Major distinctions between Producer Company and the Private Company :
All the provisions of Part-IXA (contained in sections 581A to 581ZT) relating to producer companies shall prevail over all the provision of other laws to the extent they are inconsistent therewith.
Similarly, all the limitations, restrictions and prohibitions under section 3(iii) of the Act applicable to a private company shall not be applicable to producer company as if it is a private company to the extent they are not in conflict with the provisions of this part. Given this contradiction in the formation of producer company, a producer company differ s from a private company as a distinct and different class of company. The distinction varies in the matters relating to formation, management, administration, finance, accounts, audit and merger, amalgamation or division of companies. The major distinction between these two classes of companies are as follows:
| Producer Company | Private Company |
| 1. Incorporation
The producer company can be formed by any 10 or more individuals, each of them being individuals or institutions. Its name shall bear the words “Producer Company Ltd.” and the liability of the members shall be limited by the memorandum. The objects of a producer company should be as specified in 581B, which contain 11 items. There need not be any conditions attached to articles to state that it is a private company. |
Private Company can be formed by two individuals or companies. The name of the private company should bear the words “private limited” and the liability may be limited (by shares or by guarantee) and unlimited by the memorandum. The articles should specifically contain the restrictions as stated in section 3(iii) and the minimum capital should be Rs. 1 lakh. The objects can be main, incidental or ancillary and other objects. |
| 2. Management
The minimum and maximum number of directors of a producer company is 5 and 50. Their tenure is for a minimum period of 1 year and the maximum period of 5 years. The Board can opt one or more directors or additional directors which cannot exceed 1/5th of the total number of directors. The period of such directors may be for any period. Vacation of the office of directors is provided in section 581Q and the powers have been mentioned in section 581R. The matters to be transacted by the Board only at general meeting are contained in section 581S. The liability of directors for their acts in contravention of the provisions of the Act shall be joint and several. Further, this liability shall be in addition to or not in derogation of a liability imposed under any other law. |
The minimum number of directors of a private company is two. The tenure of directors is not fixed by the law. The board can appoint additional, alternate director and director to fill up casual vacancy. An additional director shall hold the office upto the date of the next Annual General Meeting. The powers and functions of directors are specified in section 292. There is no additional liability for directors as provided for directors in a producer company. |
| 3.General Meetings
The notice of the AGM shall comprise not only the agenda but also to include minutes of the previous AGM and EGM. It shall also contain the names of candidates for elections of office of the director including a statement of their qualifications. The notice of meeting is required to be given not less than 14 days and the quorum shall be 1/4th of the total members unless the articles provide for a higher number. The first AGM is required to be held within 90 days from the date of incorporation of the company. |
The first AGM is required to be held within 18 months from the date of incorporation and notice of the meeting should be given not less than 21 days. |
| 4. Share Capital and Members Rights
The share capital of a producer company shall consist of equity shares only and a member shall hold shares in proportion to the patronage of that company. Active members shall have special rights and such shares are transferable to any other active member. The transferability is subject to prior or approval of the board and at par value. Nomination facility by members is mandatory. Circumstances for cession of membership are provided. Irrespective of the shareholding one member shall have only one vote. |
Share capital may be equity or preference or any other class. There is no provision for holding of shares according to the patronage and there is no distinction between members. Transfer of shares is restricted and nomination is voluntary. There is also no provision for cession of membership and their rights. The voting rights shall be generally governed by the manner prescribed by the articles of association. |
| 5. Loans and Investments
Loans to members can be granted only after approval by members in the general meeting. The general reserves of a producer company shall be invested in specified securities. The limit of investment in other companies either by the producer or together with its subsidiaries cannot exceed 30% of the aggregate paid up capital and free reserves. |
Excepting that of loan to directors a private company cannot provide loan or advance to its members. The provisions of Section 372A relating to inter-corporate loans and investments are not applicable to a private company. |
| 6. Finance, Accounts and Audit
Producer companies shall keep proper books of accounts and internal audit shall be carried out by a chartered accountant. Apart from the matters provided in section 227, auditor shall report on certain additional matters like debts due with bad debts, verification of cash securities, donations etc. A producer company may donate or subscribe to any institution or individuals for social and economic welfare or for promoting mutual assistance principles. The aggregate amount shall not exceed 3% of the net profit in the financial year immediately proceeding the financial year. It cannot donate directly or indirectly to any political party or purposes. |
Proper books of accounts shall be kept. Internal audit need not be carried out and auditor’s report shall be subject to the provisions as specified in section 227. A private company has no restriction for making donations or subscription and it can contribute donation to political party or purpose as specified in section 293A. |
| 7. Penalties
Penalties for contravention of provisions relating to producer company are specified generally in section 581ZA. |
Penalties for contravention of the applicable provisions is specified in appropriate sections. |
| 8. Amalgamation, Merger or Division
Registrar of Companies shall have jurisdiction over the administration of scheme of amalgamation and an appeal can be preferred to High Court. |
The Court has the jurisdiction over the matter. |
| 9. Resolution of Disputes
Any dispute relating to formation, management or business of a producer company shall be settled by the Arbitration and Conciliation Act, 1996. |
The resolution of disputes (oppression and mis-management are handled by the Company Law Board under sections 397, 398 and 399 of the Companies Act, 1956. |
| 10. Miscellaneous Provisions
Striking off the name of a producer company shall be done by the Registrar of Companies in accordance with section 560 of the Act. The provisions relating to producer companies shall have an overriding affect over any such Act or law for the time being in force. |
Striking of name of company are generally regulated by section 560 or any other scheme as may be notified by the Central Government. There is no provision which specifies that the provisions relating to private company shall have an overriding effect over any other Act or law for the time being inforce. |
| 11. Reconversion of Companies
A producer company can be converted into Inter-State Co-operative Society and viceversa. |
Reconversion is possible by converting a public company into a private company and vice-versa. |