Professional Documents
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Manual For Producer Company:: Prepared For M.P.DPIP by
Manual For Producer Company:: Prepared For M.P.DPIP by
Volume I
ACKNOWLEDGEMENTS
We express our honest and sincere gratitude to all the farming families for being part of this grand
experiment carried out by Madhya Pradesh District Poverty Initiatives Programme (MPDPIP) in its project
districts. We express the sincerest thanks to the officials and resource persons of MPDPIP at SPU and
DPSU level for providing needed information and support.
The ASA team also extends its thanks to Mr. Pradeep Bhargava, Principal Secretary, MoRD, Mr. Wasim
Akhter, Secretary, MoRD, Dr. Ravindra Pastor, Project Coordinator, MPDPIP and the Task Team members
of the World Bank for their continued inputs while preparing this manual.
We would like to thank the members of the ASA team especially Arun Joshi and Yogesh Dwivedi for
accumulating information and providing guidance whenever required. We would like to sincerely
acknowledge the contribution of the CEOs of the producers companies and their board members without
whom this work would have been difficult to achieve. Finally, we extend our sincere thanks to Dr. Surashree
Shome (consultant associate) for her contribution in editing as well as giving the final shape to this manual.
Ashis Mondal
Director
Action for Social Advancement (ASA), Bhopal
TABLE OF CONTENTS
ACKNOWLEDGMENTS
TABLE OF CONTENTS
A GUIDE TO MANUAL
CHAPTER 1:
CHAPTER 2:
Primary Produce
Producer
Producer Institution
Producer Company
Who can form producer Company
Characteristics of Producer Company
Why Producer Company?
CHAPTER 3:
CHAPTER 4:
CHAPTER 6:
ANNEXES
Annexure 1:
Annexure 2:
BOX
Box 1:
Box 2:
Box 3:
Box 4:
Box 5:
Box 6:
Box 7:
Box 8:
Box 9:
Box 10:
Box 11:
This Manual
Objects and Activities of Producer Company
Initiator in MP
FAQs
FAQs
Area Selection
Steps to be followed for the incorporation of Company
Cautions for Initiators
Legal Formalities for Formation
Power of Attorney
Does expert director have rights to vote for director of the company?
A GUIDE TO MANUAL
Ministry of Company Affairs, India has introduced a
Bill for amendment (based on the report submitted
by High Powered Committee under the
Chairmanship of Dr. YK Alagh) in the Companies
Act, 1956 by inserting Part IX A, paving a way for
the incorporation of Producer Companies. The Act
has allowed primary producers to organise
themselves to gain a maximum profit from the
market oriented economy.
CHAPTER 1
UNDERSTANDING PRODUCER COMPANY
A. PRIMARY PRODUCE
Produce of farmers from agriculture and allied activities or produce of persons engaged in handloom,
handicraft and other cottage industries, including any by-product and product resulting from ancillary
activities thereof. Also, any activity intended to increase the production or quality of aforementioned
products or activities 1 .
B. PRODUCER
Any person engaged in any activity connected with
or relatable to any primary produce 2 .
C. PRODUCER INSTITUTION
Producer Company or Institution having only
producer(s) or Producer Company(ies) as its
members (may or may not be incorporated) having
specified objects and agreeing to make use of the
services of the Producer Company(ies) 3 .
D. PRODUCER COMPANY
As per the Companies (Amendment) Act, 2002, Section No. 581A (j)
As per the Companies (Amendment) Act, 2002, Section No. 581A (k)
3 As per the Companies (Amendment) Act, 2002, Section No. 581A (m)
4 As per the Companies (Amendment) Act, 2002, Section No. 581C
2
The registered producer company should be treated as a private limited company with the
significant difference that a minimum of two persons cannot get them registered.
These companies are with limited liabilities and limited only by share capital.
The liability of the members is limited to the unpaid amount of the shares held by them 5 .
As per the new circular, minimum paid-up authorized capital is of Rs. 5 lakh.
The maximum number of members can exceed 50.
It shall never become a public (or deemed public) limited company.
Members' equity cannot be publicly traded but be only transferred.
As such, "producer companies would not be vulnerable to takeover by other companies or by Multi-national
Companies (MNCs).''
G. WHY PRODUCER COMPANY?
To offer a statutory and regulatory framework that creates the potential for producer-owned
enterprises to compete with other enterprises on a competitive footing.
To provide for the method of formation and registration of Producer Companies which, inter alia
carries the principles of mutual assistance and Co-operation within the more liberal regulatory
framework afforded by the company law with suitable adaptation.
