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  • Sanskar Garg

Sec 581B of Companies Act, 1956: Producer Companies

Updated: Oct 4, 2022

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To enable cooperatives to operate as corporate entities under the ministry of corporate affairs, the idea of a producer company was introduced. In order to allow for the incorporation of producer companies, the Ministry of Company Affairs in India has proposed a Bill to amend the Companies Act, 1956 by inserting Part IX A. The Act has made it possible for primary producers to organize themselves in a way that will maximize their profits in a market-based economy.

Formally, a business designated as a producer company must engage in any of the activities broadly categorized below:

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

Further, the Producer Company must deal primarily with the products of its active members and must be allowed to carry on any of the activities mentioned herein by itself or through other entities on behalf of the members.

  • processing including preserving, drying, distilling, brewing, venting, canning and packaging of the 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 the interests of its Members;

  • generation, transmission and distribution of power, revitalization of land and water resources, their use, conservation and communication 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 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 which include extending of credit facilities or any other financial services to its Members.

Incorporation of Producer Companies: Any of the subsequent combination of producers can incorporate a producer company:

  • Ten or more producers (individuals); or

  • Two or more producer institutions; or

  • Combination of the above two (10+2).

On registration under section 581C(1), 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.

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