MPC I

Manual for Producer Company: Volume I
---------------------------------------------------------------------------------------------------------------------------------Prepared for M.P.DPIP by: Action for Social Advancement (ASA) Bhopal asa@asabhopal.org www.asaindia.org
Manual for Producer Company: Volume 1
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
Performance of project variety Danteshwari (left) in village Roldih of District Dumka in Jharkand sown on the same date comparison to local variety Swarna (right) at Villale
TABLE OF CONTENTS
ACKNOWLEDGMENTS TABLE OF CONTENTS A GUIDE TO MANUAL CHAPTER 1: UNDERSTANDING PRODUCER COMPANY A. B. C. D. E. F. G. CHAPTER 2: Primary Produce Producer Producer Institution Producer Company Who can form producer Company Characteristics of Producer Company Why Producer Company?
INITIATORS OF PRODUCER COMPANY A. The Initiator B. Types of Initiators C. Responsibilities For The Incorporation
CHAPTER 3:
INCORPORATION OF A PRODUCER COMPANY A. Preparatory Stage B. The Legal Aspects Step 1: Digital Signature Certificate (DSC) Step 2: Director Identification Number (DIN) Step 3: Naming of a Producer Company Step 4: Memorandum & Articles of Association Step 5: Documents to be submitted to the ROC Step 6: Certificate of Incorporation
CHAPTER 4:
GOVERNANCE OF A PRODUCER COMPANY A. Members i. Defining Member: ii. Modes of Acquiring Membership iii. The Authority of Members on the Company iv. Rights of Members v. Voting Rights of a Member vi. Cessation of Membership B. Board of Directors i. Powers and Functions of the Board ii. Restrictions on the Power of the Board iii. Appointment of Directors iv. Appointment of Directors by the Board v. Remuneration to Directors vi. Removal of a Director and Cessation of Directorship

vii. Resignation of Directors viii. Penalty of a Director C. Office bearers i. Chief Executive Director CHAPTER 5: ORGANIZATIONAL MANAGEMENT OF PRODUCER COMPANY A. Business in a Company B. Annual Filing i. How to do the Filing ii. Important Points to Remember iii. Do's & Don'ts C. Committee of Directors D. Registers To Be Maintained By the Company i. Register of Directors, Managing Directors, Managers and Secretary ii. Register of Contracts, Companies and Firms in Which Directors Are Interested iii. Register of Directors Shareholders iv. Inventory/Fixed Assets Register E. Meetings i. Need and Importance of Meetings ii. Annual General Meeting (AGM) iii. Business to be transacted at annual general meeting iv. Extraordinary General Meeting Convened By Board F. Meetings of the Board of Directors i. For the meetings of the BoD ii. Quorum iii. Sitting Fee G. Contributions by Board of Directors CHAPTER 6: FINANCIAL MANAGEMENT OF PRODUCER COMPANY A. Share Capital i. Procedure for alteration of share capital ii. Consolidation/Division/Cancellation of Share iii. Diminution of Capital iv. Issue of Bonus Share B. Loans and Investments C. Books of Account D. Balance-sheet and Profit and Loss Account E. General and Other Reserves F. Issue of Bonus Shares G. Delegation of Financial Powers i. To CEO ii. Advance from the Company iii. Accounting for Advance Taken from the Company H. Audit of Accounts ANNEXES Annexure 1: Annexure 2: Definitions of other important terms related to the Producer Company Similarities and differences between Producer Company and Cooperatives

Annexure 3: Annexure 4: Annexure 5: Annexure 6: Annexure 7: Annexure 8: Annexure 9: Annexure 10: Annexure 11: Annexure 12: Annexure 13: Annexure 14: Annexure 15: Annexure 16: Annexure 17: Annexure 18: Annexure 19: Annexure 20: Annexure 21: Annexure 22: Annexure 23: Annexure 24: Annexure 25: Annexure 26: Annexure 27: 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? An approximate cost of incorporation of a Producer company A small write-up on Memorandum of Association Model Memorandum of Association A small write-up on Articles of Association Model Articles of Association Liabilities of Members Transferability of Shares Nomination and Attendant Rights Vacation of Office of Directors Election Rules for the Constitution of the Board of Directors Directors Liabilities Roles and Responsibility of the Accountant, Service provider, Company secretary and Go down keeper Model business plan of a Producer Company Augmenting and Managing Financial Resources Matters to be Disclosed in the Fixed Assets Register Procedure to Be Adopted For Procurement of Agriculture Inputs Reports and forms to be filed in ROC Office 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