To provide an opportunity (on a purely voluntary basis), to the existing large multi-state cooperative
institutions and societies, to voluntarily convert themselves into the new form of producer
companies.
--------------------------------------------------------------------------------------------ANNEXES
Annexure 1: Definitions of other important terms related to the Producer Company
Annexure 2: Similarities and differences between Producer Company and Cooperatives
CHAPTER 2
INITIATORS OF PRODUCER COMPANY
(The chapter discusses types of initiators)
A. THE INITIATOR
Initiator could be a person or a group of persons who takes the responsibility to initiate and establish a
producer company. Further, initiator could also be one of the promoters 6 of the company.
B. TYPES OF INITIATORS
Following different, singly or in a group, can be the initiators (if the initiator is not a primary producer, then
s/he could not be a promoter):
In a producer company, number of promoters should be ten or more individuals, or two or more Producer Institutions, or a combination of both.
Action for Social Advancement (ASA) is an NGO Based in Bhopal and working in MP and other states of the country primarily on livelihood issues.
ASA was assigned by MPDPIP to provide technical support in forming and establishing Producers Company in the Project.
7 As per the Part IX-A of the Companies Act, 1956, Section No. 581J
8 As per the Companies (Amendment) Act, 2002, Section No. 581K and 581L
#
10
Any community organization, whose members are interested in the concept, and are willing to
initiate a Producer Company and also to mobilize people and required resources to initiate it.
Any Government organization or department willing to promote a producer company for the
betterment of the selected people/group in an area. Government can approach an NGO,
administrative body (panchayat or any state department) or any community organization for the
purpose. Government could give the financial and professional support to the implementing body.
Box 5: FAQs
(4)
--------------------------------------------------------------------------------------------ANNEXES
Annexure 3: An approximate cost of incorporation of a Producer Company
11
CHAPTER 3
INCORPORATION OF A PRODUCER COMPANY
(This chapter is divided in two parts. The first part deals with process to be followed at field level and the
preparations required. The second part of the chapter focuses on the legal requirement for establishing a
company and process involved for the incorporation of a Producer Company)
This is the most unique section of the manual; as, neither there are any specific guidelines or directions
incorporated in the Act nor there are any documents available capturing the social aspects while
incorporating a producers company. Usually, the procedure to be followed while organizing a producer
company depends mostly on the initiator. If an initiator has minimum financial resources required to register
a company besides support of 10 or above primary producers, then s/he can go ahead for registering a
company. S/he can promote members soon after or while registering a company.
Moreover, in an ideal situation, the entire process of incorporation will undergo two major stages, namely:
The Preparatory Phase
The Legal Aspects Adherence Phase
A. PREPARATORY STAGE
This stage precedes the process of legally registering the
company. In this phase, the initiator has to select the area of
operation. This is basically done after interaction with farmers,
understanding the demand-supply aspect of the product and
assessing the overall risk factor involved in the entire venture.
The initiators, starts the entire process, through meeting with the
producers, developing rapport with them and introducing the
concept amongst them. Once the concept is understood by the
group, generally an exposure visit to successful site is organized
to further strengthen the understanding of the identified group of
producers. This involves interaction with producers already
involved with a producers company. It is mainly done to facilitate on-farm learning, sharing and enhance the
motivation level of the potential members. Once the potential members are convinced with the concept, it is
followed by focused group meeting with them. The meetings generally focus on discussing the objectives as
well as possible ideas for formulation and strengthening the venture. Once the concept is well accepted, a
common understanding is developed and concrete business plan is developed, the initiator with consultation
and support from the group develops the draft Memorandum and Articles of Association including the roles
and responsibilities of each office bearers. The shareholders have also to finalize the authorized capital of
the company and the cost of each share 10 .
10
While finalizing the cost of each share, the capacity of the poorest and deprived shareholders should also be
considered.
12
Step 6
Once these documents are in place, the first informal meting of the shareholders should be organized. The
focus/agenda of this meeting is to primarily approve the Memorandum and articles of association as well as
select/elect the promoter of the company. However, it is advisable here for the initiator to avoid election at
this stage as it can lead to drift amongst some members.
The initiator should be aware that the entire process might take two to six months (sometimes more),
depending upon the response of the producers.
After having consent of the members about the
directors of the company and the Memorandum and
Articles of Association, the initiator could go ahead of
the registration process. The amount collected through
shareholders and promoters (directors could be
promoters and can share the cost of registration, which
will certainly be refunded later) could be used for
registration.
