The Ministry of Corporate Affairs made a significant announcement on February 11, 2021, unveiling the Producer Companies Rules, 2021. It’s important to highlight that these new rules usher in changes, supplanting the existing Producer Companies (General Reserve) Rules from 2003. This blog provides a concise overview of the recently introduced Producer Companies Rules for 2021.
Applicability of the Producer Companies Rules, 2021
The Producer Companies Rules, 2021 are applicable to individuals involved in various activities related to or associated with the production of specific types of produce. The scope of applicability for producer company registration encompasses a diverse range of sectors and products.
Produce Covered by the Rules
The Producer Companies Rules, 2021 apply to individuals engaged in activities connected with or relevant to the following types of produce:
1. Agricultural Produce:
- Farmers’ produce derived from agriculture.
- Produce from animal husbandry.
- Floriculture and horticulture products.
- Viticulture and pisciculture.
- Forest products and forestry.
- Re-vegetation activities.
- Farming plantation products.
- Bee raising.
2. Other Primary Activities/Services:
Production arising from any other primary activity or service that advances the interests of farmers and consumers.
3. Handicraft, Handlooms, and Cottage Industries:
Produce from individuals engaged in handicrafts, handlooms, and other cottage industries.
Inclusive Categories:
The applicability of the rules extends to:
1. Products Resulting from the Specified Activities:
All products resulting from the aforementioned agricultural, forestry, and cottage industry activities.
2. Ancillary Activities:
Products resulting from ancillary activities associated with the specified produce.
3. By-Products:
By-products derived from the initial produce covered by the rules.
4. Activities for Increase of Produce:
All activities aimed at the enhancement of any of the produce mentioned above.
This delineation ensures a comprehensive understanding of the applicability of the Producer Companies Rules, 2021, within the specified domains.
Procedure for Alteration of Registered Office from One State to Another
In accordance with Rule 4 of the Producer Company Rules, 2021, if a producer company intends to change its registered office to a different state, a specific procedure must be followed. The steps outlined below detail the process for such an alteration:
1. Intimation of Change in Registered Office:
The producer company is required to inform about the change in the situation of its registered office using Form No. INC 22.
2. Application for Alteration of Memorandum of Association:
An application for the alteration of the memorandum of association must be filed through Form No. INC 23.
3. Submission of Additional Documents with Form No. INC 23:
The following documents must be submitted along with Form No. INC 23:
- Copy of the Memorandum of Association containing all proposed alterations.
- Copy of the minutes of the relevant general meeting.
- Copy of the Power of Attorney, Board Resolution, or the executed vakalatnama.
- List of creditors and debenture holders, including:
- Name and address of all creditors and debenture holders.
- Nature and corresponding amount due to creditors and debenture holders related to debts, claims, or liabilities.
- Duly authenticated copy of the published advertisement and corresponding notices issued.
- Copy of any objections received, along with corresponding responses.
- Acknowledged copy of the service of the application (including all annexures) to the Registrar and the Chief Secretary of the State Government/Union Territory where the registered office is presently situated.
4. Filing of Central Government’s Approval:
A certified copy of the Central Government’s order approving the alteration of the memorandum should be filed using Form No. INC 28.
By adhering to this prescribed procedure, the producer company ensures a legal and systematic alteration of its registered office from one state to another in compliance with the Producer Company Rules, 2021.
Investment from and out of General Reserves: Guidelines under Rule 5
Rule 5 of the Producer Companies Rules, 2021 delineates the permissible avenues for investment from the general reserves of a producer company. The rule allows for investments in various financial instruments and institutions. The following are the sanctioned options for investment, either individually or in combination:
1. Investment in Fixed Deposits, Securities, Units, and Bonds:
Investment is authorized in fixed deposits, securities, units, and bonds issued by the following entities:
- Central Government
- State Government
- Co-operative societies
- Scheduled banks
2. Investment in Designated Banks:
The general reserves of the producer company can be invested in any of the following types of banks:
- Co-operative bank
- State co-operative bank
- Co-operative land development bank
- Central co-operative bank
- Any other scheduled bank
3. Investment in Specified Securities:
Investments are permitted in securities specified under Section 20 of the Indian Trust Act, 1882.
4. Investment in Shares or Securities of Co-operative Societies:
The general reserves can be used to invest in the shares or securities of:
- Inter-state co-operative societies
- Any other co-operative society
5. Investment in Public Financial Institutions:
Producer companies are allowed to invest in either shares or securities or any assets of public financial institutions, as specified under Section 2(72) of the Companies Act, 2013.
These guidelines provide a comprehensive framework for the prudent utilization of general reserves, allowing producer companies to make investments in a diversified portfolio of financial instruments and institutions. Compliance with Rule 5 ensures that such investments align with the regulatory framework set forth in the Producer Companies Rules, 2021.
Final Thoughts
The Producer Companies Rules, 2021, provide a strong regulatory framework for the governance and operations of producer companies in India. These rules facilitate the formation and functioning of entities engaged in agricultural and allied activities, aiming to empower farmers and promote their economic interests. The rules outline procedures for altering registered offices, ensuring transparency and legal compliance. Additionally, Rule 5 delineates avenues for investment from general reserves, fostering financial prudence. By encompassing a broad spectrum of activities, from agriculture to handicrafts, the rules align with the diverse nature of producer companies. Overall, the Producer Companies Rules, 2021, stand as a vital instrument in promoting cooperative endeavours, sustainable agricultural practices, and the economic well-being of those involved in the production and processing of agricultural produce.