Box 12: Box 13: Box 14: Box 15: Box 16: Box 17: What should be the qualification of directors? Required Licence Statutory Registers, Books etc. To Be Maintained Period of Preservation of Statutory Registers/Records Fixed Assets Register Vouchers
Campaign on Right to choice of seeds in Chhatarpur district in M.P.
Discussing with PVSP trial holders on the performance of the variety
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. Box 1: This Manual The document is for all practitioners; with sole intention to provide a ready rekoner for establishing Producers Company It includes definition of terms related to Producers Company and legal formalities
Steps/information needed for incorporation However, incorporation of the Producer Company and establishment of Producers Company includes not only legal formalities and marketing the products but also promoting the company, This is also unique through providing an organising the members, accountability, auditing overview of the social process involved; etc. Thus, manual is designed to give first hand solely developed from experiences of information about the various processes involved in practitioners the incorporation, operation and management of a Producer Company. Major source of information for this manual came from the experiences of practitioners involved in the process to incorporate and establish Producers groups/company/community institutions. The manual contains seven chapters. The first chapter defines the definitions related to producers and Producer Company. Second chapter discusses the types of initiators and their role in the company. Third chapter deals with the process to be followed and the preparations required at the field level for the incorporation of the company. The chapter also focuses on the legal requirement for establishing a company and process involved for it. The fourth chapter describes the roles and responsibility of three major players in the Producer Company Members, Board of Directors and Office Bearers. Fifth chapter describes the organisation and management issues of the company, like procuring licences, meetings, registers to be maintained and income tax to be filed. The sixth and concluding chapter defines and describes the finance related issues, like sources of income and maintaining the accounts of the company. The whole idea behind this manual was not to provide prescription, as the producers company requires contextual strategic interventions (like any other community institutions), which is best manoeuvred by the practitioners working under situation. Thus, this manual should not be considered as a sole source of information, especially when it is matter of building the institutional dynamics and connecting the shareholders with the decision making process. It is also suggested that the person involved must go through the related Companies Act (Part IX A) and the website of Ministry of Corporate Affairs (www.mca.gov.in) for better understanding of the legal matters related to the incorporation and operation of Producer Company.
PVSP trials in Munger district, Bihar
CHAPTER 1
(This chapter discusses the definitions related to Producer Company)
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 Box 2: Objects and Activities of Producer Company (As per the Companies (Amendment) Act, 2002, Section No. 581B)
Production, harvesting, procurement, grading, pooling, handling, marketing, selling, export of primary produce of the members or import of goods or services for their benefit, processing the produce of members, manufacture, sale or supply of machinery, consumables, etc to members, providing education and other welfare activities for members, generation, transmission and distribution and distribution of power, revitalisation of land and water resources, their use, conservation and communications relatable to primary produce, insurance of produce, and other allied or ancillary activities including financing thereof.
A body corporate registered under the Companies Act, 1956; and having specified objects and activities (refer box). Ownership and membership of such companies is held only by Primary Producers or Producer Institution, and member equity shall not be publicly traded. However it may be transferred, only with the approval of the board of directors of the Producer Company. E. WHO CAN FORM PRODUCER COMPANY? 4 Any one of the following can get a producer company incorporated under the Act: Any ten or more persons engaged in any activity connected with primary produce, or Any two or more producer institutions or companies, or A combination of ten or more individuals and producer institutions.
1 2
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

F. CHARACTERISTICS OF PRODUCER COMPANY 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
As per the Companies (Amendment) Act, 2002, Section No. 581C(3)
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): Any person not necessarily a primary Box 3: Initiator in MP producer. Interested group of persons willing to DPIP, in 2003, involved ASA# to provide support contribute their time and resources to in its agriculture programme, which was being promote a producers company. supported World Bank programme. Gradually, the Any NGO working with the primary intensive efforts made by ASA started yielding producers group and willing to introduce results and the community were capacitated the concept of Producers Company for enough to make informed decisions through the economic enhancement of the democratic processes. With this, ASA was producers. Also NGOs, who are interested approached by DPIP in 2005 to extend its support in the concept but not working with the in organizing people further to form producers primary producer, can take an initiative for company. Thereafter, ASA has been working mobilizing people to start a Producer towards forming, promoting and establishing Company producers company in the DPIP programme The existing multi-State cooperative areas. societies or Federation of Co-operative can be incorporated as a Producer The above illustration is to clarify how an external Companies 7 , with the consent and agency can initiate the process for incorporation authorization by not less than two-third of of the company. the total members of the existing cooperative society in a general meeting. The conversion will allow cooperative to operate in more than one State. Registration to cooperatives shall be granted within a period of 30 days after the submission of receipt of the application to the Registrar of Comapy. From the date of registration, every member of a cooperative will become Shareholder of Producer Company. 8
6 #
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
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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 Q. Who will bear the cost incurred to incorporate the Company? A. The promoters should pull the amount needed for incorporation of a company. Amount (loan) given by the promoters in the initial stage will be reimbursed by the company. The payment however needs to be approved by the members in the first general meeting of the Producer Company#.
#As per the Part IX-A of the Companies Act, 1956, Section No. 581C
C. RESPONSIBILITIES FOR THE INCORPORATION It is the responsibility of the initiator to take certain steps for the incorporation of the company. S/he, along with other promoters, have to get drafted the Memorandum and Articles of Association, file them with the Registrar of Companies along with other documents and papers 9 , carry out corrections, if any, required by the Office of the Registrar and finally collect the Certificate of Incorporation. Initiator also has to mobilize as well as invite people to be shareholders of the company.
(4)
--------------------------------------------------------------------------------------------ANNEXES Annexure 3: An approximate cost of incorporation of a Producer Company
Refer chapter 4 for details
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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. Box 6: Area Selection The discussions with CEOs of various companies reveals that the companies have been mostly promoted in areas where farmers are progressive, have minimum understanding of market dynamics, oriented to business principles & ethics and possesses risk taking capabilities. This provides a strong platform for the initiators to introduce new concept and systems easily.
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 .
While finalizing the cost of each share, the capacity of the poorest and deprived shareholders should also be considered.
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Box 7: Steps to be followed for the incorporation of Company Step 1 Meeting with the villagers and introduce the concept Step 2 Exposure visit to a Producer Company Step 3 Motivating eligible members to become shareholders Step 4 Meeting the shareholders and discuss objectives/possible business ideas Step 5 Drafting of Memorandum and articles of association First informal meeting of the shareholders to approve: Approval of Memorandum and articles of association Selection/election of promoter (effort to be made by initiator to avoid election in this stage as it can lead to drift among some members) Authorized Capital and Cost of each share
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.
Box 8: Cautions for Initiators (First Informal Meeting with the Shareholders) Adequate ground work should be done to popularize the concept and objective of the producer Company to ensure: - Shareholder should be aware of the agenda of the meeting well in advance - Sufficient preparation at logistic level - Participation of vulnerable group, such as women, Schedule Caste and Schedule Tribe, in the meeting.
After having a registration of the company, the first General meeting of the shareholders has to be held within the 90 days. Other than discussing the business plan, the Board of Directors has also to be finalized in the meeting. The proceedings of the meeting have to be sent to the registrar within sixty days along with the list of finalized director.
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Box 9: Legal Formalities for Formation Obtain Digital Signature of the Nominated Director Choose four (04 ) names of the producer company in order of preference. Apply for name availability in FORM 1A After availability of name necessary documents are to be prepared like: Memorandum of Association Articles of Association FORM No 18 for registered Office FORM No 32 for Directors Appointment Apply online for DIN for Proposed Directors. FORM 1 Affidavits by subscribers to Memorandum Of Association in case If they have signed in Hindi Power of Attorney in favour of consultant to authorise him to make necessary changes.
B. THE LEGAL ASPECTS A step-wise basic information for the formation of a Producer Company is described as under: Step 1: Digital Signature Certificate (DSC) 11 : The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance programme are required to be filed with the use of Digital Signatures. Thus, it is necessary for a company to authorize a persons (nominated) signature who will be approved to sign the documents. Form for DSC is available with the website of Ministry of Company Affairs (henceforth website of MCA) 12 . After filling the required information, the form has to be submitted online to the Certification Agencies 13 . The DSCs are typically issued with one to two year validity. These are renewable on expiry of the period of initial issue. A person who already has the specified DSC for any other application can use the same for filings under MCA21 and is not required to obtain a fresh DSC. The company representatives and professionals required to obtain DSCs are free to procure the same from any one of the approved Certification Agencies as per the web site. The issuance costs in respect of each Agency vary and are market driven.
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
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Step 2: Director Identification Number (DIN) The DIN number can be obtained online from a company affairs cell office without any fees by only providing identification proof number (only PAN Card, Voter Identity card, passport or driving license number is accepted). DIN form is available in website of ministry of company affairs as and on line application can be made for the same. Step 3: Naming of a Producer Company 14 A producer company should be named using the following suffix ..Producer Company Limited appropriately indicating its status as a producer company. The word private is not used in the naming process and the absence of which does not indicate that the company is a public. The procedure includes for the availability of name for a Producer Company: Select, in order of preference, at least one suitable name upto a maximum of five names, indicative of the main objects of the company. Ensure that the name does not Box 10: Power of Attorney resemble the name of any other already registered company and also does not All the work required to incorporate the Company violate the provisions of emblems and can be done either by the promoters or they can authorize anyone of them or any other person to names (Prevention of Improper Use Act, follow the matter with the ROC (in most of the cases 1950) by availing the services of a service of charted accounts or company secretary checking name availability on the portal. is acquired for the purpose). In the latter case, they Apply to the concerned Registrar of have to execute a power of attorney in favour of the Companies to ascertain the availability person, who is authorised to act on their behalf. of name in e-Form 1(A) 15 by logging in A power of attorney form duly stamped and to the portal. A fee of Rs. 500/- 16 has to executed by all the subscribers of directors have to be paid alongside and the digital be submitted to the ROC. signature of the applicant proposing the company has to be attached in the form. A power of attorney holder is, specifically, authorised to make corrections, as may be If all the proposed five names are not necessary in the Memorandum and Articles of available, the applicant (promoters) will Association and all other documents filed with the be intimated by RoC and subsequently ROC and to attest the same on their behalf and to the applicant has to apply for a fresh receive the Certificate of Incorporation. name on the same application. Moreover, there is further scope of changing the name from time to time. However, this is done with adequate and appropriate justified and/or logical reason 17 .
14 15 16 17
As per the Companies (Amendment) Act, 2002, Section No. 581B
Pursuant to Section 20 & 21 of the Companies Act 1956