13
11
From September 16, 2006, Ministry of MCA has initiated an electronic mode transaction for all the process of statutory filings under the
Companies Act, 1956.
12 http://www.mca.gov.in
13 Certification Agencies are appointed by the office of the Controller of Certification Agencies (CCA) under the provisions of IT Act, 2000. There are
a total of seven Certification Agencies authorised by the CCA to issue the Digital Signature Certificates (DSCs). The details of these Certification
Agencies are available on the portal of the Ministry www.mca.gov.in
14
15
16
17
15
18
19 Stamping should be done in accordance with the requirement of the Indian Stamp Act, 1899 and the applicable rate depending on the State where
22 The amount of registration fees to be paid will depend upon the authorised share capital kept by the company promoters in the Article of
Association.
23 As per the Companies (Amendment) Act, 2002, Section No. 146. This has to be submitted to the Registrar of Company
24 As per the Companies (Amendment) Act, 2002, Section No. 303
25 As per the Companies (Amendment) Act, 2002, Section No. 33 (2)
16
17
CHAPTER 4
GOVERNANCE OF A PRODUCER COMPANY
(Three major players of the Producer Company Members, Board of Directors and Office Bearers are
defined in this chapter along with their roles and responsibility towards the Company)
To understand the governance of the company, it can be segregated in three major divisions as defined by
the law (a detailed description follows):
1. Members/shareholders: In a Producer Company, only a producer or producer institutions can
acquire membership. Producer Company is a membership based body and it can act only through
its members. Thus, a company is created by the members, and can also be wound-up by them.
Members acts through heir General Body.
2. Board of Directors: Elected by members and may act collectively only in meetings
3. Office bearers: Individual selected to look after the day-to-day affairs of the company, like CEO,
accountant, go down keeper etc. They are salaried people of the company.
1. MEMBERS
i. Defining Member:
A member is defined as a person or producer institution, whether incorporated or not, admitted as
a member of a Producer Company and who retains the qualifications necessary for continuance as
such 27 . Being a membership based entity, membership shall be voluntary and is available to all
eligible members (criteria of membership defined in the Articles of Association of a company) who
can participate and avail the facilities or services of the Producer Company.
Shares in a Company can be held in more than one name, which to be called Joint Membership.
Under the Companies Act, there is no ceiling on the number of persons holding shares jointly.
ii. Modes of Acquiring Membership
One can become a Member of a Company by any one of the following ways:
a. By subscribing to the Memorandum of Association 28 ;
A subscriber to the Memorandum of Association becomes a Member ipso facto on incorporation of
the Company, in respect of the shares subscribed by him, without any further application by him or
allotment of shares to him. He will be liable for whatever number of shares he has subscribed for.
A subscriber to the Memorandum remains a Member of the Company until s/he accepts a
surrender of the shares for valid reasons to do so by the articles of association or the subscriber
himself transfer shares to somebody else.
27
28
18
Approve the Budget and adopt the Annual Accounts of the Company;
Approve the quantum of withheld price;
Approve the patronage bonus;
Authorize the issue of bonus shares;
Appoint an auditor;
Declare a dividend and decide on the distribution of patronage;
Amend the Memorandum of Association and Articles;
Specify the conditions and limits of loans that may be given by the Board to any Director; and
Approve or act on any other matters that are specifically reserved in the Articles for decision
by the Members.
29
For example, the company has allotted without application, shares in the name of Mr/Mrs X and the same is communicated t him/her. Person X
signs a proxy or otherwise acts as the owner in respect of those shares. This is a case of becoming a member by estoppels.
19
In a case where the membership consists solely of an individual member, the voting right
shall be based on single votes for every member, irrespective of his/her shareholding or
patronage of the Producer Company.
There shall be no allocation of additional votes to any Active Member 30 at the end of each
financial year, on the basis of their patronage.
In a case where the membership is composed only of Producer institutions, the voting rights
may be computed on the basis of the participation in the business dealings of the Company
by the respective institutions in the previous year, save that for the first year of its
registration, the voting rights shall be determined on the basis of the shareholding.
In a case where the membership is composed of individuals as well as Producer
institutions, the voting rights shall be computed on the basis of a single vote for every
Member.
