Introduction to Producer Limited Companies
Producer companies in India are distinctive corporate entities registered under the Companies Act of 2013. Their primary objective is to uplift the welfare of their members, who are typically involved in agriculture, rural entrepreneurship, or primary goods production. These organizations aim to foster collaboration, pool resources, and provide various benefits in agriculture and rural development.
Tax Benefits & Support for Farmer Producers
Farmer Producer Companies primarily serve Farmer Producer Members and offer them tax advantages:
- While Section 10(1) of the Income Tax Act of 1961 exempts agricultural income, specific tax exemptions for Producer Companies are not specified.
- Farmers can establish Producer Limited Company Services in alignment with the main objectives specified under the Companies Act, 2013, to avail tax benefits and exemptions.
- Income from the sale of grown produce is considered agricultural income under the Income Tax Act, 1961, and is entirely tax-free. However, further processing incurs taxation on 60% of the income.
- Reduced customs duty on agricultural equipment and parts imports benefits Producer Companies engaged in agricultural activities.
Primary Objectives of Producer Companies
According to the Companies Act, 2013, Producer Companies focus on the following objectives:
- Production, harvesting, procurement, and marketing of primary produce.
- Processing, manufacturing, and supplying machinery or equipment to members.
- Providing education, technical services, and welfare measures to promote member interests.
- Generation and distribution of power, conservation of resources, and insurance services.
- Financing and other ancillary activities related to procurement and marketing.
Financial Assistance
Farmer Producers can access support from the Small Farmers Agribusiness Consortium (SFAC), including:
- A Credit Guarantee Fund to mitigate credit risks for financial institutions lending to Farmer Producer Companies.
Matching equity grants of up to Rs. 10 Lac to augment borrowing capacity.
- Additionally, NABARD provides credit support for business operations and technical and managerial support.
Additional Requirements
Limited by Shares:
A quorum for General Meetings is set at 1/4th of the total members.
- Number of Directors & Minimum Quorum in Board Meetings:
- Requires a minimum of 5 and a maximum of 15 directors.
Board Meeting quorum is 1/3rd of the total strength, with a minimum of 3 directors.
- Company Secretary:
Companies with an average annual turnover exceeding Rs. 5 crore must appoint a full-time Company Secretary.
- Conversion:
Inter-state Co-operative Societies have the option to convert into a Producer Company.
- Voting Rights:
- Each member has one vote, with the Chairman having a casting vote in case of a tie.
Producer Companies operate as companies limited by shares.
- Membership & Quorum in General Meetings:
- Formed by 10 or more individuals or a combination of producer institutions and individuals.
Payment to Producer Company Limited Members
Producer Company members are compensated in the following ways:
- a) Value for Produce: Determined by the Board and disbursed in cash, kind, or equity shares.
- b) Limited Return: Members receive bonus shares based on their share capital contribution.
- c) Patronage Bonus: Surplus funds are distributed among members based on their participation in business activities.
Post-Registration Compliances for "Producer Company Limited"
- Statutory Audit
- Tax Audit
- Income Tax Returns Filing
- Annual ROC Compliances
- Ongoing Corporate Secretarial Compliances
- Fulfillment of any other Compliances or Returns mandated by relevant Competent Authorities, if applicable
