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Producer Company

About Producer Company

Section 465 of the Companies Act, 2013 offers that the provisions of Part IXA of the 1956 act shall be relevant mutatis mutandis to a producer enterprise in a manner as if the 1956 Act repealed till a specific act is enacted for producer companies. In a producer company, the shares are held solely by way of the producers. Furthermore, in contrast to in cooperatives, there is no provision of authorities representation on the board of directors.

Part XIA is divided into 12 chapters, comprising a whole of forty six sections. As per Section 581A(l) a producer employer skill a physique company having objects or things to do distinctive in Section 581B and registered as a producer enterprise underneath the Companies Act, 1956. Section 581A(k) defines a producer as a character engaged in any pastime related with or relatable to any most important produce. Section 581A(j)defines principal produce. It consists of the manufacturing of farmers, bobbing up from agriculture animal husbandry, horticulture, floriculture, pisciculture, etc., or produce of individuals engaged in handloom, handicraft and different cottage industries; or any merchandise ensuing from any of the aforementioned activities, inclusive of by-products of such products, and so forth. Section 581B defines the objects of a producer company. Some of them consist of processing such as preserving, drying, distilling, brewing, canning and packaging of the produce of its members; manufacture, sale or grant of machinery, gear or consumables usually to its members; supplying training on the mutual help ideas to its participants and others, and so forth.

Section 581A(d) defines participants as a individual or producer institution, whether or not included or not, admitted as a member of a producer organisation and who retains the skills essential for permanence as a member.

Furthermore, Section 581(2) states that each producer organization shall deal with the produce of its lively contributors for carrying out any of its objects targeted in this section. A producer business enterprise is a hybrid between cooperative societies and personal constrained companies. Agriculture is the spine of India. It acts as a fundamental supply of livelihood for about 58% of India’s population. On fifth July 2019, the central authorities introduced a sketch to promote 10,000 new farmer producer agencies over the subsequent 5 years.


In India, a majority of farmers are small and marginal who domesticate small plots of land. Their earnings is much less than their consumption expenditure due to subsequent droughts and monsoon failures, ensuing failure of crops. Other restraints such as nominal market information, excessive transaction costs, impeded get right of entry to to credits, heft hobby quotes on loans add to the farmers’ deficit, consequently reducing their scale of production. Furthermore, the majority of farmers in India work in isolation.

For years a plethora of strategies have been taken to prepare farmers, specifically smallholder farmers, in order to beautify their farm profitability. The thought of ‘Cooperative’ used to be one of the choices accessible for the producers to arrange themselves as energetic participant in the supply-chain by means of cost addition and commercial enterprise ownership.

On guidelines of an professional panel headed by using Y.K. Alagh, the authorities amended the Companies Act, 1956, in 2003 to encompass the thinking of producer corporations to consort the really useful elements of a cooperative for the welfare of farmers. Consequently, producer agencies have been brought to the statute by using enacting Part XIA. Producer organizations are essentially a company physique registered beneath the act which seeks to facilitate farmers to pool their assets and work as a collective team. The farmers emerge as shareholders of such physique company and it is run by using them conjointly.

Such collectivization is anticipated to decrease transaction fees and convey scale benefits via bulk buy of inputs, trade of expertise and statistics amongst members, price efficiencies in value-addition and marketing, higher fee realisation thru aggregation and fee addition, and chance reduction. Such collectivisation succours farmers socio-economically. The cooperative enables farmers to compete in contemporary markets and bolsters their bargaining power. The fundamental producer organisation registered in India was once Farmers Honey Bee India Producer Company Ltd. Following the change in 2003, a complete of 5 producer organizations had been registered in the succeeding economic year.