Fees should be deposited in the regional bank authorised by the MCA. As per the Companies Act , Section 21
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Step 4: Memorandum & Articles of Association 18 After ascertaining the name of the producer company, a memorandum and articles of association have to be prepared. Memorandum and Articles of Association should be printed. A computer print printed on both side of the paper. Get the Memorandum and Articles of Association duly stamped 19 . Get the Memorandum and Articles of Association subscribed/signed by the requisite subscribers/promoters in his/her own hand, his/her father's name, occupation, address and the number of shares subscribed for. Ensure that the Memorandum and Article is dated on a date after the date of stamping. Step 5: Documents to be submitted to the ROC 20 for the Incorporation of Producer Company 21 [It should be noted that all the information and forms are available on the website of MCA (http://www.mca.gov.in), and can be accessed and filled up easily]. File the following documents along with the fees payable 22 with the Registrar of companies of the state, where the Registered Office of the company is to be situated: Copy of the letter of Registrar of Companies confirming the availability of name for formation of the company should be made; Memorandum and Articles of Association duly stamped and signed; Form 18 regarding situation (full address) of Registered Office 23 Form 32 (in duplicate) regarding particulars of directors 24 Form 1 (on a stamp paper) declaring compliance of all and incidental matters regarding formation of companies 25 Form 29 consent of the director An affidavit has to be submitted if the Memorandum of Association is submitted in Hindi by subscribers, claiming the understanding of same. Power of Attorney. Step 6: Certificate of Incorporation The Registrar of the Companies, on being satisfied that all the documents 26 for the incorporation of a company is submitted, he is obliged to register the memorandum, the articles and other documents, if any,
18
A small write-up on Memorandum of Association and Articles is given in Appendix 2
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
the Registered Office of the company is to be situated.

