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Producer Company Incorporation (FPO Registration) - An Overview

Producer company registration is forming a producer company under the Companies Act of 2013. Producer companies are special types of businesses formed by farmers and other agricultural producers to help them market and sell their products more effectively. They have limited liability for their members, which means that the members are not personally responsible for the debts and liabilities of the company.

Benefits of FPO Registration

There are many benefits to registering a Farmer Producer Organization (FPO), including:

• Limited liability for members

  Members of an FPO are not personally liable for the debts and liabilities of the organisation. This means that their personal assets are protected if the FPO goes bankrupt.

• Access to government subsidies and grants

  FPOs are eligible for various government subsidies and grants, which can help them finance their operations and grow their business.

• Easier access to credit from banks and financial institutions

  Banks and financial institutions are more likely to lend money to FPOs than to individual farmers, as FPOs are seen as being more creditworthy. FPOs have a larger pool of assets and members and can negotiate better interest rates.

• Increased bargaining power with buyers

  FPOs can negotiate better prices for their produce with buyers because they can sell in bulk. This can lead to higher profits for FPO members.

• Improved efficiency and productivity

  FPOs can help farmers improve their efficiency and productivity by providing access to better inputs, technology, and training.

• Better access to markets

  FPOs can help farmers to reach new markets and sell their produce at a higher price

Eligibility Criteria for Registering of Farmer Producer Company Online in India

To register a producer company online in India, you must meet the following eligibility criteria:

• Minimum number of members

  There must be at least 10 producer individuals or at least 2 producer institutions as members.

• Minimum number of directors

  There must be at least 5 directors.

• Minimum capital

  The company must have a minimum capital of Rs. 5 lakhs.

• Name of the company

  The company's name must end with the words 'Producer Limited Company'.

• Registered office

  The company must have a registered office address in India.

Documents Required for Producer Company Registration

The following documents are required for producer company registration in India:

• PAN card of all members and directors

• Aadhaar card of all members and directors

• Passport-size photographs of all members and directors

• Registered office address proof (such as electricity bill, gas bill, or rent agreement)

• Memorandum of Association (MoA)

• Articles of Association (AoA)

• Digital Signature Certificates (DSCs) of all directors

• No Objection Certificate (NOC) from the landlord of the registered office premises (if applicable)

• Copy of the Producer Certificate issued by the District Horticulture Officer (DHO) or any other competent authority (if applicable)

• Copy of the registration certificate of the producer organisation (if applicable)

Producer Company Registration Objectives

The objectives of producer companies are defined in Section 581B of the Companies Act of 2013. These objectives include:

• To provide benefits to its members by undertaking activities related to the production, harvesting, procurement, grading, pooling, handling, marketing, and selling primary agricultural produce.

• To provide financial services to its members, such as extending credit facilities and providing insurance.

• To provide educational and technical services to its members.

• To promote mutual assistance and cooperation among its members.

• To undertake other activities that benefit its members and the agricultural sector as a whole.

Membership and Voting Rights

The voting rights of the members differs based on the types of members present in a producer company

• Voting rights when the producer company has individual producers

  • In a producer company where every member is an individual, every producer is presented with a single vote irrespective of their shareholdings or patronage in a producer company.

• Rights when producer institutions are present

  • If producer institutions are present the voting rights are determined based on the participation of the institution in the business in the previous year

  • Producer institutions' voting rights during a producer company's first year of registration are decided based on their shareholdings.

• Voting rights when both producer institutions and individual producers are present

  • If the producer company has both individuals and producer institutions the voting rights are calculated based on the single vote of every member.

• Membership Conditions and Voting Rights

  • The rules of any Producer Company can outline the conditions under which a member can keep their membership

  • They can also describe how voting rights are exercised by the members.

• Restrictions on Voting Rights

  • A Producer Company can limit voting rights to only active members in special or general meetings if allowed by its rules.

• Conflict of Interest

  • No one with a business interest conflicting with the Producer Company's business can become a member

  • If a member acquires a conflicting business interest, they must stop being a member and be removed according to the company's rules.

• Memorandum of Producer Company

  Memorandum of a producer company is an important document required for producer company incorporation. Make sure to verify whether the following information is present while drafting the memorandum for a producer company registration:

  • The company's name should end with ‘Producer Company Limited’

  • The state in which the business will have its headquarters

  • The company's main goals, which should be in line with what's specified in Section 581B

  • The names and addresses of the people who are signing this document

  • How much money (share capital) is needed to start the company, and how it's divided into shares with fixed amounts

  • The names, addresses, and jobs of the people signing this document, who are also the first directors

  • The restricted liability of the company's members are mentioned

  • Each person's name is followed by the number of shares they're taking; everyone must take at least one share

  • If the company's goals cover more than one state, it should be listed.