Some Salient Features of a producer company

  • It presents a statutory and regulatory framework to cooperatives which possess the functionalityfor producer-owned corporations to compete in modern-day markets. Furthermore, a cooperative society can be transformed into a producer employer if 2/3rd of its participants vote in favour of a decision to that effect. This conversion is in simple terms voluntary and the individuals of the organization have to be the major producers.
  • The producer business enterprise is dealt with as a non-public restricted company. Hence they have restrained legal responsibility to the extent of the quantity of unpaid on shares held through them. Furthermore, every person is given equal vote casting electricity irrespective of
    the shares owned by using them. Moreover, shares of a producer employer shall consist offairness shares only. The title of a producer organisation shall stop with ‘Producer Company Ltd.’
  • The most quantity of individuals can’t exceed 50. The minimal quantity of administrators need to be 5 and a minimal paid-up share capital of ₹5 lakhs is required to include a producer company. Shares are no longer publicly traded, however they can also be transferred with the approval of the board of directors. Furthermore, it shall in no way be deemed as a public company. The share of income will be in the ratio of commercial enterprise contribution and investment.
  • A producer agency enjoys larger credibility as in contrast to unregistered farmer/agriculturalists
    organisations. Furthermore, it is thoroughly entitled to receive deposits from or lend loans to its contributors at real looking fees of interest.
  • Lastly, the Companies Act, 2013 presents an chance to multi-state cooperative societies [Section 581A(e) to willingly choose for a new shape of producer companies. It allows mutual help and cooperative concepts foundation inside a greater liberal regulatory framework.

Formation and registration of a producer company

Section 581C states that any ten or extra individuals, every of them being a producer, or any two or extra producer institutions, or a aggregate of ten or greater men and women and producer establishments can
structure a producer company.

Section 581A(m) defines a producer organization as a producer enterprise or any different organization having solely producer or producers or producer business enterprise or producer businesses as its contributors whether or not integrated or no longer having any of the objects referred to in Section 581B and which is of the same opinion to make use of the offerings of the producer employer or producer
businesses as supplied in its articles.


The system of registering a producer enterprise is comparable to that of a personal confined company. It consists of the following steps.

  • Obtain a digital signature certificates (DSC) and administrators identification wide variety from its administrators alongside with self-attested copies of archives like contact details, PAN, aadhaar, etc.
  • Fill the proposed title in FORM-1A with the registrar of the worried country alongside with prescribed fees. Once the advised title has been authorised by way of the registrar, an utility of incorporation has to be filed in the prescribed format.
  • The entity has to draft memorandum of association (MoA) and articles of affiliation (AoA), bringing up the quantity of share capital to be registered and the bye-laws of the company.
  • Other files like the statutory announcement in FORM-1 declaring compliances of incidental matters, affidavits signed through subscribers, a statement drafted by way of a expert in the layout of FORM INC – 8, administrators consent and important points beneath FORM DIR – two and FORM DIR – 8, utility consignment and NOC used to be taken from the proprietor whose tackle is to be used as the registered workplace has to be filed.
  • Once the registrar is cosy with the software and the submitted documents, he shall inside 30 days of receipt of files required for registration, register the equal and problem a certificates of incorporation. Thereafter, the business enterprise can start its operations.

The promotion humans or the producer establishments have to be desirous of forming a producer enterprise having its object elucidated in Section 581B. They will have to comply with provisions of Part IXA and provisions of the Companies Act, 1956 in regard to registration.
The legal responsibility of the individuals will be restrained by using the memorandum to the amount, if any, unpaid on shares held through them. The producer agency may additionally additionally reimburse to its promoters all direct expenses related with advertising and registration, consisting of registration, criminal fees, printing of AoA and MoA, and the fee thereof shall be authorized by means of the first conventional assembly of the members. Upon registration, a producer corporation shall come to be a physique company as if it is a personal confined corporation except any ceiling on its members. A producer company, shall not, beneath any circumstance grow to be or deemed to end up a public company.


Membership and vote casting rights of members

Section 581D delineates vote casting rights of members. It prescribes vote casting rights in accordance to who varieties the producer company. In the case the place the possession consists totally of character members, the vote casting rights shall be based totally on a single vote for each and every member, irrespective of his shareholding or patronage of the producer company.