20 In Madhya Pradesh, the address of registrar office : Regional Director, Chamber Bhawan, Sanatan Dharm Mandir Marg, Lashkar, Gwalior, MP, Phone: 91 751 321907 Fax: 91 751 331853, Email: roc-gwa@hub.nic.in 21 The applicant can apply for registration of the new company within six months of name approval
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)
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and issue a certificate of incorporation within thirty days, which is a conclusive proof of its formation in terms of Part IX A. [Section 581C (2)]. The incorporation of Company is effective from the date mentioned in the certificate of registration granted by the Registrar of Company. On incorporation, a company becomes a juristic person, i.e. a person in the eyes of law. It has perpetual succession i.e. its members may come and go but the company goes on till it is wound up by following the process of law. It has a common seal, which is affixed on all the documents executed on behalf of the company in the presence of a director and be signed by the authorized signatory or signatories. It is empowered to hold all properties in its own name and has its own right. It can sue others and can be sued by other and enter into contracts in its own name. ________________________________________________________________________ ANNEXES Annexure 4: Annexure 5: Annexure 6: Annexure 7: A small write-up on Memorandum of Association Model Memorandum of Association A small write-up on Articles of Association Model Articles of Association
General Body meeting of Farmer Producer Company in Chhatapur
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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
Refer section on Cessation of Membership in this chapter As per the Companies Act, 1956, Section No 41
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b. By agreeing in writing: by application and allotment: two essential conditions have to be fulfilled by any person to become a member of a Company other than by subscribing to its Memorandum of Association, they are: an agreement in writing to become a member, and entry in the register by taking a transfer of shares: membership may be acquired from an existing member by purchase if all or any of the shares of the company. A transfer deed duly executed by both the transferor and the transferee together with the share certificate. However, the membership will be granted to transferee only after when the transferor will give in writing in a prescribed form, and when the transfers registered in the books of the company. by transmission of shares: a person can become a shareholder in consequence or by reason of the death or bankruptcy of a member or any other event constituting transmission. Here also, person will become member only when he applies in writing requesting the company to make him a member and the company puts his/her name on the register of members. c. estoppel 29 : by allowing his/her name to be in the Register of Members or otherwise holding himself out or allowing to be out as a member. iii. The Authority of Members on the Company: Members act through the General Body, and the Body alone can: a. b. c. d. e. f. g. h. i. 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.
iv. Rights of Members When once a person becomes a member s/he is entitled to exercise all the rights of a member until s/he ceases to be a member in accordance with the provisions of the Act. The rights of a Member are: 29
to transfer his shares; to vote on resolutions at meetings of the Company; *to requisition an extraordinary general meeting of the Company or to be a joint requisitions; to receive notice of a general meeting; to attend and speak in a general meeting;
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

to move amendments to resolutions proposed at meetings; in case the Member is a corporate body, to appoint a representative to attend and vote at general meetings on its behalf; - *to require the Company to circulate its resolutions; - to enjoy the profits of the Company in the share of dividends; - *to elect directors and to participate in the management of the Company through them; - *to apply to the Company Law Board for relief in case of oppression; - to apply to the Company Law Board for relief in case of mismanagement; - to apply to the Court for winding up of the Company; - to share in the surplus on winding up; and - to have a share certificate issued to him in respect of his shares. * It can be exercised only if the person possesses the requisite minimum shares holding. Otherwise they can be exercised jointly with the number of shareholders. v. Voting Rights of a Member a) b) c) 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). -
d) e)
vi. Cessation of Membership A member is seized of with his/her membership: 30
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;
Refer definition in Annexure 1
20

by recession of contract of membership, on the grounds of misrepresentation or mistake.
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 : Determination of the dividend payable. Determination of the quantum of withheld price and recommended patronage to be approved at General meeting. Admission of new members. Pursue and formulate the organizational policy, objectives, establish long-term and annual objectives, and approve corporate strategies and financial plans Appointment of a CEO and other officers, as may be specified in the Articles. 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. Acquisition or disposal of property of the company in its ordinary course of business. Check that proper books of account is maintained. 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: approval of budget and adoption of annual accounts of the Producer Company; approval of patronage bonus; issue of bonus shares;
31 32
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
21

declaration of limited return and decision on the distribution of patronage; specify the conditions and limits of loans that may be given by the Board to any director; and approval of any transaction of the nature as is to be reserved in the articles for approval by the Members. iii. Appointment of Directors: The members who sign the memorandum and articles may designate therein the first Board of Directors who shall govern the affairs of the Box 11 Company until the directors are elected 34 by Q. Does expert director have rights to the members in a general meeting, which vote for director of the company? shall be done within ninety days 35 of A. Expert Directors, who are not incorporation of Producer Company. shareholders, shall not have the right to vote in the election of the Chairman, but Every director in a Producer Company, may serve in that position if elected by the elected by the members in the general Board. meeting shall hold office for a period of not less than one year and not more than five years. 36 Also, it must be noted that the entire Board of Directors, except the Chief Executive Officer and Expert Directors, is subject to retirement by rotation in a period of five years. Retirement of Directors shall take place at the Annual General Meeting where the re-election also shall take place. However, every director who retires is eligible for re-appointment 37 . iv. Appointment of Directors by the Board a. Additional or Expert Directors The Board 38 may co-opt one or more expert directors or an additional directors not exceeding one fifth of the total number of directors 39 , or appoint any other person as additional director for such period as the Board may deem fit. b. Alternate Directors The Board of Directors of a Producer Company may, if authorised by its Articles of Association or a resolution passed by the Company in general meeting, appoint an alternative director to act in a place of an original director during his absence for not less than three months from the State in which the Board meetings are ordinarily held. The alternative director so appointed holds office for the period the original director is away from the State and when the original director returns to the State in which the meetings of the board are ordinarily held, the alternative director ceases to be the director.
34 35
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)
22