Each Active Member shall have a minimum of one vote. However newly admitted Members
shall have no voting rights for at least six months (or for a time period as specified by the
Board).
b)
c)
d)
e)
by transferring his/her shares. In the case of a transfer, the person transferring will
continue to be a Member until the shares are registered in the name of the transferee;
by forfeiting his/her shares;
by a valid surrender;
by death, but until the shares are transmitted, his/her estate will be for any money due on
the shares;
by the Company selling his shares in exercise of its right under its Articles of Association;
by order of a Court or any other competent authority attaching and selling the shares, in
satisfaction of a decree or claim;
by the official assignee disclaiming his shares, on his adjudication as an insolvent;
20
2. BOARD OF DIRECTORS
Every Producer Company should have a Board of Directors of not less than five and not more than fifteen 31
& 32 .
i. Powers and Functions of the Board
The Board may act only in areas not reserved to the General Body and may not exercise executive
functions. In general, the Board has authority and is responsible for formulating, supervising, and
monitoring of the performance of the producer Company in respect of the following matters 33 :
Pursue and formulate the organizational policy, objectives, establish long-term and annual
objectives, and approve corporate strategies and financial plans
Exercise superintendence, direction and control over CEO and other officers.
Sanction any loan or advance, in connection with the business activities of the Producer
Company to any member, not being a director or his relative.
Investment of the funds of the Company in the ordinary course of its business.
Ensure that annual accounts are placed before the annual general meeting with the
auditors report.
Take such measures or do such other acts as may be required in the discharge of its
functions or exercise of its powers.
The Board may make recommendations in the case of those matters reserved for decision of the
General Body.
All the powers specified above shall be exercised by the Board only by means of a resolution
passed at its meeting and decision can be made or resolution adopted by circulation. Also to be
noted that a director or a group of directors who do not constitute the Board, shall not exercise any
of the powers exercisable by it.
ii. Restrictions on the Power of the Board
The Board of Directors shall be authorised to exercise the following powers on behalf of the
Company, subject to the approval of the Members by a resolution adopted in a general meeting:
As per the Part IX A of the Companies Act, 1956, Section No. 581-O
In case of an inter-state co-operative society incorporated as a Producer Company, there may be more than fifteen directors for a period of one
year from the date of its incorporation as a Producer Company.
33 As per the Part IX A of the Companies Act, 1956, Section No. 581R
32
21
As per the Part IX A of the Companies Act, 1956, Section No. 581P
As per the Part IX A of the Companies Act, 1956, Section No. 581P
36 As per the Part IX A of the Companies Act, 1956, Section No. 581P (3)
37 As per the Part IX A of the Companies Act, 1956, Section No. 581P (4)
38 The power is available to the Board of Directors of a Producer Company by virtue of the Act and does not require any specific provision to be
made in the Articles of Association.
39 As per the Part IX A of the Companies Act, 1956, Section No. 581P(6)
35
22
40 It may be noted that there is no specific or overriding Provision under Part IXA of the Act specific for the Producer Companies, in this regard.
41 As per the Part IX A of the Companies Act, 1956, Section 284(1)
42 Under Section 388E of the Companies Act, 1956
23
c.
that any person concerned in the conduct and management of the affairs of a Company is
or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or
default in carrying out his obligations and functions under the law, or breach of trust; or
that the business of a company is not or has not been conducted and managed by such
person in accordance with sound business principles or prudent commercial practices; or
that a Company is or has been managed by such person in a manner which is likely to
cause, or has caused, serious injury or damage to the interest of the trade, industry or
business to which the Company pertains; or
that the business of a Company is or has been managed by such person with intent to
defraud its creditors, members or any other person or otherwise for a fraudulent or
unlawful purpose or in a manner prejudicial to public interest.
The Tribunal
Where on application to the Tribunal for prevention of oppression under Section 397 and
mismanagement under Section 398 of the Act, the Tribunal finds that the relief ought to be
granted, it may terminate or set aside any agreement of the Company with the director or
managing director or other managerial personal on such terms and conditions as it think
just and equitable. The court may constitute an advisory board as a proper administrator.
Where the appointment of the director is so terminated or set aside, he cannot, except
with the leave of the Tribunal, serve any company in a managerial capacity foe a period of
five years. He also cannot sue the company for damages or compensation for loss of
office.
The Companies Act does not make express provisions for the resignation of a director. A
director may resign his office in the manner provided by the Articles. If the Articles
contain no provision regarding the resignation by a director, he may resign his office at
any time by giving reasonable notice to the Company, no matter whether the Company
accepts it or not.
Thus, in the absence of any provision in the Articles, resignation once made will take
effect immediately when the intention to resign is made clear. In such a case, the
resignation tendered by a director equivocally in writing will take effect from the time when
such resignation is tendered.
