Producer Companies- Treatment Under Indian Corporate Law


There was a bill which was introduced by Ministry of company Affairs India which was based on the report which was submitted by high powered committee under chairmanship of Dr. YK Alagh under the Companies Act, 1956.[1] Under this act primary producers have organised themselves to gain a maximum number of profit from the market under the oriented economy. The concept of Producer Company was introduced by Ministry of Corporate Affairs.[2]


Under The Companies Act, 2013 producer is defined as any person who is engaged in any activity which is connected with or relatable under any primary produce. A producer company must have a body corporate which includes the production pooling grading harvesting procurement marketing export of primary producer of the members setting handling Import of goods or services for the benefit.[3]



Under this Section the Companies Act 1956 and the registration of The Companies (Sikkim) Act, 1961 shall stand repealed. Under Section 465 of the Companies Act the provision of part 9-A of the Companies Act, 1956 will be applicable in a manner as per the Companies Act 1956 was not repealed under the special at which is enacted for producer companies which is given in the first provision of Section 465 of the Companies Act, 2013.[4]

This leaves to know separate revision under the Companies Act, 2013 regarding the producer company as governed by chapter IXA of the Companies Act, 2013.[5]


A body corporate which is registered as a producer company and user Companies Act, 2013 is known as a producer company and will carry the following activities is broadly-

  1. Production, selling, harvesting, pooling, handling, selling, marketing, export of primary producer of the members or import of goods or services for the benefit.
  2. Rendering the Technical Services, training education research and development Consultancy Services and the development of all the activities which related to the promotion of interest of the members.
  3. Generation, distribution of power transmission and water resources and the conversation and Communication of relatable to primary produce.
  4. Promoting of mutual assistance, financial services and welfare measures of producers or their primary produce.


 Under the ownership of the producer company is-

  1. Only the person who is engaged in an activity which is connected or related to the primary produce can participate.
  2. The members must be related to the primary producers.
  • If any amount is unpaid on the shares then the company term with a limited liability you will have the Limited number of members.
  1. The name of the company shall only and with the words producer Company Limited.
  2. For becoming private limited company the producer company shall on the registration for food the purpose of application of law of and administration of the company.
  3. This must not comply with the provision of part IXA.
  • The limit of maximum number of members is not applicable to these Companies.


The share capital of a producer companies must consist of equity shares only and the member of equity shares cannot be publicly traded but can only be transferred.[6]


The voting rights can only be based on a single word for every member. Where the voting rights are for producer institution must be based on the participation. When there is the combination of both the individual and producer Institutions then the voting right must be based on every single vote for every member.


 Every company has to have

  1. At least 5 and not more than 15 directors.
  2. A full time chief executive should (CEO) be appointed by the board and

iii. “shall be entrusted with substantial powers of management as the board may determine”.[7]

“If any director resigns from his post the election shall be conducted within 90 days from the date of resignation of such director.  The Director shall hold his office for a period not less than 1 year but not more than 5 years as may be specified in the articles.  Every director shall be eligible for reappointment.  The Directors of the Board are elected by the members in the Annual General Meeting.  The Board may co-opt one or more expert directors or additional directors not exceeding one fifth of the total number of directors.   The expert director and additional director shall hold the post for the period as prescribed in the articles”.[8]



The members will initially receive the benefit on the value of the produce or product which are pooled and supplied under the determination of directors. The amount which will be later disbursed will be there in cash or any kind of allotment under the equity shares. The members would be eligible to receive bonus shares. “An interesting provision is for the distribution of patronage bonus (akin to dividend) after the annual accounts is approved — patronage bonus means payment out of surplus income to members in proportion to their respective patronage (not shareholding)”.[9]


The registrar has the right to strike the name of the producer company only if a company has fail to comments its business within one year from the date of registration of its transactions after the notice which is given to the company. Any member of the producer company must be aggrieved against such order.[10]


In the case of vanilla India producer Company Limited new venture was promoted by Indian vanilla farmers so that there is the production of the long term interest of vanilla growers all over the country. The vanilco which is a producer company as the journal director of promoting Vanilla production and processing vanilla as per the international standards. The farmers owned Vanilco and it is the duty of them to produce the best Vanilla beans and extracts. They must ensure that the fair value is provided to the farmers as per the international Markets and standard. Today vanilco is one of the most reliable suppliers of the natural venalinte market this. This has only been possible with the up gradation of Technology and quality of products and the knowledge of the Global market.


It must be noted that the concept of Producer Company has only been put forward it so that there is the Assurance of benefit and easily adaptation of regulatory framework of such companies

[1] CS Divesh Goyal, Producer Company under Companies Act, 2013 (2016), (last visited Apr 20, 2017).

[2] CS Divesh Goyal, Incorporation of Producer Company under Companies Act, 2013 (2016), (last visited Apr 20, 2017).

[3] Producer Company in India, Producer Company in India (2014), (last visited Apr 20, 2017).

[4] Id.

[5] Producer Companies – How Do They Operate?, (2016), (last visited Apr 20, 2017).

[6] Mr. M. GOVINDARAJAN, PROVISIONS FOR PRODUCER COMPANY (2015), (last visited Apr 20, 2017).

[7] Id.

[8] An analysis on producer company , , (last visited Apr 20, 2017).

[9] Producer Company under Companies Act, 2013, , (last visited Apr 20, 2017).

[10] Mr. M. GOVINDARAJAN, PROVISIONS FOR PRODUCER COMPANY (2015), (last visited Apr 20, 2017).

Team @Law Times Journal
Hello. We are team members of Law Times Journal. Editorial members at Law Times Journal is a team of writers led by Vedanta Yadav. Want to become a writer at Law Times Journal? Send your current work/resume with title "Resume-Editor" at