No specific provisions have been made regarding filling up of casual vacancies, occurred between two Annual General Meetings due to such resignation, insolvency, disqualification etc. v. Remuneration to Directors Reimbursement of actual expenses of travelling, lodging and food occurred while attending the Company's meeting (Business/Non-business). However in case of business need of the Company, provision can be made for a fixed Daily Allowance (DA) and other facilities like communication allowances for all or only selected directors who are giving their extra time, for the promotion of the company' business activities. Box 12 Q. What should be the qualification of directors? A. As per the Companies Act, 1956, Section 253, only an individual can be a director. There is no statutory requirement that a director must hold qualification shares in the Company in which s/he is a director. Thus a person may be a director in a Company without being its member.
vi. Removal of a Director and Cessation of Directorship a. Shareholders of the Company A director may be removed from office before the expiry of his term by 40 shareholders of the Company The shareholders of a company may, by passing an ordinary resolution at a general meeting, remove a director before the expiry of the period of his office 41 . However, the following directions cannot be removed by the company unless otherwise stipulated in the terms of their appointment. a director appointed by the Central Government under Section 408; a director appointed by a financial institution under the terms of a loan agreement; and a director appointed by the National Company Law Tribunal.
b. The Central Government A director may be removed by the Central Government. The Central Government may remove a director by making a case against the person and refer the same to the Tribunal with the request that the Tribunal inquire into the case and record the decision as to whether or not such a person is a eligible to hold the office of director, or any other office connected with the conduct and management of any company 42 . The Central Government may make such an application to the Tribunal where it is of the opinion that there are circumstances suggesting:
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

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.
c.
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.
vii. Resignation of Directors 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.
viii. Penalty of a Director If a director or an officer of a Producer Company wilfully fails to furnish any information relating to the affairs of the Producer Company required by a Member or a person duly authorised in this behalf, he shall be liable to imprisonment for a term which may extend to six months and with a fine equivalent to five per cent of the turnover of that company during preceding financial year. Thus, if a director or officer of a Producer Company - makes a default in handing over the custody of books of account and other documents or property in his custody to the Producer Company of which he is a director or officer; or
24

- fails to convene the annual general meeting or other general meetings; s/he shall be punishable with a fine which may extend to Rs. 1 lakh, and in the case of a continuing default or failure, with an additional fine which may extend to Rs. 10,000 for every day during which such default or failure continues. 3. OFFICE BEARERS Individual appointed 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. i. Chief Executive Officer (or by whatever Name called) Board of Directors has to appoint full time CEO amongst persons other than members. The qualification, experience and the terms and conditions of services shall be decided by the Board. The CEO shall be the ex-officio Director of the Board and shall not retire by rotation. The CEO shall be entrusted with substantial powers of management as may be determined by the Board. S/he is accountable for the performance of the Producer Company, both, to the Board of Directors and to the Members. The CEO shall be authorised to exercise the powers and discharge the functions as described below 43 : - do administrative acts of a routine nature including managing the day-to-day affairs of the Company; - operate bank accounts or authorize any person, subject to the general or special approval of the Board; - make arrangements for safe custody of cash and other assets of the Company; - sign business related documents as may be authorized by the Board for and on behalf of the Producer Company; - maintain proper books of account, prepare annual accounts, place the audited accounts before the Board and in the annual general meeting of the Members; - furnish the members with periodic information to appraise them of the operation and functions of the Company; - make appointments to posts in accordance with the powers delegated to him by the Board; - assist the Board in the formation of goals, objectives, strategies, plans and policies; - advise the Board with respect to legal and regulatory matters concerning the proposed and on going activities and take necessary action in respect thereof; - exercise the powers as may be necessary in the ordinary course of business; - discharge such other functions, and exercise such other powers, as may be delegated by the Board; - to provide timely information to the Members and Board of Directors for scheduled company meetings or emergency or short notice meetings. ________________________________________________________________________ ANNEXES Annexure 8: Liabilities of Members Annexure 9: Transferability of Shares Nomination and Attendant Rights Annexure 10: Vacation of Office of Directors
43
As per the Part IX A of the Companies Act, 1956, Section No. 581W
25

Annexure 11: Election Rules for the Constitution of the Board of Directors Annexure 12: Directors Liabilities Annexure 13: Roles and Responsibility of the Accountant, Service provider, Company secretary and Go down keeper
National workshop on Public-private partnership for farmers preferred seed varieties organised by ASA in Bhopal, MP
Man and wife with PCI varieties vs local varieties
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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

the Mandi license. The company can also procure certification from FPO, AgMark, ISI and BIS to increase the marketability of its product. In case, the Company intends to undertake the production, processing and marketing of seed, the certification is done for the concurrent production process each season (as per the procedure laid down by the state seed certification agency for each individual grade and crop accordingly). 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 respective e 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 4 5 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
a. How to do the Filing The companies can do e-Filing in three different ways:
1.
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

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.
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.
Comparison between two project introduced varieties one with early maturity in Gujarat
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c. Do's & Don'ts
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. D. REGISTERS TO BE MAINTAINED BY THE COMPANY It is compulsory for Producer Company to maintain the registers discussed below, failing to it will be punishable with fine which may extend to Rs.500/- (in case of first two registers) or up to fifty thousand rupees and with a further fine extending up to two hundred rupees for every day during which the default continues (in case of third register). All the registers mentioned below should be open to inspection by members of the company, without any charge, during the business hours of the company. The third register should also be produced at the commencement of every annual general meeting of the company and shall remain open and accessible during the continuance of the meeting. Failing to produce the registers on demand, the concerned person, would be liable to fine, which may extend to five hundred rupees. i. Register of Directors, Managing Directors, Managers and Secretary The following particulars of directors, managing director, CEO and secretary have to be kept in a register in its registered office 46 : a. his present and any former name and surname in full; b. his fathers (in case of a married woman her husbands) name and surname in full: c. his nationality or the nationality of origin: d. if he holds the office of director, managing director, manager or secretary in any other corporate body (except in case of a private company which is not a subsidiary of a public company), the particular of each such office held by him; and e. the date of his birth.
PVSP trials of soybean crop in Chhatarpur distrct of M.P.
46
As per the Companies Act, 1956, Section 303
31