A Chief Executive or Managing or Whole Time Director, however, cannot resign merely by
giving notice. His resignation is governed by the terms and conditions of his appointment.
In this case, the formal acceptance of the resignation is essential so as to make it
effective, for he has to be relieved of his duties and obligations.
24
As per the Part IX A of the Companies Act, 1956, Section No. 581W
25
26
CHAPTER 5
ORGANIZATIONAL MANAGEMENT OF PRODUCER COMPANY
(This chapter describes the methods adopted by the initiators to start a producer company.)
A. BUSINESS IN A COMPANY
After the registration of the company, the major task of the company starts, that is operating the company
successfully. The first major task is to prepare a business plan with consultation of the members. A detailed
discussion on the business plan (description of business plan and a model business plan is given in
Appendix 14 & 15)of the company should be done during the first general meeting. While making the
business plan, the company have to understand the area (physical, social and cultural) of their working, its
potential, requirement of the shareholders (if the company is only for farmers) in concern to farming
(fertilizer, seeds, pesticides, tolls and machineries), surrounding markets and competitors. Demand and
supply analysis of products to be sold and product to be required by shareholders would be helpful.
A business plan would not only convey the organizational structure, business goals and the strategies to
meet them, but also will allow the company to assess the potential problems and the ways to solve them.
Business plan will also help to assess the capital required for the planned business, which, further be
required to be submitted to any financial agency (nationalized/ cooperative banks etc) to apply for loans.
Other than preparing business plan, the company also have to do the following simultaneously:
Open a Bank Account with two to three officially nominated signatories in the name of the
Company.
Procure PAN number from the Income Tax and TIN number from the Commercial Tax Department
to carry out business. Also, the company have to register itself for Service Tax from Commercial
Tax Department and VAT from Excise department.
Apply for the commercial connection of Power supply to related agency/board.
Water Connection with local water supply authority.
For the successful management of the Companys business, the Company should have following divisions
(depends on the business of the company):
Production Division: The division should do the market survey and can forecast to the farmers of
the products that are in demand and can yield maximum profits. Also the division can process the
product of the members to gain maximum profit. The Company might have to acquire statutory
obligations like permission from pollution control board (depending on the business of the
company).
Marketing Division: The products manufactured by the processing unit or produced by the
members would be sod through by this division. The division should try to get the maximum price
for the products of members. Also, the company can sell the products of its members through the
Agricultural Produce Market Corporation (APMC). For the purpose the company have to procure
27
Purchase and Procurement Division: After collection and compilation of demands of their members
within the working territory of the Company, the Company can place a purchase order through their
purchase and procurement committee.
Box 13: Required Licence
The purchase committee should contact
all
interested
and
available
The best possible way (as per the experience of
manufactures, producers, suppliers or
the interviewed CEOs of four companies) to
distributor for supply of required
initiate a business of Producer Company by timely
material at a comparative price and
supply of agricultural inputs like seeds, fertilizer
quality bidding in volume notified by the
and pesticides to farmers in their own village1 in
committee. The negotiated supply price
an appropriate price. For the purpose, the
may be lower than local market price
Producer Company have to attain the necessary
with better quality assurance and timely
licenses
from
the
respectivee
availability to the members.
organisation/institutions.
B. ANNUAL FILING
From September 16, 2006, electronic filing is mandatory to all type of companies and physical documents
are not permissible for filing. As a part of Annual Filing companies incorporated under the Companies Act,
1956 are required to file the following documents along with the e-Forms to the Registrar of Companies
(RoC):
Sr. No.
1
2
3
Document
Balance-Sheet
Profit & Loss Account
Annual Return
Annual Return
Compliance Certificate
e-Form
Form 23AC to be filed by all companies
Form 23ACA to be filed by all companies
Form 20B to be filed by companies having share
capital
Form 21A to be filed by companies without share
capital
Form 66 to be filed by companies with paid up
capital between Rs. 10 lakh to Rs. 2 crore
2.
The company representative can upload the e-Forms from the MCA21 portal through the Annual
Filing Process link (after registering oneself as a user of the portal) at his convenience from his
office/ home. This is the most convenient way for e-Filing.
The company representative can prepare the e-Form following the guidelines, copy them in a CD
and go to the nearest Temporary Facilitation Offices opened for the purpose of accepting Annual
Filings e-Forms or can take service of Company Secretary to avoid official problem. During the
28
3.
normal days, the TFO staff will help the company representative to upload the form and generate a
Challan. During last 10 days of Oct and Nov. CDs will be collected and an acknowledgment given.
