. Companies with more than 15 directors are also allowed to exist. Incorporation-related privileges are available for one year only. These companies must have directors appointed within 90 days of incorporation.

Performing an audit

Auditor reports made by producer companies must be exceptional. It is essential to audit records internally by contractor bookkeepers. However, recorded organizations are required to comply with the provision, which is not required of restricted organizations.

Resolution of disputes

Regarding the establishment, administration, and business of producer’s organizations, the Arbitration and Conciliation Act, 1996 applies. It should be noted, however, that any verdict given will be final. The grant cannot be challenged which is unfair because it can be claimed against in the high courts if a claim has been made against it in mediation.

Benefits from taxation

It is stated under Section 10(1) of the Income Tax Act, 1961, that income derived from agriculture is exempt from taxation. Although the said act is indeed a great help to producers, it must be noted that the act does not per se provide any special benefits or exemptions to producers. Although a number of tax benefits can be availed based on the type of agricultural activity that the business is engaged in.