How to Register a Producer Company in India: Who Can Be Members, Objects and Registration
Who can form a producer company, which objects qualify, how voting works and how registration under Chapter XXIA of the Companies Act 2013 proceeds.
CA Harun Raaj
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A producer company is the Companies Act's answer to a practical problem: farmers, fish farmers, weavers and other primary producers (s.378A(j)–(k), Companies Act 2013) need collective marketing, processing and bargaining power, but a conventional company concentrates control in proportion to capital. The producer company keeps the limited-company shell — separate legal identity, limited liability — while running on co-operative principles. The whole of this design sits in Chapter XXIA (Producer Companies) of the Companies Act 2013, inserted by Act 29 of 2020 w.e.f. 11-2-2021.
What it is: a private-limited-like body that can never go public
On registration, a producer company becomes a body corporate as if it were a private limited company governed by the producer-company Chapter — but without any limit on the number of members, and it can never, under any circumstance, become or be deemed to become a public limited company (s.378C(5), Companies Act 2013). Its liability form is fixed: members' liability is limited by the memorandum to the amount unpaid on their shares, and it is termed a company limited by shares (s.378C(3), Companies Act 2013). Its name must end with the words "Producer Company Limited" (s.378F(a), Companies Act 2013).
Who can be members
Any ten or more individuals, each being a producer, or any two or more producer institutions, or a combination of ten or more individuals and producer institutions, desiring to form a producer company with objects specified in section 378B and otherwise complying with the Chapter and the Act's registration requirements, may form one (s.378C(1), Companies Act 2013). A producer is any person engaged in any activity connected with or relatable to primary produce, which covers farm produce (including animal husbandry, horticulture, pisciculture and forestry) and the produce of handloom, handicraft and other cottage industries (s.378A(j)–(k), Companies Act 2013). In practice that means three doors: ten producers together, two producer institutions together, or a mixed group of ten or more.
Two conflict rules police the membership. No person with a business interest in conflict with the producer company's business may become a member (s.378D(4), Companies Act 2013), and a member who later acquires such a conflicting interest ceases to be a member and is removed under the articles (s.378D(5), Companies Act 2013). A trader competing with the company's marketing business cannot sit inside it.
What objects qualify
The objects must relate to all or any of a closed statutory list (s.378B(1), Companies Act 2013): production, harvesting, procurement, grading, pooling, handling, marketing, selling and export of members' primary produce, or import of goods or services for their benefit; processing including preserving, drying, distilling, brewing, vinting, canning and packaging of members' produce; manufacture, sale or supply of machinery, equipment or consumables mainly to members; education on mutual-assistance principles; technical, consultancy, training, research and development services for members' interests; power generation, transmission and distribution and land and water revitalisation relatable to primary produce; insurance of producers or their produce; promoting mutuality techniques; member welfare measures decided by the board; ancillary activities and anything promoting mutuality and mutual assistance among members; and financing of these activities including credit facilities and financial services to members (s.378B(1)(a)–(k), Companies Act 2013).
Two points matter for drafting. First, the memorandum must state that the main objects are one or more of the section 378B objects (s.378F(c), Companies Act 2013) — anything outside the list does not belong. Second, the company must deal primarily with the produce of its active members in carrying out its objects (s.378B(2), Companies Act 2013). A producer company is not a general agri-business vehicle; it exists to handle its own members' produce first.
Voting: one member, one vote
Where membership consists solely of individuals, voting is one vote per member regardless of shareholding or patronage (s.378D(1)(a), Companies Act 2013). Where only producer institutions are members, voting follows participation in the company's business in the previous year as the articles specify — except in the first year, when it follows shareholding (s.378D(1)(b), Companies Act 2013). In mixed individual-plus-institution membership, it is one vote per member again (s.378D(1)(c), Companies Act 2013). The articles may set conditions for retaining membership and the manner of exercising votes (s.378D(2), Companies Act 2013), and may restrict voting to active members at special or general meetings (s.378D(3), Companies Act 2013). Capital does not buy control: in individual and mixed membership each member has one vote regardless of shares or patronage (s.378D(1)(a), (c), Companies Act 2013).
How registration works
The formation group prepares a memorandum stating the "Producer Company Limited" name, the state of the registered office, section 378B main objects, the subscribers' names and addresses, the share capital and its division into shares of fixed amount, the producer-subscribers who will act as first directors with their names, addresses and occupations, and the limited liability of members (s.378F, Companies Act 2013). It must also state the number of shares each subscriber takes (at least one each) and, if objects extend beyond one State, those States (s.378F(d), (h), (i), Companies Act 2013). Articles signed by the subscribers, containing the mutual assistance principles, are filed with the memorandum (s.378G(1)–(2), Companies Act 2013). If the Registrar is satisfied that all requirements on registration and matters precedent and incidental are complied with, the Act directs the Registrar to register the memorandum, articles and other documents within thirty days of receiving the required documents and to issue the certificate of incorporation (s.378C(2), Companies Act 2013).
Other rules that apply once registered
All limitations, restrictions and provisions of the Act applicable to a private company apply to a producer company as if it were a private limited company, so far as they do not conflict with the Chapter (s.378ZR, Companies Act 2013). The company may reimburse its promoters the direct costs of promotion and registration, including registration and legal fees and the printing of the memorandum and articles, subject to approval at its first general meeting of members (s.378C(4), Companies Act 2013). Every producer company must have at least five and not more than fifteen directors (s.378-O, Companies Act 2013).