Box 14: Statutory Registers, Books etc. To Be Maintained
Share/Debenture transfer register [Section 108] Copy of every instrument deed, etc., creating any charge which requires registration [Section 136] Register of charges [Section 143] Register of members [Section 150] Index of members [Section 151] Copies of annual returns and certificates and documents required to be annexed thereto [Section 159 to 161] Minute books of Board Meetings & meetings of committee of the Board [Section 193] Minute books of general meetings [Section 193] Register of dividend declared and remaining unpaid [Section 205] Proper books of accounts [Section 209] Proper books of accounts in relation to transactions effected at Branch Office. Register of contracts, companies and firms in which directors are interested [Section 301]. Register of directors, etc.[Section 303] Register of directors share-holdings, etc. [Section 307] Register of inter-corporate loans and investments [section 372A] Register of renewed and duplicate certificate [Rule 7(2) of the Companies (Issue of Share Certificates) Rules, 1960] Register and index of beneficial owners. Books of accounts of producer company [Section 581ZE(1)] Register of particulars of investments of producer companies [Section 581ZL(7)].
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
As per the Companies Act, 1956, Section 301 48 As per the Companies Act, 1956, Section 307
32

a. The number, description and Box 15: Period of Preservation of Statutory Registers/Records amount of Register/ Record Period S.No. shares. Register and index of members Permanent 1. b. Debentures of the company, or Books of accounts and vouchers 8 years 2. its subsidiary or holding company Register of deposits 8 years from the year 3. which are held for of last entry him, or which he Annual return and certificate 8 years from the date 4. has any right to annexed thereto. of last filling with become the ROC. holder whether Any other statutory register/ record. 8 years 5. on payment or not. c. Details of any transactions (date, price and any other information considered important) regarding the shares or debentures of the directors. d. The nature and extent of directors interest over the shares or debentures should also be indicated in the register. iv. Inventory/Fixed Assets Register The management have to maintain a fixed asset register of the physical assets of the company. For the purpose, management have to exercise physical verification of at least once in a year. The process is necessary to safeguard Producers Company assets lying at different locations with several user/ user departments. This is also required to ensure proper reconciliation between physical assets lying at different locations and assets as per books of accounts. Steps should be taken for physical verification of assets is: a. Prepare list of assets, lying at different locations, on the basis of Fixed Assets Register; b. Send the list to each unit/ department/ location for carrying out the physical verification of assets; c. The list should, then be compared with the Assets register and case of variances noted; d. The reason of the variances must be clarified by the user/ user department and forwarded to the Head Office for action; e. Balance sheet should show only physical assets available with the unit/ user department; 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 Box 16: Fixed Assets Register (FAR) is required to show all the permanent assets owned by Company. It should show the quantity and value of things like all fixed assets, furniture, fixtures, vehicles, land, buildings, plant and machinery etc. and both should not be merged at one place.
33

forum i.e. meetings of members. Such forums enable free and face-to-face exchange of ideas and views and provide for collective wisdom to be brought into place for achieving the corporate goals. The Companies Act, 1956 has given elaborate provisions for holding and conducting meetings. It is necessary to observe those provisions; failing to it will disqualify the decisions taken and cannot be effected. ii. Annual General Meeting (AGM) Shareholders are the owners of the Producer Company, thus, it is desirable that they should meet once in a year to discuss and review the companys work. It is during AGM that directors are elected/reelected, and also, decision on replacing or re-appointing of auditors is decided. The annual report of the company is presented in this meeting. Also, decisions on distribution of dividend are taken in these meetings. a. A Company shall hold the first general meeting within a period of 90 days from the date of its incorporation. b. Producer Company should, in each year, hold an annual general meeting 49 (in addition to any other meetings). c. Not more than fifteen months shall elapse between the date of one annual general meeting and that of the next. d. An annual general meeting of the Company shall be called by giving not less than fourteen days prior notice in writing. e. The Registrar may, for any special reason, permit extension of the time for holding any annual general meeting (not being the first annual general meeting) by a period not exceeding three months. f. The Members shall adopt the articles of the Producer Company and appoint directors of its Board in the annual general meeting. g. The notice calling the annual general meeting shall be accompanied by the following documents, namely:the agenda of the annual general meeting; the minutes of the previous annual general meeting or the extraordinary general meeting. The names of candidates for election, if any, to the office of director, including a statement of qualifications in respect of each candidate; 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; The amount proposed to be disbursed as patronage bonus; The material changes and commitments, if any, affecting the financial position of the Producer Company and its subsidiary, which have occurred in between the date of the annual accounts of the Producer Company to which the balance sheet relates and the date of the report of the Board.
49
As per the Part IX A of the Companies Act, 1956, Section No. 581ZA
34

Any other matter of importance relating to energy conservation, environmental protection, expenditure or earnings in foreign exchanges;
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
50
As per the Companies Act, 1956, Section No. 169 to 186
35