The files will be uploaded into the system subsequently and the company will have to download the
challan from the link provided at the Annual Filing Corner of the portal after two working days of the
submission. At Other locations where TFOs/Collection Centre are not being opened, the eForms
will be accepted at the existing Registrars Front Offices (RFO).
The company representative can also contact any of the Certified Filing Centers (CFCs) for the
Annual Filing of e-Forms by paying the service charges to the CFCs. The details about the CFCs
are available under the CFC Corner on the MCA21 Portal.
b. Important Points to Remember
1.
2.
3.
4.
This time the Balance Sheet and the Profit & Loss Accounts are to be filed as two separate
documents with different e-forms;
Each e-Form along with the relevant attachment should be less than 2.5 MB.
The Annual Return, the Balance Sheet and the Profit & Loss Account are filed as attachments to
the respective e-Forms. So far, the users have been filing the attachments as scanned images of
those documents. Please note that a scanned copy considerably increases the size of the
document besides being more expensive. As such, you are advised to use the Text file/ Excel
sheets as such, convert the same into PDF by using the PDF converter (the software is available
on the portal for a registered user without any charge) and upload these attachments as PDF
documents.
The MCA21 database in respect of Authorised Capital and Paid-up Capital may not be correct. The
companies have been requested to apply for correction of Master Data in this respect. Since this
process is taking time, the Ministry will be accepting the Authorised Capital and Paid-up Capital
figures as declared by the companies in the respective forms pertaining to Annual Filings.
Accordingly, the companies are requested to declare the correct amount on these points without
waiting for formal correction in the database.
29
Dos
1.
2.
3.
4.
5.
6.
7.
8.
Apply for DIN from the MCA21 Portal in case you dont have DIN
Apply for Digital Certificate from the MCA21 Portal (or the portal of any of the Certifying Authorities
portal) in case you dont have any.
Check your master data from the portal with Authorized Capital
Download the latest version of the eForm, User Guidelines and Index Sheet from the portal
Read the guidelines carefully before filling up and pre-scrutiny. You will need an internet
connection for doing the online pre-scrutiny of the form.
You can use the pdf converter facility in the MCA21 Portal. Business Users can upload a
word/excel/powerpoint/gif/jpeg/ tif document along with their eMailIed, and the converted pdf copy
will be eMailed to the User.
Upload the form through the VFO or the Facilitation Centres opened for the purpose of Annual
Return Filing. In both cases you will get the Challan immediately. You can also opt for online
payment through Credit Card.
Alternatively you can submit the eForms in a CD at the collection centers. In such case you have to
download the challan from the portal after two days.
Donts
1.
2.
3.
4.
5.
6.
7.
Do not wait for the last date. To avoid rush file in advance.
Do not use Digital Certificate of others. Use of Digital Certificate by person other than the person to
whom it has been issued is not in consonance with the IT Act.
Do not use physical documents for filing. Electronic filing is mandatory w.e.f September 16, 2006.
Do not fill up the eForms in a hurry. Read the guidelines carefully before filling it up.
Do not add bulky attachment to the eForm. The total size of an eForm along with the attachments
should be less than 2.5 MB. See the guidelines if the size of your eForm exceeds 2.5 MB. Use the
PDF Converter on the portal if your attachments are in MS Word or Excel.
Do not file, in case approval for increase in Authorized Share Capital or Change in Location from
one ROC to another ROC is pending with ROC. File after you have received the approval or before
the last filing date whichever is earlier.
Do not forget to pay the filing fees at any authorized bank branch before the expiry date of the
challan. If the challan expires you have to file again.
C. COMMITTEE OF DIRECTORS
A committee may be constituted to assist BoD for its efficient discharge of its functions 44 . Provided the
Board shall not to delegate any of its powers or assign the powers of the Chief executive to any committee.
Moreover,
The CEO 45 or a director of the Producer Company shall be a member of such committee.
Every such committee shall function under the general superintendence, direction and control of
the Board, for such duration and in such manner as the Board may direct.
44
45
As per the Part IX A of the Companies Act, 1956, Section No. 581U
As per the Part IX A of the Companies Act, 1956, Section No. 581W
30
The fees allowance to be paid to the Members of the committee shall be such as may be
determined by the Board
The minutes of each meeting of the committee shall be placed before the Board at its next
meeting.
