How to Register a Producer Company in India

Registering a producer company runs on section 378C of the Companies Act, 2013, and the requirement that is specific to this form is the promoter count: ten or more individuals who are producers, or two or more Producer Institutions. Everything else is the ordinary incorporation sequence with two Chapter XXIA documents in place of the general ones.

Who can register a producer company under section 378C?

Section 378C(1) names three eligible promoter groups, and the arithmetic differs across them.

The eligible individuals are producers, which section 378A(k) defines as any person engaged in any activity connected with or relatable to any primary produce. A Producer Institution under section 378A(m) is a producer company or other institution whose members are only producers or producer companies, incorporated or not, having any of the section 378B objects and agreeing to use the services of the producer company as its articles provide.

The promoters must be desirous of forming a Producer Company having its objects specified in section 378B and otherwise complying with Chapter XXIA and the registration provisions of the Act.

What is the registration sequence, step by step?

1. Fix the objects against section 378B(1), choosing one or more of its eleven clauses. Section 378F(c) requires the memorandum to state them as the main objects.
2. Draft the memorandum to the nine-item template in section 378F, with "Producer Company Limited" as the last words of the name under clause (a).
3. Draft the articles to section 378G. Sub-section (2) requires the seven mutual assistance principles; sub-section (3) requires sixteen further provisions in clauses (a) to (p).
4. Present both to the Registrar of the State in which the memorandum states the registered office is to be situate, per section 378G(1), with the articles duly signed by the subscribers to the memorandum.
5. Registrar registers within thirty days of receiving the required documents, if satisfied that the Act has been complied with, and issues a certificate of incorporation under section 378C(2).
6. Elect the Board within ninety days of registration, per section 378P(2). Until then the Members who signed the memorandum may designate an interim Board of not less than five directors under section 378P(1). The standing size rule is section 378-O: at least five and not more than fifteen directors, with a proviso letting a converted inter-State co-operative society exceed fifteen for one year from its incorporation as a producer company.
7. Lay the memorandum and articles before a special general meeting within ninety days of registration, which section 378G(3)(o) requires the articles to provide for.

What must the section 378F memorandum contain?

Nine items, in clauses (a) to (i):

• (a) The name of the company with "Producer Company Limited" as the last words.
• (b) The State in which the registered office is to situate.
• (c) Main objects, one or more of those specified in section 378B.
• (d) Names and addresses of the persons who have subscribed to the memorandum.
• (e) The amount of share capital the company is to be registered with, and its division into shares of a fixed amount.
• (f) Names, addresses and occupations of the subscribers being producers, who shall act as the first directors in accordance with section 378J(2).
• (g) That the liability of its members is limited.
• (h) Against each subscriber's name, the number of shares taken, with a proviso that no subscriber shall take less than one share.
• (i) Where the objects are not confined to one State, the States to whose territories they extend.

Clause (b) and the registered office provisions of the general Act read together, since section 378ZR applies the private-company provisions of the Act as far as they do not conflict with the Chapter.

What do the section 378G articles have to contain?

The articles carry two required blocks. Sub-section (2) sets the mutual assistance principles, which section 378A(f) then defines by reference back to it: voluntary and available membership for all eligible persons willing to accept the duties of membership; a single vote per Member irrespective of shareholding, save as otherwise provided in the Chapter; administration by an elected or appointed Board accountable to the Members; particulars on limited return on share capital; equitable distribution of surplus through business development, common facilities and distribution in proportion to participation; provision for education of Members and employees on mutuality; and active co-operation with other producer companies.

Sub-section (3) then requires sixteen further provisions in clauses (a) to (p), including the manner of ascertaining patronage and patronage-based voting rights, the constitution of the Board and the terms of the Chief Executive's appointment, the determination and distribution of the withheld price, the disbursement of patronage bonus, the reserves under section 378Z-I, the terms of loans to Members, and any other provision Members recommend by special resolution.

What is the effect of registration?

Section 378C(3) makes the liability of Members limited by the memorandum to the amount, if any, unpaid on their shares, and terms the company one limited by shares.

Section 378C(5) then sets the status that separates this form from an ordinary company. On registration under sub-section (2), the producer company becomes a body corporate as if it is a private limited company, with the Chapter applying, without, however, any limit to the number of Members thereof, and it shall not, under any circumstance, whatsoever, become or be deemed to become a public limited company.

Section 378C(4) permits reimbursement to the promoters of direct costs associated with promotion and registration, including registration, legal fees and printing of the memorandum and articles, subject to approval at the first general meeting of the Members.

The conversion route in section 378J

An existing inter-State co-operative society need not register a producer company from scratch, and the section splits its requirements across two sub-sections.

Section 378J(1) opens with a notwithstanding on section 378C(1) and lets any inter-State co-operative society with objects not confined to one State make an application to the Registrar for registration as a producer company under the Chapter. That geographic condition is the only one sub-section (1) imposes.

Section 378J(2) then lists what must accompany the application, in clauses (a) to (d): a copy of the special resolution, of not less than two-thirds of total members, for incorporation as a producer company; a statement showing the names, addresses or occupation of the directors and the Chief Executive and a list of members; a statement indicating that the inter-State co-operative society is engaged in any one or more of the objects specified in section 378B; and a declaration by two or more of its directors certifying that the particulars in clauses (a) to (c) are correct. So the section 378B objects are an element of the accompanying statement under clause (c), not a condition of eligibility under sub-section (1).

On compliance with sub-sections (1) to (3), section 378J(4) requires the Registrar to certify the registration within a period of thirty days of the receipt of application, and section 378J(6) then transforms the society into a producer company governed by this Chapter to the exclusion of its earlier law.

The related provisions carry the consequences of that route: section 378K on the effect of incorporation, section 378L on vesting of the undertaking, section 378M on concessions deemed granted, and section 378N on officers and employees. Conversion in the other direction is provided for by section 378ZS, re-conversion of a producer company to an inter-State co-operative society. The route is distinct from conversion of an LLP into a company under sections 366 to 374, which is a Chapter XXI provision and reaches different entities.

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