A producer company is a hybrid between a private limited company and a cooperative society.

Producer Company


A producer company is a hybrid between a private limited company and a cooperative society. The objective of the Producer Company is production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary production of the members or import of goods or services for their benefit, provided that the Producer Company may carry on any of the activities specified in this clause either by itself or through other institution.

Objective of Producer Company

Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the Members or import goods for their benefit
  • Processing including preserving, drying, distilling, brewing, venting, canning and packaging of produce of its members
  • Manufacture, sale or supply of machinery, equipment or consumables mainly to its Members.
  • Providing education on the mutual assistance principles to its Members and others.
  • Rendering technical services, consultancy services, training, research and development and all other activities for the promotion of interest of its members.
  • Generation, transmission and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce
  • Insurance of producers or their primary produce
  • Promoting techniques of mutuality and mutual assistance
  • Welfare measures or facilities for the benefit of Members as may be decided by the Board
  • Any other activity, ancillary or incidental to any of the activities referred to in above clauses which may promote the principles of mutuality and mutual assistance amongst the Members in any other manner
  • Financing of procurement, processing, marketing or other activities specified in above clauses which include extending credit facilities or any other financial services to its members

Pre-Incorporation Checklist

  1. Any 10 or more producers (individuals) can join together to form a production company but there is no upper limit on the number of members.
  2. Or, any 2 or more producer institutions can form a producer company.
  3. A minimum paid-up capital is required to incorporate a producer company.
  4. There should be a minimum of 5 directors (maximum of 15) in a producer company.
  5. It can never be converted into a public company however it can be converted into a multi-state co-operative society.

Benefits of Farmer Producer Companies

The following are the benefits enjoyed by a Farmer Producer Company:
  1. The members of the producer company initially will receive the value for the produce pooled and supplied as determined by the directors. This amount will be given out later in the form of cash/ kind/ equity shares.
  2. The members of the producer company will be entitled to get bonus shares in the same proportion to the shares held by them.
  3. The surplus (after providing provision for payment of limited return and reserves) may be given as patronage bonus* to the members of the producer company.
*Patronage bonus signifies a distribution of the surplus income to the members of the producer company in proportion to their respective patronage. Patronage, on contrary, is the participation by members in their business activities by using the services offered by the producer company.

Tax Benefit (Taxability of Producer Company)

  1. 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.
  2. 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.
Udyog Buddy is a team of experienced professionals, our end-to-end service model, combined with personalized support, makes the incorporation journey straightforward and stress-free. Additionally, our commitment to cost-effective solutions and time efficiency allows businesses to focus on growth and operations without unnecessary delays or financial strain. Choosing Udyog Buddy means partnering with a trusted expert dedicated to helping your business succeed from the very start.
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Questions that may arise ?
No, it is not mandatory. Even a Proprietorship Firm, Private Limited, Limited Company can run their agriculture business.
• Any 10 or more Individuals; or
• Any 2 or more Producer Institutions; or
• Combination of 10 or more Individuals and Producer Institutions
Minimum 5 directors are required in every Producer Company.
No minimum capital requirement, you may start with Rs 10000/- capital also.
As the name of the Company ends with Producer Company Limited it seems to be a Public Company but as per clause (5) of the section 581C of Companies Act, 1956, on registration the Producer Company shall become a body corporate as if it is a Private Company and shall not under any circumstances deemed to be a Public Company.
The Producer Company shall become a body corporate as if it is a Private Company without however any limit to the number of members. [581C (5) of the Companies Act, 1956]
Documents required for the formation of Producer Company:

Documents of Proposed Members:
• KYC Documents of Proposed Members (PAN, Aadhar, Mobile, Email Id, Bank Statement, Passport Size photograph)
• Proof of Farming land
• (Copy of Khasra or Copy of Farmer/Book or Khatauni)
Documents for the proof of Register office Place:
• Rent Agreement (if proposed register office is rented)
• Electricity bill
• NOC (Non objection Certificate) from Land Lord
With Udyog Buddy, Farmer Producer Company incorporation usually takes 20-30 days. This is subject to government approvals time and completeness of your documentation.

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Disclamer: The article provided here is solely for information purposes. This is prepared based on information provided on various forums and the same has been utilized only for information of the readers. The information presented in this article does not constitute legal or professional advice and should not be relied upon for such purposes or used as a substitute for legal advice. In case of necessity, consult with professionals.