46
31
The director and other managerial personnel are under a statutory obligation to disclose to the company
within twenty days of their appointment.
ii. Register of Contracts, Companies and Firms in Which Directors Are Interested
Every Company shall keep one or more registers in which particulars of all contracts or arrangements,
to which Section 297 or Section 299 of Companies Act applies, should be kept 47 :
a. date of contract or arrangement;
b. names of the parties;
c. principal terms and conditions;
d. in the case of a contract to which Section 297 applies or in the case of a contract or
arrangement to which sub-section(2) of Section 299 applies, the date on which it was placed
before the Board;
e. names of the directors voting for and against the contract or arrangement and the names of
those remaining neutral.
iii. Register of Directors Shareholders
It is obligatory for every company to maintain a register of directors shareholdings 48 . The register
should show, in respect of each director of the company:
47
32
E. MEETINGS
i. Need and Importance of Meetings
In a corporate body like Producer Company, where every member have equal voting rights, meetings
are important for collective decision making. Meetings provide a place for fruitful participation of the
managerial corps in planning and executing their job and later on justifying their actions before another
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As per the Part IX A of the Companies Act, 1956, Section No. 581ZA
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Any other matter which is required to be, or may be, specified by the Board;
The text of the draft resolution for appointment of auditors;
The text of any draft resolution proposing amendment to the memorandum or articles to be
considered at the general meeting, along with the recommendations of the Board.
h. The Board of Directors shall, on the requisition made in writing, duly signed and setting out the
matters for the consideration made by one-third of the Members entitled to vote in any general
meeting, proceed to call an extraordinary general meeting. 50
i. Every Annual General Meeting shall be called at a time during business hours on a day that is not
a public holiday. It shall be held at the registered office of the Producer Company or at some other
place within the city, town or village in which the registered office of the Company is situated.
j. The notice of the general meeting indicating the date, time and place of the meeting shall be sent
to every Member and auditor of the Producer Company.
k. Unless the articles of the Producer Company provide for a larger number, one-fourth of the total
number of members of the Producer Company shall be the quorum for its annual general meeting;
l. The proceedings of every annual general meeting along with the Directors Report, the audited
balance-sheet and the profit and loss account shall be filed with the Registrar within sixty days of
the date on which the annual general meeting is held, with an annual return along with the filing
fees as applicable under the Act.
m. In the case where a Producer Company is formed by producer institutions, such institutions shall
be represented in the general body through their Chairmen or the Chief Executives, who shall be
competent to act on their behalf.
iii. Business to be transacted at annual general meeting
The following will be approved in the AGM:
a. The agenda of the annual general meeting
b. The minutes of the previous annual general meeting or the extraordinary general meeting.
c. The name of the candidates for election, if any, to the office of the director including statement of
qualifications in respect of each candidate.
d. The audited balance sheet and profit and loss accounts of the Producer Company and its
subsidiary, if any, together with a report of the Board of Directors of such Company with respect to,
the state of affairs of the Producer Company, the amount proposed to be carried to reserve, the
amount to be paid as limited return on share capital and the amount proposed to be distributed as
patronage bonus.
e. All big (equal or more to Rs.1 lakh) contracts with other company or persons, done by BoD or CEO
or other person authorized for the same on behalf of the Company.
f. Any other disputed/ unsolved/ problematic issues of Board of Directors or any other business or
management matters required so far and felt by CEO can be brought in the meeting for approval or
finalisation.
g. Proceedings of every annual general meeting along with the Directors report, the audited balance
sheet and the profit and loss account shall be filed with the Registrar within sixty days of the date
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ii.
53 As per the Part IX A of the Companies Act, 1956, Section No. 581ZH, Producer Company shall not make, directly or indirectly, any contribution or
subscription or make available any facilities including personnel or material to any political party or for any political purpose to any person.
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CHAPTER 6
FINANCIAL MANAGEMENT OF PRODUCER COMPANY
(This chapter can be divided in two parts. First part describes the two major sources of income, i.e share
capital, loan given to members and investments of the company. In the second part, process to maintain a
books of account of its expenditure for running the company, has been discussed)
A. SHARE CAPITAL:
Share capital 54 is the total of the payments made to the company by all the shareholders on their shares. In
a Producer Company it shall consist of only equity shares 55 and the shares held by a member should as far
as possible, be in proportion to the patronage of the Company.