Section 581A(h) defines patronage as the use of offerings presented by way of the producer employer to its participants via participation in its commercial enterprise activities.

In a case the place the membership consists of produce establishments only, the vote casting rights if such producer establishments shall be decided on the foundation of their participation in the enterprise of the producer enterprise in the preceding year, as may also be decided on groundwork of their participation in the commercial enterprise of the producer corporation in the previous, as can also be detailed via articles of the company.

The proviso to Section 581D(1)(b) states that at some point of the first 12 months of registration, the balloting rights shall be decided on the groundwork of the shareholding by using such producer institutions.

In a case the place the membership consists of persons and producer institutions, the balloting rights shall be computed on the groundwork of a single vote for each member.

Notwithstanding the aforementioned, the articles of a producer organization may additionally supply for the prerequisites challenge to which a member may additionally proceed to preserve his membership and the manner in which balloting rights shall be exercised by way of the members. Likewise, any producer corporation may, if so accredited with the aid of its articles, avert the vote casting rights to energetic members, in any distinct or time-honored meeting. Any member who acquires any enterprise hobby which is in combat with the commercial enterprise of the producer business enterprise shall give up to be a member and be eliminated therefrom.

Benefits to members

Section 581E expounds the advantages handy to members. Subject to provisions made in the article, each member shall firstly obtain solely such fee for the produce or merchandise pooled and supplied, and the withheld rate might also be disbursed later in money or in form or by using allotment of fairness shares, in percentage to the produce furnished to the organization all through the economic year. The extent and manner of the identical are to be determined by way of the board. Section 581A(n) describes withheld fee as phase of the fee due and payable for items provided by means of any member to the producer organisation and as withheld with the aid of the corporation for price on a subsequent date.

A member shall get hold of solely a restrained return on groundwork of share capital contributed. The proviso to Section 581E(2) states that each such member may additionally be distributed bonus shares in accordance with Section 581ZJ. Section 581ZJ prescribes difficulty of bonus shares, upon hints of the board and passing of the decision in a common meeting. Such bonus share shall be issued with the aid of the capitalization of quantities from prevalent reserves in share to shares held via members. Any surplus, final after making provision for fee of restrained return and sources referred to in Section 581ZI, might also be dispensed as patronage bonus, amongst the members. Section 581ZI explicates that each producer enterprise shall hold a well-known reserve in each and every economic year. Section 581A(i) defines patronage bonus as repayments made by way of a producer organization out of its
surplus earnings to the individuals in share to their respective patronage. The patronage is to be paid in percentage to the member’s participation in the business. It may additionally be paid in money or via way of allotment of fairness shares, or each as determined through the individuals at the everyday meeting.

Memorandum and Articles of a producer company

Section 581F exemplifies that a memorandum of each producer organisation shall kingdom the title of the organization with ‘Producer Company Ltd.’ as its suffix, the nation the place the registered workplace is situated, the predominant objects for incorporation, identify and addresses of subscribers, quantity of share capital and division thereof, that the legal responsibility of its individuals is limited, and the quantity of shares contrary to every subscriber’s name, furnished no subscriber shall take much less than one share.

Section 581M describes the manner of change of the memorandum. A producer company, may also by way of different resolution, no longer inconsistent with Section 581B alter its objects. The altered memorandum alongside with a replica of the exclusive decision duly licensed with the aid of two administrators shall be filed with the registrar inside 30 days from date of its adoption. Section 581(G) exemplifies that articles of each producer agency shall nation concepts of mutual assistance, namely, the membership is voluntary, every member shall have solely a single vote irrespective of the shareholding, the employer shall be administered with the aid of a board and shall be to blame to its members, there shall be restricted return share capital, and provisions shall be made for the training of participants and personnel on methods of mutual assistance. Furthermore, it shall additionally country that the producer business enterprise shall actively cooperate with different producer agencies at a nearby or countrywide level so as to fine serve the activity of the communities it purports to serve. The equal shall be presented, for registration to the registrar of the kingdom in which the registered workplace of the agency is situated.

