CERTIFICATE COURSE IN CO-OPERATIVE SECTOR PRODUCERS COMPANY CA

CERTIFICATE COURSE IN CO-OPERATIVE SECTOR PRODUCERS COMPANY CA. RAMESH S. PRABHU 13/12/2015, COMMITTEE FOR CO-OP &NPO SECTOR OF ICAI.

A Producer Company A producer company is a hybrid between a private limited company and a cooperative society. 2. It combines the goodness of a cooperative enterprise and the vibrancy and efficiency of a company. 3. It accommodates the unique elements of cooperative business with a regulatory framework similar to that of a private limited company 1. 2

Section 465 of the Companies Act, 2013 1 2 3 • The Companies Act, 1956 and the Registration of Companies (Sikkim) Act, 1961 (hereafter in this section referred to as the repealed enactments) shall stand repealed • The provisions of Part IX A of the Companies Act, 1956 shall be applicable mutatis mutandis to a Producer Company in a manner as if the Companies Act, 1956 has not been repealed until a special Act is enacted for Producer Companies ( 1 st Proviso to Section 465(1))

Concept of Producer Company Introduced • Introduced in 2002 by incorporating a new Part IXA (section 581 A to 581 ZT) into the Companies Act, 1956 • Based on recommendations given by expert committee led by economist, Y. K. Alagh 4

Meaning of Producer Company A producer company is basically a body corporate registered as Producer Company under Companies Act, 1956 and shall carry on or relate to any of following activities classified broadly: (a) production, harvesting, processing, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import of goods or services for their benefit : (b) rendering technical services, consultancy services, training, education, research and development and all other activities for the promotion of the interests of its Members; (c) generation, transmission and distribution of power, revitalization of land water resources, their use, conservation and communications relatable to primary produce; (d) promoting mutual assistance, welfare measures, financial services, insurance of producers or their primary produce; 5

Primary Produce • Produce of farmers, arising from agriculture (including animal • • 6 husbandry, horticulture, floriculture, pisciculture, viticulture, forestry, forest products, re-vegetation, bee raising and farming plantation products), or from any other primary activity or service which promotes the interest of the farmers or consumers ; or Produce of persons engaged in handloom, handicraft and other cottage industries ; Any product resulting from any of the above activities, including byproducts of such products ; Any product resulting from an ancillary activity that would assist or promote any of the aforesaid activities or anything ancillary thereto Any activity which is intended to increase the production of anything referred to above to improve the quality thereof

Incorporation Any one of the following combination of producers can incorporate a producer company: • 10 or more producers (individuals); or • 2 or more producer institutions; or • Combination of the above two (10+2). 7

Registration of Producer Company • Only persons engaged in an activity connected with, or related to, primary produce can participate in the ownership • The members have necessarily to be primary producers. • Termed as “Companies with Limited Liability” and the liability of the members will be limited to the amount, if any, unpaid on the shares. • Name of the company shall end with the words "Producer Company Limited“ 8

On Registration of a Producer Company The producer company shall become as if it is a private limited company for the purpose of application of law and administration of the company However it shall comply with the specific provisions of Part IXA The maximum number of members is not applicable to these companies. 9

Share Capital Share capital of a Producer Company shall consist of equity shares only Members' equity cannot be publicly traded but only transferred Voting Individuals - single vote for every member Institution - basis of their participation Combination - single vote for every member. 10

Management Every producer company is to have At least 5 and not more than 15 directors. A full time chief executive should be appointed by the board and Shall be entrusted with substantial powers of management as the board may determine. 11

Reserves Every producer company has to maintain a general reserve in every financial year Where there is no sufficient funds in any year for such transfer, The shortfall has to be made up by members' contribution in proportion to their patronage in the business. 12

Members’ Benefit • Eligible to receive bonus shares • Receive only such value for the produce or products pooled and supplied as the directors may determine • Provision is for the distribution of patronage bonus (akin to dividend) after the annual accounts are approved • Patronage bonus means payment out of surplus income to members in proportion to their respective patronage 13

Dispute Resolution Disputes are settled by conciliation or arbitration under the Arbitration and Conciliation Act, 1996 14

Audit Producer Companies shall carry out an internal audit of its accounts, at regular intervals in accordance with its articles of association and such an audit shall be carried on by a Chartered Accountant. The auditor shall make an annual audit report to the members of the company on the accounts examined by him 15

Examples of Producer Companies in India Karnavati Producer Company Limited in Madhya Pradesh Vanilla India Producer Company Ltd (VANILCO) has been promoted by Kerala based Indian Farmers Movement (Infarm) The Indian Organic Farmer Producer Company Limited is an Aluva company of farmers producing organic products. 16

Co-op Enterprises & Co-op Stakeholders Let us be Partner in Nation Building CA. Ramesh S. Prabhu, FCA, CISA(USA) O 9820106766/ rsprabhu 13@gmail. com

What is all this empowering us to do? Innovate, Get involved & Solve social problems for financial inclusion and better India through Co-ops! Thank you for Getting involved in the discussion! CA RAMESH PRABHU , – 09820106766 EMAIL: rsprabhu 13@gmail. com CHAIRMAN MAHARASHTRA SOCIETIES WELFARE ASSOCIATION, MEMBER OF TASK FORCE FOR NPOS & CO-OPS OF MAHARASHTRA, CONVENER TO PREPARE GUIDANCE NOTE ON AUDIT OF DISTRICT AND STATE CO-OP BANKS –PUBLISHED BY PDC OF ICAI, COOPTED MEMBER OF CO-OP COMMITTEE (MAHARASHTRA) OF WIRC OF ICAI.