on which the annual general meeting is held, with an annual return along with the filing fees as applicable under the Act. iv. Extraordinary General Meeting Convened By Board Every general meeting, other than AGM, is an extraordinary general meeting. It is usually called by the BoD for transecting some urgent business for which has to be done before the next annual meeting. It has to be done as per the provisions of Companies law. The Board of the Directors shall, (on the requisition made in writing duly signed and setting out the matters for consideration, made by one-third of the members entitled to vote in any general meeting), proceed to call an extraordinary general meeting in accordance with the provisions made in companies act 51 .
General Body meeting of Farmer Producer Company
F. MEETINGS OF THE BOARD OF DIRECTORS The Board may meet as often as it may consider necessary for transaction of the business. However, it shall meet at least once in every two months. In any circumstances, the Board shall meet not less than once in every three months and at least four such meetings shall be held in every year. i. For the meetings of the BoD a. The Board meeting shall be called generally with seven days notice (should be issued by CEO) 52 , but in case of emergencies, it can be called at a shorter notice.
51 52
As per the Companies Act, 1956, Section 169 and 186 As per the Part IX A of the Companies Act, 1956, Section No. 581V (3)
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b. In case, the CEO fails to issue a notice for holding a meeting of the Board, s/he will be punishable with fine which may extend to one thousand rupees. c. Every year after the constitution of the Board, in the first Board meeting the Board shall elect the Chairman of the Producer Company for a period of two years. d. The Chairman shall preside over the meeting of the Board. In case of his absence, the directors present shall elect one of the elected directors as the Chairman of the meeting. e. Each member of the Board shall have one vote. f. Decisions at the Board meeting shall be arrived at by majority votes of the directors present. In case of a tie, the Chairman of the meeting shall have the casting vote in addition to his usual vote except in case of election of the Chairman. Tie in case of election of chairman, the matter shall be decided by draw of lots. g. An elected member of the Board who is absent from three consecutive meetings of the Board without obtaining the leave of absence, shall cease to be a member of the Board. h. No member shall be present at discussion or vote on any matter in which he has personal interest. ii. Quorum The presence of at least three Directors or one third of its total strength, which ever is higher, shall form the quorum for the Boards meeting. In absence of quorum in a meeting, then the meeting shall automatically stand adjourned till the same day in the next week, at the same time and place, and if that day is public holiday, till the next succeeding day, which is not a public holiday, at the dame time and place. iii. Sitting Fee The Articles of Association may authorise the payment of a sitting fee and allowance to directors including the co-opted directors - for attending the Board meetings. The quantum of the sitting fee and allowance shall be determined by the members in a general meeting from time to time. G. CONTRIBUTIONS BY BOARD OF DIRECTORS 53 A Producer Company may make contributions or donations as discussed in the following paragraphs: i. Contributions to the National Defence Fund etc. The Board of Directors of any Company or any person or authority exercising the powers of the Board of Directors of a Company or of the company in general meeting, may contribute such amount as it thinks fit to the National Defence Fund or any other fund approved by the Central Government for the purpose of national defence. A Producer Company may, by special resolution, make donation or subscription to any institution or individual for the purposes of a. promoting the social and economic welfare of Producer Members or producers or general public; or b. promoting the mutual assistance principles:
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.
37

This is provided that the aggregate amount of all such donation and subscription in any financial year shall not exceed three percent of the net profit of the Producer Company in the financial year immediately preceding the financial year in which the donation or subscription was made. --------------------------------------------------------------------------------------------------------------------ANNEXES Annexure 14: Annexure 15: Annexure 16: Annexure 17: Annexure 18: Model business plan of a Producer Company Augmenting and Managing Financial Resources Matters to be Disclosed in the Fixed Assets Register Procedure to Be Adopted For Procurement of Agriculture Inputs Reports and forms to be filed in ROC Office
PVSP trial showing project introduced variety with early maturity
38
CHAPTER 6
(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).
FINANCIAL MANAGEMENT OF PRODUCER COMPANY
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
55
54
39

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.
ii. Consolidation/Division/Cancellation of Share into Larger/Smaller Amount a. For the consolidation/division/cancellation of shares, at first, it should be considered and approved by the Board in its meeting. In the same meeting the date/time for the general meeting and the notice of the meeting 58 containing the necessary resolutions and explanatory statements may also be finalised and approved. b. At the general meeting: - The necessary resolution should be passed, - Form No. 23 has to be filed 59 within 30 days of passing the resolutions along with the filing fees and enclosures as prescribed in Schedule X to the Act with the Registrar of Companies. c. In case of consolidation/division, the Members must be issued new certificates in lieu of the existing share certificates, by making appropriate entries in the register of members. Whereas, in cancellation of shares, a notice to the Registrar of Companies in Form No. 5, along with the fees as prescribed in Schedule X to the Act. iii. Diminution of Capital a. The Company may diminish the amount of its authorised or nominal (but not issued) capital by cancelling shares which have not been issued or agreed to be issued, if its Articles authorise such cancellation. b. The diminution may be affected and it must be given to the Registrar within 30 days thereafter in Form No. 5. c. It must be noted that the resolution does affect the Company from subsequently increasing its nominal capital by passing an ordinary resolution in general meeting. It should also be noted that diminution of capital is not reduction of capital. d. In case of diminution, the cancelled shares that have never been issued or allotted to anyone are extinguished. iv. Issue of Bonus Share 60 Any Producer Company may, upon recommendations of the Board and passing of resolution in the general meeting, issue bonus shares by capitalization of amounts from general reserves, in proportion to the shares held by the members on the date of issue of such shares.
57 58
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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The procedure for issue of bonus shares: a). The Share Capital as increased by the proposed Bonus Shares should be well within the authorised capital of the Company. If not, necessary steps should be taken to increase the authorised capital, by amending the capital clause of the Memorandum of Association. b). Recommendation for capitalization of reserves should be made by the Board by passing a resolution. c). A resolution should be passed in the general meeting duly convened and filed with the signatory within 30 days together with requisite documents and fees. d). Where the Company has availed of any loan facility from term lending institutions, prior permission is to be obtained from the institution as per the term lending agreement. The allotment of Bonus shares should be made by the Board after approval of Members in general meeting is obtained and share certificate issued to the Members. Form 2 should be filed with the Registrar within 30 days also with requisite fees.
Campaigning
Conducting PRA with farmers to identify farmer preferred crop varieties
41