Who it suits
The form suits a group of producers — a village cluster, a farmer-producer organisation or a weaver collective, that already markets together and wants to formalise with limited liability and a clear legal identity, without letting the largest contributor capture control. Because voting follows membership rather than capital for individuals (s.378D(1)(a), Companies Act 2013), a smallholder and a large farmer stand equal at general meetings, subject to any articles restricting votes to active members (s.378D(3), Companies Act 2013). It does not suit a single agri-entrepreneur, an investor-owned food-processing business, or anyone needing public fundraising — the company can never become public (s.378C(5), Companies Act 2013) and must deal primarily with active members' produce (s.378B(2), Companies Act 2013).
Producer company vs co-operative society
The producer company borrows co-operative principles but lives under company law. Movement between the forms is expressly provided in both directions. An inter-State co-operative society with objects not confined to one State may apply to the Registrar to become a producer company, with a special resolution of not less than two-thirds of its total members (s.378J(1)–(2), Companies Act 2013). In reverse, an erstwhile inter-State co-operative society that became a producer company may apply to the Tribunal for re-conversion — after a general-meeting resolution by not less than two-thirds of members present and voting, or on request by creditors representing three-fourths of total creditor value (s.378ZS(1), Companies Act 2013). The Tribunal directs a meeting of members or creditors (s.378ZS(2), Companies Act 2013), and if a majority in number representing three-fourths in value present and voting in person agree, the Tribunal-sanctioned re-conversion binds all members, creditors and the company (s.378ZS(3), Companies Act 2013). The Registrar must certify registration of an applying inter-State co-operative society within thirty days of receiving the application (s.378J(4), Companies Act 2013). Choose the producer form when the group wants company-law identity with no cap on the number of members; the re-conversion route exists only for an erstwhile inter-State co-operative society.
What to do now
- Next step: present the memorandum and the articles, signed by the subscribers, to the Registrar of the State in which the registered office will be (s.378G(1), Companies Act 2013). Check every subscriber is a producer or a producer institution and that no one has a conflicting business interest (s.378C(1); s.378D(4), Companies Act 2013).
- Timeline: if the Registrar is satisfied, registration follows within thirty days of receiving the documents (s.378C(2), Companies Act 2013). Director elections must then be held within ninety days of registration (s.378P(2), Companies Act 2013).
- Consequence to plan for: once registered, the company can never become a public limited company (s.378C(5), Companies Act 2013), and a member who later acquires a conflicting business interest ceases to be a member (s.378D(5), Companies Act 2013).
Have a CA review your facts before you act or file.
FAQ
Who can register a producer company in India?
Any ten or more individuals each being a producer, any two or more producer institutions, or a combination of ten or more individuals and producer institutions, with section 378B objects and compliance with the Chapter and registration provisions (s.378C(1), Companies Act 2013).
What is the minimum number of members for a producer company?
Ten producers, or two producer institutions, or a combined ten (s.378C(1), Companies Act 2013). There is no upper limit on members (s.378C(5), Companies Act 2013).
What objects can a producer company pursue?
Only the statutory list: handling, marketing, export and processing of members' primary produce, inputs and equipment supply, mutual-assistance education, technical services, power and resource work relatable to produce, insurance, welfare, ancillary activities and member financing (s.378B(1), Companies Act 2013) — and it must deal primarily with active members' produce (s.378B(2), Companies Act 2013).
How does voting work in a producer company?
One member one vote for individual-only or mixed membership, regardless of shareholding (s.378D(1)(a), (c), Companies Act 2013); participation-based voting for institution-only membership, shareholding-based in the first year (s.378D(1)(b), Companies Act 2013). Articles may restrict votes to active members (s.378D(3), Companies Act 2013).
Can a competitor join?
No person with a business interest conflicting with the company's business may become a member, and a member acquiring one ceases to be one (s.378D(4)–(5), Companies Act 2013).
What must the memorandum contain?
The name ending in "Producer Company Limited", the state of the registered office, section 378B main objects, subscribers' details, share capital and its division, the producer-subscribers acting as first directors, and limited liability (s.378F, Companies Act 2013), plus the number of shares each subscriber takes (at least one each) and, if objects extend beyond one State, those States (s.378F(d), (h), (i), Companies Act 2013).
Who acts as first directors?
The memorandum names the producer-subscribers who will act as first directors (s.378F(f), Companies Act 2013); the signatories designate a first Board of at least five (s.378P(1); s.378-O, Companies Act 2013), which governs until directors are elected within ninety days of registration (s.378P(2), Companies Act 2013). The Board may later co-opt expert or additional directors up to one-fifth of its strength (s.378P(6), Companies Act 2013).
Can a producer company become a public limited company?
Never — it cannot under any circumstance become or be deemed to become a public limited company (s.378C(5), Companies Act 2013).
How is a producer company different from a co-operative society?
It is a body corporate under company law operating as if a private limited company with no cap on the number of members (s.378C(5), Companies Act 2013), with limited liability by shares (s.378C(3), Companies Act 2013). A producer company that was an erstwhile inter-State co-operative society may apply to the Tribunal after a two-thirds member resolution or a three-fourths-value creditor request; re-conversion then needs approval at a Tribunal-directed meeting and the Tribunal's sanction (s.378ZS(1)–(3), Companies Act 2013).
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