A Producer Company is a body corporate having an object that is one or all of the following:

Production, harvesting, procurement, grading, pooling, handling, marketing, selling, the export of primary produce of the Members or import of goods or services for their benefit.

Further, the Producer Company must deal primarily with the produce of its active Members and must allow to carry on any of the following activities by itself or through other entities – on behalf of the members.

1. processing including preserving, drying, distilling, brewing, vinting, canning and packaging of the produce of its members;
2. manufacture, sale or supply of machinery, equipment or consumables mainly to its members;
3. providing education on the mutual assistance principles to its members and others;
4. rendering technical services, consultancy services, training, research and development and all other activities for the promotion of the interests of its members;
5. generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communication relatable to primary produce;
6. insurance of producers or their primary produce;
7. promoting techniques of mutuality and mutual assistance;
8. welfare measures or facilities for the benefit of Members as may be decided by the Board;
9. any other activity, ancillary or incidental to any of the activities which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner;
10. financing of procurement, processing, marketing or other activities which include extending of credit facilities or any other financial services to its members.

FORMATION OF PRODUCER COMPANY

1. Any ten or more individuals, each of them being a producer or any two or more Producer institutions, or a combination of ten or more individuals and Producer institutions
2. A Producer Company so formed shall have the liability of its Members limited by the memorandum.
3. The Producer Company shall become a body corporate as if it is a private limited company to which the provisions contained in this Part apply, without, however, any limit to the number of Members.
4. In case of producer company minimum 5 director and maximum 15 directors are allowed can be increase by passing SR.

CHIEF EXECUTIVE AND HIS FUNCTIONS

1. Every Producer Company shall have a full time Chief Executive, by whatever name called, to be appointed by the Board from amongst persons other than Members.
2. The Chief Executive shall be ex officio director of the Board and such director shall not retire by rotation.
3. Save as otherwise provided in articles, the qualifications, experience and the terms and conditions of service of the Chief Executive shall be such as may be determined by the Board.
4. The Chief Executive shall be entrusted with substantial powers of mana-gement as the Board may determine.
5. Without prejudice to the generality of sub-section (4), the Chief Executive may exercise the powers and discharge the functions, namely: –

(a) do administrative acts of a routine nature including managing the day-to-day affairs of the Producer Company;

(b) operate bank accounts or authorise any person, subject to the gene-ral or special approval of the Board in this behalf, to operate the bank account;

(c) make arrangements for safe custody of cash and other assets of the Producer Company;

(d) sign such documents as may be authorised by the Board, for and on behalf of the company;

(e) maintain proper books of account; prepare annual accounts and audit thereof; place the audited accounts before the Board and in the annual general meeting of the Members;

(f) furnish Members with periodic information to appraise them of the operation and functions of the Producer Company;

(g) make appointments to posts in accordance with the powers dele-gated to him by the Board;

(h) assist the Board in the formulation of goals, objectives, strategies, plans and policies;

(i) advise the Board with respect to legal and regulatory matters concerning the proposed and on-going activities and take necessary action in respect thereof;

 (j) exercise the powers as may be necessary in the ordinary course of business;

(k) discharge such other functions, and exercise such other powers, as may be delegated by the     Board.

6. The Chief Executive shall manage the affairs of the Producer Company under the general superintendence, direction and control of the Board and be accountable for the performance of the Producer Company.

TRANSFERABILITY OF SHARES AND ATTENDANT RIGHTS

1. Save as otherwise provided in sub-sections (2) to (4), the shares of a Member of a Producer Company shall not be transferable.
2. A Member of a Producer Company may, after obtaining the previous approval of the Board, transfer the whole or part of his shares along with any special rights, to an active Member at par value.
3. Every Member shall, within three months of his becoming a Member in the Producer Company, nominate, in the manner specified in articles, a person to whom his shares in the Producer Company shall vest in the event of his death.
4.  The nominee shall, on the death of the Member, become entitled to all the rights in the shares of the Producer Company and the Board of that Company shall transfer the shares of the deceased Member to his nominee: Provided that in a case where such nominee is not a producer, the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board.
5. Where the Board of a Producer Company is satisfied that –

(a) any Member has ceased to be a primary producer; or

(b) any Member has failed to retain his qualifications to be a member as specified in articles,

The Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board:

Provided that the Board shall not direct such surrender of shares unless the Member has been served with a written notice and given an opportunity of being heard.

 INVESTMENT IN OTHER COMPANIES, FORMATION OF SUBSIDIARIES, ETC

1. The general reserves of any Producer Company shall be invested to secure the highest returns available from approved securities, fixed deposits, units, bonds issued by the Government or co-operative or scheduled bank or in such other mode as may be prescribed.
2. Any Producer Company may, for promotion of its objectives acquire the shares of another Producer Company.
3. All investments by a Producer Company may be made if such investments are consistent with the objects of the Producer Company.

Tax Benefit (Taxability of Producer Company)

The Income Tax Act, 1961 under section 10(1) exempts agricultural income. However, the exemption provided under section 10(1) for the agricultural income sometimes vary on the basis of the agricultural activity carried out.

The Income Tax Act does not specify any specific tax benefit which essentially provides special tax benefits or exemptions to producer companies by its definition. But subject to the agricultural activity carried out by the producer company, certain tax benefits and exemption can be availed.

For example, income derived from selling the grown green tea leaves is an agricultural income under the Income Tax Act and it is 100 % tax-free. However, if the tea leaves are further processed for the manufacturing of tea, only 60% of such income will be considered as agricultural income and 40% of such income will be taxed. Thus, it is apparent that the tax benefit and exemption to a producer company is totally depending upon the activity it carries on.