B. LOANS AND INVESTMENTS: The members of the Producer Company are primary producers, and thus, are in need of financial assistance from time to time. Hence, a special provision has been made in the Act 61 of Producer Company of giving loans to its members. The Company can provide financial assistance to its members 62 through: Credit facility, to any member, in connection with the business of the Company, for a period not exceeding six months. Loans and advances, against security specified in articles to any Member, repayable within a period exceeding three months but not exceeding seven years from the date of disbursement if such loans or advances. Investment in Other Companies 63 a. The general reserves of any Producer Company should be invested to secure the highest returns available from approved securities, fixed deposits, units and bonds issued by the Government or co-operative or scheduled bank or in any other prescribed mode. b. For the promotion of its objectives, a Producer Company may acquire the shares of another Producer Company. Also, by passing a special resolution, it can also subscribe to the share capital, or enter into any agreement or other arrangement, whether by way of formation of its subsidiary company, joint venture or in any other manner with any body corporate, for the purpose of promoting the objectives of the Producer Company in this behalf. c. Any Producer Company, either by itself or together with its subsidiaries, may invest, by way of subscription, purchase or otherwise, shares in any other company, other than a Producer Company, specified in point 2 above for an amount not exceeding thirty per cent of the aggregate of its paid-up capital and free reserves. However, with the prior approval of the Central Government by passing special resolution, a Producer Company can invest even in excess of 30% of the aggregate of its paid up capital and free reserves. d. All investments by a Producer Company may be made if such investments are consistent with the objectives of the Producer Company. e. Every Producer Company shall maintain a register containing particulars of all the investments, showing the names of the companies in which shares have been acquired, number and value of shares; the date of acquisition; and the manner and price at which any of the shares have been subsequently disposed of. f. The register referred to in the above point shall be kept at the registered office of the Producer Company and the same shall be open to inspection by any Member. C. BOOKS OF ACCOUNT The capital invested by shareholders in the company has been utilized for running the business of the Company. The Company, on the other hand, have to maintain a books of account of each and every paisa used for the purpose of running the company. Chief Executive Officer (CEO), every director of the company (in absence of CEO), and every officer and other employee and agent of the company 64 is responsible for
61 62
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.
42

keeping of Books of Accounts. A proper books of account of Producer Company should be kept at its registered office with respect to: i. all sums of money received and expended by the Producer Company and the matters in respect of which the receipts and expenditure take place; ii. all sales and purchase of goods by the Producer Company; iii. the instruments of liability executed by or on behalf of the Producer Company; iv. the assets and liabilities of the Producer Company; v. in case of a Producer Company engaged in production, processing and manufacturing, the particulars relating to utilization of materials or labour or other items of costs. Box 17: Vouchers A voucher should be prepared for transactions, and supporting documents (in original) should be attached to it, such as invoice, challan, bills, purchase orders etc). All the vouchers should be approved by the authorised official. There are 3 types of vouchers to be maintained viz.; (1) Cash Voucher for cash transaction, (2) Bank Voucher for bank transaction and (3) Journal Voucher* for internal adjustments. Vouchers should be serially numbered along with the ongoing financial year and filed in a sequential order along with supporting documents. Separate files should be maintained for Cash, Bank and Journal vouchers. * Refer annexure 21 for sample format
D. BALANCE-SHEET AND PROFIT AND LOSS ACCOUNT Producer Company has to prepare a balance-sheet and profit and loss account (along with needed annexure) of each financial year, which will be laid before the shareholders at the annual general meeting of the company 65 . The balance sheet and profit and loss account should be signed by two directors (on behalf of BoD) and CEO of the company. Every producer company has to file its Directors Report, the audited balance sheet and profit and loss account along with the proceedings and the annual return with the Registrar within 60 days from the day on which the balance sheet and profit and loss account were laid before the members at the annual general meeting 66 . E. GENERAL AND OTHER RESERVES Every Producer Company shall maintain a general reserve in every financial year, in addition to any reserve maintained by it, as may be specified in articles.
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.
43

In a case where the Producer Company does not have sufficient funds in any financial year for transfer to maintain the reserves as may be specified in articles, the contribution to the reserve shall be shared amongst the Members in proportion to their patronage in the business of that company in that year. F. ISSUE OF BONUS SHARES Any Producer Company may, upon recommendation of the Board and passing of resolution in the general meeting, issue bonus shares by capitalization of amounts from general reserves in proportion to the shares held by the Members on the date of the issue of such shares. G. DELEGATION OF FINANCIAL POWERS i. To CEO a. He can withdraw cash up to the limit of Rs. 5000/ (Rs. Five thousand) from the Companys bank account; b. The cash payment against any purchase of goods or services in any circumstances shall be limited to Rs. 500/- (Rs. Five Hundred Only). c. 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.
iii. Accounting for Advance Taken from the Company a. Before request for advance is granted, ensure that the proposed expense is within the limits of Plan & Budget for the relevant year; b. Ensure that purpose of work advance is mentioned on the voucher; c. Also ensure that advance should be sanctioned only when the previous drawings are settled and it is urgent.
44

d. Ensure that accounts are settled within 15 days or immediately after the work is completed whichever is earlier. H. AUDIT OF ACCOUNTS It is compulsory to conduct Internal Audit 67 in the case of Producer Company. Internal audit of its accounts should be carried out, at such interval and in such manner as may be specified in its article of association, by a chartered accountant. ---------------------------------------------------------------------------------------------------------------------ANNEXES Annexure 19: Annexure 20: Annexure 21: Annexure 22: Annexure 23: Annexure 24: Annexure 25: Annexure 26: Annexure 27: 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
67
As per the Part IX A of the Companies Act, 1956, Section No. 581ZF
45

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Manual for Producer Company: Volume I

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--------------------------------------------------------------------------------------------ANNEXES Annexure 3: An approximate cost of incorporation of a Producer Company

Refer chapter 4 for details

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