Section 581-I describes the method of change of articles. Any change shall be proposed through now not much less than 2/3rd of the elected administrators or through now not much less than 1/3 of the participants of the producer company, and adopted by way of the contributors with the aid of a exclusive resolution. The amended articles alongside with the replica of the specific decision duly licensed by using two administrators shall be filed with the registrar inside 30 days from date of its adoption.

Directors in a producer company

Section 581O states that a producer corporation shall have at least 5 and no greater than 15 directors. However, in case of an inter-state cooperative society included as a producer company, such agency may also have greater than 15 administrators for a length of 1 12 months from the date of its incorporation.

According to Section 581P, the election of administrators shall be performed inside a length of ninety days of the registration of the producer company. Every man or woman shall maintain the workplace of a director for a duration now not much less than 1 yr however no longer exceeding 5 years. Every director shall be eligible for reappointment after retirement. The administrators shall be appointed or elected by
means of the participants in the annual common meeting. Furthermore, the board can also appoint one or extra specialist administrators no longer exceeding 1/5th of the complete quantity of administrators or appoint any different man or woman as an extra director as the board may additionally deem fit. Provided such administrators shall now not be eligible to vote in the election of the chairman and their duration of workplace shall no longer exceed such length as can also be targeted in the articles. Section 581T exemplifies the legal responsibility of directors. It states that when a director votes for a decision in contravention with the provisions of the act, has made any income of end result of such contravention, or the corporation has suffered a loss or injury due to such contravention, the administrators shall be held together and severally dependable to make excellent the loss or harm incurred. Furthermore, the legal responsibility imposed shall be in addition to and now not in derogation of a legal responsibility imposed on a director below this act.

Meetings of a producer company

Section 581Y states that until the articles require a large number, 1/4th of the complete membership shall represent the quorum at a well-known meeting. Section 581ZA necessitates a producer agency to maintain an annual typical assembly in addition to any different meetings. Such shall be cited in the notices for calling such a meeting, and no longer greater than 15 months shall elapse between the date of one annual widely wide-spread assembly and that of the next. However, the registrar may additionally allow an extension for any unique reasons.

A producer employer shall preserve its first annual normal assembly inside a length of ninety days from date of its incorporation. Such conferences are held to appoint directors, shall be referred to as for throughout business hours of the day inside 14 days’ prior notice, and 14th of the complete variety of individuals of the enterprise shall be viewed as the quorum.

Section 581V states that a assembly of the board shall be held much less than as soon as in each three months and at least four such conferences shall be held in each year. Notice of the assembly shall be given 7 days prior to the date and the quorum for the assembly shall be 1/3 of the whole power of directors, difficulty to a minimal of 3.

Committee of directors, chief executive, and secretary

Section 581U prescribes for a committee of administrators for the cause of supporting the board. It shall feature below the instructions of the board and may additionally with its approval appoint a such range of humans as it deems fit.

Section 581W states that each producer corporation shall have a full-time chief govt to be appointed by means of the board from amongst person’s different members. He shall be the ex-officio director of the board and is entrusted with widespread powers of administration as the board might also determine. Section 581X prescribes each and every producer agency having an common turnover exceeding ₹five crores in every of three consecutive monetary years to have a full-time secretary. He shall be a member of ICSI and the corporation shall be responsible to a high-quality if it fails to comply with the provision.

Members rights of a producer company

As per Section 581Z, each member shall have one vote and in the case of a tie, the chairman shall have a casting vote besides in instances of the election of the chairman. Section 581ZB states that shares held by using a member shall be in percentage to the patronage of the company.
Section 581ZD expounds that shares of a member shall no longer transferrable. However, a member may also after acquiring prior approval of the board switch entire or phase of his shares alongside with exceptional ant rights to an energetic member at par value. Section 581ZD(3) states that each and every member shall, inside three months of turning into a member, nominate a individual to entire his shares in the agency shall vest in the match of his demise.

