What is a Producer Company?
Have you ever heard of a ‘producer company’ and wondered what it means? A Producer Company /Producer cooperative is a subset of a Private and Public Company. These businesses have characteristics of cooperative societies. Only ‘primary producers’ or ‘producer institutions’ can establish a producer cooperative and participate in its ownership.
People involved in the Primary Produce process are referred to as “Primary Producers”. Farmers’ primary produce includes animal husbandry, horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, beekeeping, and farming plantation products. It can also include the products of people working in handloom, handicraft, and other cottage industries, as well as byproducts and products derived from ancillary industries.
The primary characteristics of a Producer Company
A registered producer company operates as a private limited company, requiring the participation of ten or more ‘Primary Producers’ in its formation. The registration process, like that of a private company, requires a minimum of two individuals. The maximum number of members permitted is 50, while the maximum number of Directors is five. It is necessary to have a minimum authorized and paid-up capital of Rs. 5 lakh. It is critical to understand that the producer cooperative will never be converted into a public limited company. The members’ liability is limited to the unpaid amount of the shares they own. Moreover, profit distribution will be determined by the ratio of business contribution and investment.
Benefits of Incorporating Producer company
Members of a Producer cooperative will initially be compensated for the produces they contribute, as determined by the directors. This compensation can take the form of cash, in-kind services, or equity shares. Members will also have the opportunity to receive bonus shares in proportion to the number of shares they own. After accounting for limited returns and reserves, the surplus income may be distributed to members as a patronage bonus. A patronage bonus is a distribution of surplus income based on the members’ participation and utilization of the producer cooperative’s services.
Registration of the Company
The registration procedure is then similar to that of a Private Limited firm. First, obtain the Director’s Service Code and a Director Identification Number for the Producer cooperative’s proposed first directors. The application for name reservation can be filed with the Registrar of Companies after obtaining the DSC and DIN. The name must end with the words “Producer Limited Company.” Once the ROC has approved the name, apply for incorporation in the prescribed format to incorporate the Producer firm.
If the Registrar is satisfied with the Producer Company’s incorporation application, he or she will approve it and issue a Certificate of Incorporation. Once formed, a producer cooperative will function similarly to a private limited company, subject to certain restrictions. Unlike a Private Limited Company, it does not have a maximum number of members. Furthermore, even though the name of a Producer firm ends with the words “Producer Limited Company,” it shall never become or be deemed to become a public limited company.
Producer firms are hybrids of corporations and cooperatives. These firms gained ground on cooperatives. Because cooperatives are not commercial but rather welfare-oriented. Furthermore, they are promoted by the states, implying greater state involvement. Management under central legislation is also thought to be more libertarian than government control.