The active members may, if so provided in the Articles, have special rights 56 and the Producer Company
may issue appropriate instruments to them in respect of such special rights. The said instruments of the
Producer Company issued shall, after obtaining approval of the Board, be transferable to any other active
Member of that Producer Company.
i. Procedure for alteration of share capital
a. Increase of capital
The authorised capital could be increased by creation of new shares by passing an ordinary resolution in
general meeting. The alteration does not affect the companys issued capital, nor can the resolution compel
the existing shareholders to take the additional shares.
b. Procedure for increasing capital
The Articles of Association of the company should confer this power. Where the articles are silent, they
have to be suitably amended so as to provide the necessary power.
The extent of increase of share capital will have to be decided keeping in view the requirements of the
Company.
The Board will decide the extent of increase and the date/time of the general meeting for passing the
necessary resolution for increasing the share capital. It will also finalise amendments to the articles, if
necessary.
The Board will also approve the draft notice of the general meeting, the necessary resolutions and
explanatory statements relating thereto and authorise the Company Secretary to convene the meeting.
On the appointed day in the general meeting, the following types of resolutions are to be passed.
Ordinary Resolution for increasing the share capital (a special resolution if so required by the
articles for this purpose).
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As per the Part IX A of the Companies Act, 1956, Section No. 581ZB
Under the Companies Act, 1956, Section 86, a company (other than Producer Company) have two types of share capital viz: i) equity share
capital, and ii) preference share capital.
56 As per the Part IX A of the Companies Act, 1956, Section No. 581ZC
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Special resolution for making consequential amendments to the articles where necessary.
Notice of increase in share capital should be filed in Form No. 5 within 30 days of passing resolution for
increasing the share capital along with the filing fee.
Form No. 23 should be filed with the Registrar of Companies within 30 days after passing
resolutions 57 , if any, along with filing fees and other necessary enclosures
The registration fee for the increased authorised capital should be paid. The amount payable will be the
difference between the fees payable on the increased capital and the fee payable, on such date, for
registration, of the company immediately before the increase.
The Amendment should be noted in every copy of Memorandum and Articles.
In case of a delay in reporting to RoC, even after increasing the share capital/cancellation of shares of the company, additional fees must be paid.
The Company Secretary may also be authorised to convene the meeting.
59 The companys article must empower consolidation/division/cancellation of shares, if not, a special resolution is passed for making consequential
amendments to the Articles.
60 The articles of association of the Company should empower the Company to issue Bonus Shares. Where there is no provision in this regard in the
Articles, the Articles should be amended by passing a special resolution
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Campaigning
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As per the Part IX A of the Companies Act, 1956, Section No. 581ZK
However, loan or an advance can also be given to the directors (including those who are not member of the Company) and their relatives only if it
has been approved by the members in a general meeting.
63 As per the Part IX A of the Companies Act, 1956, Section No. 581ZL
64 Failing it by the mentioned people should be punishable with imprisonment up to six months of with fine which may extend to Rs.1000 or both.
Moreover, no person shall be sentenced unless it is proved that the contravention was committed willfully.
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65 A copy of every balance sheet, profit and loss account, auditors report and every other document required to be annexed or attached to the
balance sheet must be sent, before twenty-one days before the annual general meeting to all the directors of the company.
66 All in three copies duly signed by the authorized person of the company. In case of default, the concerned people of the company would be
punishable with fine up to Rs. 500 for every day during the period of default continues.
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All payments above Rs. 500/- (Rs. Five Hundred Only) shall be paid by cheque only. In case
of non acceptance of cheque by any institution or individual, cash payment only with the
approval of a committee comprising of 3 directors.
d. Purchase of all consumable goods and services for use by the Company for its business
operations or managing its affairs up to Rs. 5000/- (RS Five Thousand Only) following
stipulated purchase procedure.
ii. Advance from the Company
a. The work advance may be taken from the office by staff for the following purpose:
Travel expenses and Daily Allowance(s);
Procurement of official item(s);
Any other purpose(s).
b. Scrutinise advance account of staff by concerned employee to ensure that previous
outstanding balance(s) has been cleared;
c.
Ensure proper approval of departmental head on the payment voucher or application for
advance, before fresh advance is given to any staff.
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List of annexure to be attached with the balance sheet, which has to be laid before the
shareholders in Annual General Meeting.
Sample format of Cash Voucher for cash transaction, Bank Voucher for bank
transaction and Journal Voucher
Defining the process of keeping records of Cash Transaction and Sample format to
record it.
Defining the process of keeping records of Bank Transaction and Sample format to
record it.
Accounting for purchase
Qualification and Disqualification of Auditors
Appointment of Auditors
Liabilities, power and duties of auditors
Legal Position of Auditors
As per the Part IX A of the Companies Act, 1956, Section No. 581ZF
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