• Amendment of Memorandum

  A Producer Company cannot change the conditions in its memorandum unless this Act explicitly allows it. However, the company can alter its specified objectives in the memorandum through a special resolution, as long as it's consistent with Section 581B.

• Filing Changes

  • The changes must be submitted to the Registrar within 30 days of the resolution's adoption date. This includes a certified copy of the updated memorandum and a special resolution approved by two directors

  • Before they become effective, changes pertaining to transferring the registered office from one state to another must be approved by the Board via a petition

  • Changes related to moving the registered office from one state to another must be confirmed by the Board through a petition before they can take effect.

• Articles of Association

  Article of association is presented to the registrar of the state where the producer company is incorporated. This is a crucial document containing all the information about the producer company. The following information has to be presented in the article of association:

• Memorandum and Articles

  • The Producer Company should have a memorandum and articles

  • These articles should follow certain principles.

• Mutual Assistance Principles

  • Anyone who meets the requirements and is eager to participate in the company's operations is welcome to join

  • Regardless of the quantity of shares they own, each member is only allowed one vote

  • The company is governed by a board elected or appointed in a specific manner

  • There is limited return on share capital

  • Surplus from operations is distributed fairly for business development, common facilities, and among members

  • Education on mutual assistance principles is provided

  • The company collaborates with similar organisations for the benefit of members and communities.

• Specific Provisions

  • Articles must outline membership qualifications, conditions, and share transfer details

  • They should specify patronage and voting rights

  • The structure, powers, and duties of the board, director elections, chairman's role, and voting procedures

  • Establishing and allocating withholding pricing

  • Patronage bonuses are paid either in cash or equity shares

  • Matters related to contribution sharing and funds

  • Credit, loans, and advances granted to members

  • Members' right to access company information

  • Handling funds in case of company dissolution

  • Authorisation for division, merger, subsidiaries, and joint ventures

  • Presentation of the memorandum and articles to a special general meeting

  • Inclusion of any other provision recommended by members through a special resolution.

• Amendment of Articles

  • To make changes to the articles, at least two-thirds of the elected directors or one-third of the company's members must propose the amendment

  • These changes should then be adopted by the members through a special resolution.

• Filing Amendments

  Following the modifications' approval, the Registrar must receive a certified copy of the special resolution and the amended articles, both of which have been signed by two directors, within thirty days of the adoption date.

• Option to Inter-State Co-operative Societies to Become Producer Companies

  Inter-State co-operative societies, with objectives extending beyond a single state, can apply for registration as Producer Companies under this Act. The application must include:

  • A special resolution approving the cooperative society's transition to a producer company, signed by at least two-thirds of its members overall

  • A statement with details of directors and the Chief Executive (if any) of the co-operative society, along with a list of its members

  • A declaration stating that the cooperative society participates in at least one of the endeavours outlined in Section 58IB

  • A declaration attesting to the veracity of the data in clauses (a) through (c), signed by two or more directors of the cooperative organisation.

• Name Change

  An interstate cooperative society's name includes ‘Producer Company Limited’ when it is registered as a Producer Company, with a term or phrase defining its identity coming before it.

• Certification and Transformation

  • The Registrar shall attest within thirty days of the completion of the conditions in sub-sections (1) to (3) that the co-operative society is registered and incorporated as a Producer Company under this Act

  • The registered inter-State co-operative society is transformed into a Producer Company and will follow the rules outlined in this Part, except for actions taken or omitted before the conversion. No one can claim against the co-operative society or the company due to this change

  • The Registrar of Companies that registers the company will inform the Registrar in whose register the previous inter-State co-operative society was listed for the appropriate deletion of the society's name

Did You Know?
The government of India has introduced a new Central Sector Scheme called ‘Formation and Promotion of 10,000 Farmer Producer Organisations (FPOs)’ with a budgeted allocation of ₹6865 crore, along with a defined strategy and committed resources to develop and promote 10,000 new FPOs nationwide.

Share Capital and Members Rights

A Producer Company's capital is made up of equity shares only.The number of shares a member has in the company should ideally be based on how much they support the company.

• Proportional Patronage (Section 581ZB)

  • As much as practicable, a member's shareholdings in a Producer firm should correspond to the assistance and business they give that firm

• Special User Rights (Section 581ZC)

  • According to the articles, active members of the firm may be entitled to certain privileges

  • The Producer Company can issue specific instruments related to these special rights

  • These instruments can be transferred to other active members of the company with the approval of the Board

  • ‘Special rights’ in this context refer to any rights connected to providing additional produce or other rights related to a member's produce, as determined by the Board.