The nominee shall, on the loss of life of the member, end up entitled to all the rights in the shares of the organization and the board shall switch the shares of the deceased member to his nominee. If such a nominee is now not a producer, the shares shall be surrendered with specific rights. Furthermore, the place a member has ceased to a most important producer or has failed to preserve such skills as stated in the articles, the board shall direct the capitulation of shares with distinctive rights at par price as may additionally be decided via the board.

Audits and Accounts

Section 581ZE states that each producer shall hold books of account at its registered office. Section 581ZF necessitates an inner audit of such accounts, at such interval and in such manner as may also be special in articles, by means of a chartered accountant. Section 581ZE(2) prescribes that the stability sheet and income and loss debts of the producer enterprise shall be organized in accordance with provisions contained in Section 211. Section 581ZG elucidates the responsibilities of the auditor. They consist of a file on extra things such as the quantity of money owed alongside with particulars of horrific debt, verification of money stability and securities, small print of belongings and liabilities, etc.


Section 581ZI states that each and every producer organization shall keep a familiar reserve in each and every economic year, in addition to any reserve maintained via it as may additionally be specific in articles. In case a employer doesn’t have ample cash in a monetary 12 months to transfer, the contribution of the reserve shall be shared amongst individuals in share to their patronage. A producer agency may, by means of distinctive resolution, make a donation to any group or person for the cause of merchandising the social and financial welfare of producer contributors or, advertising mutual help principles. However, Section 581ZH states that shall make donation in any economic 12 months shall now not exceed 35 of the internet earnings of the producer agency in the economic yr right now previous the monetary yr in which donation was once made. Such donation shall no longer be made for any political purpose.

Loans to members

Section 581ZK expounds that the board of a public company, difficulty to its articles, grant monetary help too its contributors by means of way of.

Credit facility: This is reachable to any member in connection with the commercial enterprise of the producer company. The length shall no longer exceed six months.

Loans and advances: This is reachable to participants in opposition to safety point out in the articles. It shall be repaid inside a length of three months however now not exceeding 7 years from the date of disbursement of such mortgage or advances. Any mortgage or increase to the director or his household shall be granted solely after approval with the aid of participants in a popular meeting.

NABARD: It stands for the country wide financial institution for agriculture and rural development. It affords economic help and aid to meet the wants of producer companies. In 2011, it created a committed fund of ₹50 crores referred to as the producer business enterprise development fund. It seeks to help producer businesses on three levels, credit score facilitation, ability constructing and market linkage

Furthermore, a ₹200 crore fund was once set up by using NABARD in 2014-15 referred to as the producers’ employer improvement and upliftment corpus. It aimed to construct 2,000 farmer produce firms in the united states and promote new farmer producer organisations.

SFAC: Small farmer’s agri-business consortium is a society registered in 1994 to facilitate agri-business ventures by using actuating personal funding via project capital help in shut affiliation with the economic association. It offers each fairness furnish scheme and deposit warranty fund scheme issue to a most of ₹15 lakh in two tranche inside a length of three years to farmer produce enterprises at nascent stage. Section 581ZL states that the normal reserves of a producer corporation shall be invested to invulnerable the first-rate appropriate return and approves it to collect shares of different producer companies.

Tax advantages reachable to producer companies

Initially producer agencies have been dealt with at par with personal organizations and taxed accordingly. Section 10(1) of the earnings tax act, 1961 exempts agricultural income. This varies on the foundation of agricultural endeavor carried out. The authorities vide the finance act, 2002 decreased the customs responsibility on the import of agricultural equipment. Section 80P of the earnings tax, 1961 presents a
hundred percent deduction to farmer produce corporations registered as cooperative societies. In the 2018 finances speech, this gain was once sought to be prolonged to farmer produce groups too. Such deduction shall be for a length of 5 years and for these who have a whole turnover of up to ₹100 crores. at some point of the monetary 12 months and their earnings is derived from advertising agricultural
produce, buy of seeds, cattle meant for agriculture, and processing of agriculture produce for its members. Such a tax incentive used to be given to inspire operation veggies and provide a increase to Sampada Yojana.


