Conversion of Producer Company into Multi-State Cooperative Society
The Companies (Amendment) Act 2002 vides notification no. S.O. 135 (E) inserted part IX – A of the Companies Act, 1956 (hereinafter referred to as “the Act”) and introduced the concept of Producer Company. In the year 2002 an expert committee led by noted economist Y.K Alagh framed legislation for incorporation of a producer company, and conversion of inter- state cooperative society into a producer company and its reconversion into cooperative society.
It aims at upliftment of rural producers for following reasons:
Rural producers have been at a potential disadvantage given their limited assets, resources, educational and access to advanced technology.
In Indian context the farmers disposes of his produce in unprocessed form there is no plough back of surpluses from value addition to the farm.
Agribusiness enterprises are therefore increasingly looking for direct tie up with the farmers to source the agricultural produce required by them.
Therefore companies (Amendment) act 2002 part IX-A is a step in this direction.
“Producer” means any person engaged in any activity connected with or relatable to any primary producer such as-
1. Produce of farmers of agriculture including animal husbandry, horticulture, floriculture, pisiculture, viticulture, forestry, forest products, revegetation, bee-raising and farming plantation products and produce from any other primary activity or service which promotes the interest of farmers or consumers.
2. Produce of persons engaged in handloom, handicraft and other cottage industries.
3. Any other product resulting from any of the above activities or any by- products thereof.
4. Any product from an ancillary activity that would promote any of the above activities or any thing ancillary thereto.
5. Any activity which is intended to increase the production of anything referred to in (1) to (4) above.
“Producer Company” means a body corporate having objects or activities as specified and registered as producer company under the act.
“Producer” institution means a producer company or any other institution having only producer or producers or Producer Company or producer companies as its members whether incorporated or not having objects referred to in section 581 B and which agrees to make use of services of the Producer Company or producer companies as provided in its articles.
THE CONSTITUTIONAL PROVISION
The entry 44 of list 1 (union list) of seventh schedule of the Constitution of India carries legislation for incorporation, regulation of corporations.
OBJECTS OF PRODUCER COMPANY
A producer company means a body corporate, having objects specified in section 581 B and registered as a Producer Company.
The object of a producer company shall relate to all are any of the following namely:
1. Production harvesting, procurement, grading, pooling, handling marketing, selling, export of primary produce of members or import of goods or services for their benefit:
2. Provided that the producer company may carry on any of the activities specified in this clause either by itself or through other institution;
3. Processing including preserving drying, distilling, brewing, venting canning and packing of produce of farmers;
4. Manufacture, sale or supply of machinery, equipment or consumables mainly to its members;
5. providing education on mutual assistance principles to its members and others;
6. rendering technical services , consultancy services , training , research and development and all other activities for the promotion of interests of its members;
7. generation , transmission and distribution of power , revitalisation of land and water resources their use , conversion and communications relatable to primary produce;
8. insurance of producers on their primary producer;
9. promoting techniques of mutuality and mutual assistance ;
10. welfare measures or facilities for the benefit of members as may be decided by the board;
11. Any other activity, ancillary or incidental to any of the activity referred to in clauses (a) to (i) which include extending of credit facilities or any other financial services to its members.
Producer Company shall deal primarily with the producer of its active member.
Under Clause (a) sec 581A – An Active Member means a person who fulfils the quantum and period of patronage of company as specified by the article of Producer Company.
Also, the Act deals with number of members required for incorporation of a producer company after complying with the requirements and provisions of the act in respect of registration.  Any ten or more individuals, each of them being a producer or two or more producer institution or a combination of ten or more individual producer institution can form a producer company provided that if a person ceases to be a primary producer, the board of director is entitled to ask him to surrender his shares.
The Guidelines issued by the Ministry Of Company Affairs regarding selection of names for proposed company:-
CONFIRMATION OF NAME FROM THE REGISTRAR
An application in form-1 –A of companies (central government’s) general rules and forms 1956 shall be made to the registrar of companies in the state where the registered office of the proposed company will be situated. A fee of Rs. 500 will be also sent to the applicant shall give four alternative names. The name of the promoters should also be the subscribers to the memorandum. The last words of the company should be “……………..producer company limited”.
The registrar’s confirmation of availability of name will be valid for six months and if a company with that name is not registered within six months, a fresh application will have to be made to the registrar with fees of Rs. 500
Within six months of confirmation from the registrar regarding availability of name, the promoters of a producer company shall produce to the registrar of the state in which the registered office will be located the following:
1. Memorandum of association duly signed by the subscribers and witnessed (2 copies).
2. Articles of association duly signed and witnessed as above (2 copies).
3. declaration in form No. by an advocate of the supreme court or high court, an attorney or pleader entitled to appear before high court, or a secretary or a chartered accountant, in whole –time practice in India, who’s is engaged in the formation of company or by a person named in the memorandum as director of the company, to the effect that all the requirements of the act and the rules there under have been complied with in respect of registration and matters precedent and incidental thereto.
