India’s economy is mostly agrarian, with approximately 60% of the population relying on agricultural activities. However, the journey for primary producers and farmers in India has been tough. In an effort to address these issues, the Government of India established an expert committee, spearheaded by economist Y.K. Alagh, to go into the matter. The year 2002 saw the introduction of the concept of Producer Company registrations to the Indian economy under their guidance. Since then, these entities have played a vital role in facilitating primary producers’ access to essential resources such as inputs, credit, production technology, and markets. In this blog, we shall discuss about Farmer Producer Company in India under Companies Act, 2013.
What is a Farmer Producer Company in India under Companies Act, 2013?
A Farmer Producer Company in India under Companies Act, 2013 is a legally recognised entity comprising farmers and agriculturists, formed with the goal of enhancing their standard of living and ensuring support, incomes, and profitability. Governed by Section 465(1) of the Companies Act, 2013, a Producer Company can be created by 10 individuals or more, 2 institutions or more, or a combination of both. It is a hybrid between private limited companies and cooperative societies, offering democratic governance with equal voting rights for each member or producer, regardless of shareholding.
Objectives of the Farmer Producer Company
The primary objective of a Farmer Producer Company in India under Companies Act, 2013 is to help in formation of cooperative businesses like companies as well as enable conversion of existing cooperative businesses into companies. As outlined in the Companies Act, 2013, the objectives of a Producer Company should encompass various matters, including production, harvesting, procurement, processing, marketing, and export of primary production. The Farmer Producer Company in India under Companies Act, 2013 can also engage in activities such as processing, manufacturing, providing technical services, insurance, and welfare measures for its members. The overarching goal is to promote the principles of mutuality and mutual assistance among members.
Farmer Producer Company serves as a crucial mechanism for empowering farmers, fostering cooperative business models, and promoting sustainable agricultural practices in India.
Authorised Activities of Farmer Producer Company in India under Companies Act, 2013
Farmer Producer Company in India under Companies Act, 2013 are empowered to engage in a range of activities related to the produce of their members. The following activities are authorised for Producer Companies:
1. Processing of Produce:
This includes processing, preserving, brewing, drying, distilling, canning, as well as packaging of the produce of its members.
2. Manufacture, Sale, or Supply:
Producer Companies can engage in the manufacture, sale, or supply of equipment, machinery, or consumables to their producer members.
3. Education on Mutual Assistance:
Providing education on mutual assistance principles to the producer members of the company and others is an authorised activity.
4. Consultancy and Technical Services:
Offering consultancy services, technical services, training, research and development, and other necessary activities to promote the interests of producer members.
5. Power Generation and Distribution:
Engaging in the generation, transmission, and distribution of power, as well as conservation and communication related to primary produce and the revitalisation of land and water resources.
6. Insurance Services:
Providing insurance services for the primary produce and its producers is within the scope of authorised activities.
7. Promotion of Mutual Techniques:
Promoting the techniques of mutuality and mutual assistance is a recognised activity for Producer Companies.
8. Welfare Initiatives:
The Board of the Producer Company has the authority to decide and implement welfare measures for its members.
9. Financial Support:
Financing procurement, marketing, processing, and other activities, including extending credit facilities or providing financial assistance to producer members, is an authorised function.
10. Ancillary Activities:
Any other activity, ancillary or incidental to the main objectives of the Producer Company, aimed at promoting mutual assistance among producer members and aligning with the principles of mutuality.
Note:
Primary produce, as defined under the Companies Act, 1956, includes a wide range of products arising from agriculture, such as animal husbandry, floriculture, horticulture, viticulture, pisciculture, re-vegetation, bee raising, forestry, forest products, farming plantation products, produce of handloom, handicraft, and other cottage industries.
Pre-Incorporation Checklist for Farmer Producer Company in India under Companies Act, 2013
Before incorporating a Producer Company, certain criteria and procedures need to be followed. The pre-incorporation checklist includes:
1. Membership Criteria:
Any 10 or more producers can form a production company without an upper limit on the number of members.
Alternatively, any 2 or more producer institutions can come together to establish a producer company.
2. Paid-Up Capital Requirement:
A minimum paid-up capital is necessary for the incorporation of a producer company.
3. Directorship Requirements:
There should be a minimum of 5 directors and a maximum of 15 directors in a producer company.
4. Conversion and Registration:
Producer companies cannot be converted into public companies, but they have the option to convert into a multi-state co-operative society.
Registration Procedure for Farmer Producer Company in India under Companies Act, 2013
The registration process for a Producer Company is similar to that of a Private Limited Company:
1. Digital Signature and Director Identification Number:
Obtain DSC for proposed directors and also obtain DIN for directors by filing the necessary forms with identity and address proof.
2. Name Reservation:
File an application for name reservation with the Registrar of Companies. The name must end with “Producer Limited Company.”
3. Incorporation Application:
Once the name is approved, file an application for incorporation with the prescribed documents.
4. Memorandum and Articles of Association:
Draft the Memorandum of Association outlining the company’s objectives as well as the Articles of Association containing the company’s by-laws.
5. Affidavit and NOC:
All subscribers must sign an affidavit declaring their legal competency and obtain a utility bill and a No Objection Certificate for the registered office.
6. Submission and Approval:
Attach all documents to Form SPICe+ and upload them to the ROC website.
After proper verification, the ROC issues a Certificate of Incorporation, allowing the company to commence its operations.
This form of establishment empowers low-income primary producers to optimise their income through collective bargaining and direct product sales to consumers.
Final Thoughts
The Farmer Producer Company in India under Companies Act, 2013 is a vital initiative in India’s agricultural sector. Introduced in 2002 to address the challenges faced by farmers, FPCs facilitate cooperative business structures, combining aspects of private limited companies and cooperative societies. With democratic governance, equal voting rights, and a focus on mutual assistance, FPCs empower farmers economically. The authorised activities encompass a broad spectrum, from processing and manufacturing to insurance and welfare measures. The pre-incorporation checklist and registration procedures provide a systematic framework for establishing these entities. While specific tax benefits hinge on agricultural activities, FPCs play a central role in uplifting farmers, promoting sustainable practices, and fostering collective prosperity.