Recently, the cupboard accredited the organizations change bill, 2020. In the CLC report, the producer groups are described as a physique company comprising of farmers and agriculturalists who work in cooperation with every different to promote higher requirements of dwelling and attain less difficult get admission to to credit, technology, market, etc. Furthermore, the invoice additionally supposes the insertion of chapter-XXIA in the act. The chapter will grant a framework for classification of producer agencies and relaxations and advantages prolonged thereto comparable to the 1956 act.
Moreover, in line with the 2019-20 price range speech of Hon’ble Prime Minister Narendra Modi, the centre seeks to obtain 10,000 farmer establishments in the subsequent 5 years. Such a scheme will assist mobilise at least three million farmers. The scheme additionally postulates to minimize documentation, furnish working capital for procurement, and restructure SFAC’s. The centre has additionally disbursed ₹6,868 for the new scheme and it additionally plans to promote 250 new farmer producer establishments in 2020-21. Producer organizations are a extremely good thought to mobilise farmers together, do away with middlemen, with higher market viability and bargaining power. It has the attainable to radically change Indian agriculture. What has modified is that the authorities has commenced treating agriculture as a business, granting loans, formulating schemes, this helps uplift marginalised farmers. Companies like AMUL, Sayhyadri farms, Mahindra Agribusiness, etc. have had big success in the area of agriculture as producer companies. With the trendy scheme as introduced in this year’s budget, it is sure to increase.


Eligibility For NSIC Registration


Tender at No Cost

Government issues Tender sets at free of cost.

Reservation for MSEs

Central Government and PSUs are reversed their 25% of total
requirements for enlisted MSEs.

No Earnest Money Deposit

MSEs with NSIC registration allow to bid with any Earnest Money Deposit.

Special Product List for MSEs

Government of India reverse 358 items to purchase from only MSEs.

Procurement from MSEs

While allotment of tender, government allows L1 +15% to supply upto 25% of total requirement.

Other Multiple Schemes

Ministry of MSME introduces various schemes for NSIC holders time to time.

Validity of Producer Company

The Registration Certificate issued under Single Point Registration Scheme is valid for 2 (Two) years from the date of issue of certificate.
Above Registration is to be renewed after every 2 years.


Pan Card

Detail of Plant & Machinery

Udyam Registration

Audited Balance Sheet for last 3 years

Latest Electricity Bill

Bankers Report

List of Directors/Partners

List of Plant & Machinery

List of quality control equipment and testing facility available in factory.

Copy of Ownership documents of the Premises or Copy of Rent Agreement

Frequently Asked Questions (FAQs)

Yes, in the Public Procurement Order 2012 service industries are at par  with the manufacturing industry.

Investment in Plant & Machinery or equipment does not exceed one  crore rupees and turnover does not exceed five crore rupees. 

The Buying Agency can verify the GP Enlistment Certificate either from  NSIC website www.nsic.co.in OR www.nsicspronline.com 

SPRS Enlistment Certificate is valid for Two Years from the date of issue. 

NSIC do not register the traders. 

MSEs engaged in manufacturing of Ayurveda, Siddha, Unani &  Homeopathy (ASU&H) Drugs will be considered for enlistment under Single Point  Registration Scheme. 

Yes. NSIC issues Provisional Enlistment Certificate to those MSEs under  SPRS who have started the production but not having the audited Balance sheet for  the last one year.

In the year 2006 

Investment in Plant & Machinery or equipment does not exceed ten crore  rupees and turnover does not exceed fifty crore rupees. 


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