4. List of persons named in the MOA as first directors and their consents in form -29 to act as directors.
5. form -32 in duplicate giving particulars of the said persons named as directors
6. form -18 in respect of situation of registered office
7. power of attorney on NJ stamp paper , if any , executed by any subscriber authorising a person to sign the MOA and AOA on his behalf or executed by a producer institution as subscriber
8. Power of attorney on NJ stamp paper signed by all subscribers authorising one of the subscribers or other person authorising him to make corrections on any of the document as may be required by the registered.
9. Evidence as to deposit of fees for incorporation of the company on the basis of the authorised capital as given in schedule X to the act.
The formalities for registration are identical for all companies as per Section 581 C (1) that for registration of a producer company under part IX –A, the provisions of the act in respect of registration have to be complied with.
Where any subscriber is illiterate?
Where any subscriber is an illiterate person, he can give his thumb impression or mark on the column for signature in Memorandum of Association, Article of Association and his name, address description and occupation and number of shares agreed to be taken by him shall be written by another person writing for him above the mark.
GRANT OF CERTIFICATE OF INCORPORATION
The ROC if satisfied that all formalities relating to registration are duly compiled with, shall register one MOA, AOA and other necessary documents and issue a certificate of incorporation within 30 days of receipt of document for registration.
On registration, the producer company shall be deemed to be a private limited company limited by share without any limit on the number of member and its share capital is to be dividing only into equity shares.
OPTION TO MULTI-STATE COOPERATIVE SOCIETIES TO CONVERT INTO PRODUCER COMPANIES
A Multi-State State Cooperative Society as defined in section 3(p) of Multi-State cooperatives Act, 2002 and includes any Cooperative Society registered under any law in force and which has after its formation, extended any of its objects to more than on state.
The Inter-State Cooperative Society whose objects not confined to one state can opt for conversion into a producer company.
For registration as a Producer Company an application is required to be submitted along with the prescribed document to the registrar for registration as Producer Company.
Following enclosures and documents are required to be submitted with along the application:
1. A copy of the special resolution passed with 2/3 majority of the member.
2. A statement showing the of names, addresses and occupation of the Directors and the Chief Executive.
3. A list of the members.
4. A statement indicating that the Inter-State Cooperative Society is any one or more of the objects specified in section 581B.
5. A declaration by two or more Directors certifying that the particulars given as per para (1) to (4) above are correct.
The Registrar on being satisfied that all the required document relating to registration have been duly complied with shall within 30 days of receipt of the application Issue a Certificate of Incorporation. And the word ‘Producer Company Limited ‘shall form part of its name to explain its identity.
The Inter-State Cooperative Society shall, upon registration stand transformed into a producer company, and shall be governed by the provision of Part IX A of the Companies Act, 1956.
All its properties, assets, liabilities, debts etc. shall vest in Producer Company with effect from the Registration date.
All legal proceeding may be continued against the Producer Company.
RECONVERSION OF PRODUCER COMPANY INTO MULTISTATE COOPERATIVE SOCIETY:
A Producer Company may be reconverted into Inter-State Co-operative Society after obtaining approval of its members in general meeting by Two-third majority or on request by its creditors representing three-fourth of its value of creditors, may make an application to High Court for its reconversion into ‘Inter-State Co-operative Society’.
DISCRETION OF HIGH COURT:
The High Court, may after having been satisfied, sanction the reconversion which shall be Binding on all members and all creditors and also on the company.
A certified copy of the order shall be filed with the registrar.
The Producer Company which has been sanctioned reconversion, shall now make application for registration as Inter-State Co-operative Society under the Multi-State Co-operatives Act, 2002.
CONCLUSION (Section 581K, 581L and 581M)
Where an inter state co-operative society transforms into a producer company, every shareholder of the erstwhile society shall deemed to have become shareholder of the producer company from the date of registration. The directors, officers and employees will be governed by provisions of section 581 N and the capital of the erstwhile society shall form part of the capital of the producer company. All the existing arrangements, legal proceedings and all the fiscal and other concessions against the co-operative society shall be deemed to have been granted to the producer company.
 Enforceable with effect from February 6th, 2003
 Section 581 B
 Section 581 C
 Section 581 F
 Section 581 C (2)
 Section 581J
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