Advantages of a Farmer Producer Company
A Farmer Producer Company or a Producer Company is a legally recognized entity of farmers and agriculturists who join together to collectively undertake activities related to the production, procurement, harvesting, grading, pooling, handling, marketing, and selling, or export of primary produce. The main objective of a Producer Company is to promote the interests of its members and improve their profitability by facilitating the formation of corporate businesses into companies and converting existing cooperative businesses into companies. It requires a minimum of 10 producers and 5 directors to form a Producer Company as per Section 378 of the Companies Act, 2013. The Producer Company model provides limited liability to its members, professional management, and better access to finance. It is a unique form of organization that plays a significant role in the Indian economy, especially in the agriculture and allied sectors.
Why should you register a Farmer Producer Company?
The Producer Company enables Farmers, Producers and Agriculturalists to come together for mutual benefit specifically for agriculture and allied sectors. This unique model of structure gives the following advantages to a Producer Company and its members:
Limited Liability: Limited Liability protects the personal assets of the partners and subscribers of the Producer Company in case of debt or insolvency. The liability of the members in respect of the company’s debts is limited only till their investment of capital in the organisation and not their personal assets.
Better Scalability: There is no upper limit to the number of members in a Producer Company. Hence there is always scope for major expansion and growth in the business. Also, it enables a streamlined system to introduce new capital in the business.
Better Management: Since the Board members of a producer company are appointed by the members, the members have the option to bring professional hands to manage the Farmer Producer Company and its activities.
Borrowing Capacity: Since this form of company mandates a minimum of 10 members to start, the collective borrowing capacity would be any day considered better than an individual making it ideal to go for heavily funded projects.
Funding Availability: The government Of India as well as various State Governments have various funding schemes for producer companies via NABARD which makes this form of company the most appropriate if you want to take advantage of the NABARD FPO Schemes.
Tax Advantages: Farmer producer Companies don’t have direct tax benefits but based on the agricultural activities the company engages in the company can take various tax benefits such as tax exemption if it’s engaged completely in agricultural activities.
Perpetual Succession: Like any company registered under the companies act, the life of Producer Companies is not determined by the longevity of its members. If a member dies, or hypothetically, all the members of the company die or resign, only their shares in the FPO will be transferred to new people but the company will continue to exist.