Manual for Producer Company: Volume IIasaindia.org/pdfs/MPC_II.pdf · Manual for Producer Company: Volume 2 2 ANNEXES. Annexure 1 . Definitions of Important Terms Related To the Producer

Manual for Producer Company: Volume II

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Prepared for M.P.DPIP by: Action for Social Advancement (ASA) Bhopal [email protected] www.asaindia.org

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mailto:[email protected]

http://www.asaindia.org/

Manual for Producer Company: Volume 2

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ANNEXES

Annexure 1 Definitions of Important Terms Related To the Producer Company

Active Member Members who will actively participate in activities/ business/services offered by the Company, and also will not be absent without prior information from all the Company’s affairs, meetings and programmes. In short, active member means a member who fulfils the quantum and period of patronage of the Producer Company as may be required by the articles. Audit Audit is an examination of accounting records undertaken with a view to establishing the correctness or otherwise of the transactions reflected therein. It involves the intelligent scrutiny of the books of account of a company with reference to documents, vouchers and other relevant records to ensure that the entries made therein give a true picture of the business conducted during the period under review, that every transaction has been properly authorized by the appropriate authority and that effect of all the entries in the books of account has been duly reflected in the final accounts. The main objective of audit is to ensure that the statement of accunts of the relevant financial year, truly and fairly reflect the state of affairs of te company. Audit also provides a moral check on those who are entrusted with the task of running business and of keeping and maintaining the books of account of the company. Balance Sheet It ordinarily means a statement prepared from the books of a concern showing the debit and credit balances of assets and liabilities. After the preparation of profit and loss accounts, a statement is drawn up at the end of each trading or financial period, setting forth the various assets and liabilities of a concern at a particular date. It can be said a shareholders’ quick guide to ascertain the financial position of the company. A proper Balance Sheet should give the following:

i. the nature and the cost of assets of the company on the date of the balance sheet; ii. the nature, extent and the type of liabilities on that date; and iii. whether the company is solvent and whether it is over trading.

Patronage “Patronage” means the use of services offered by the Producer Company to its members by participation in its business activities; Patronage Bonus “Patronage Bonus” means payments made by a Producer Company out of its surplus income to the Members in proportion to their respective patronage. Profit and Loss Account It is the account by which the directors disclose to the shareholders of the company the result of the actual working of the company in a financial year. It serves to give its capital, and enable them to judge about the administration and management of the affairs of the company. The ‘Profit and Loss Acount’ should contain he following:

i. It must disclose the result of the company’s working during the period covered by it. ii. It must disclose every material feature including credits and debits in respect of non-recurring

transactions of an exceptional nature.


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iii. Transfers to and from reserves and provisions must be fully disclosed. iv. It must disclose any material effect to transactions or circumstances of an abnormal,

exceptional or non-recurrent nature. v. It must disclose any material effect of change in the basis of accounting.

Share Certificate A Share Certificate is a document issued by a Company stating that the person named therein is the registered holder of a specified number of shares of a certain class (if there is more than one class), and that they are paid-up to the stated amount. Section 84 states in plain language the objective of a share certificate. It says “A Share certificate under the common seal of the Company, specifying any shares held by any member, shall be prima fascia evidence of the title of the member of such shares. Thus, the share certificate being prima fascia evidence of title, gives the shareholder the facility of more easily dealing with his shares.” Special rights Special rights means any right relating to supply of additional produce by the active Member or any other right relating to his produce which may be conferred upon him by the Board. Withheld Price “Withheld Price” means part of the price due and payable for goods supplied by any Member to the Producer Company’ and as withheld by the Producer Company for payment on a subsequent date.


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Annexure 2: Similarities and Differences between Producer Company and Cooperatives

Parameter Cooperatives Producer Company

1. Core Philosophy • Cooperation among cooperatives • One for all, all for one

• Competitive Advantage • Equity

2. Objectives • Generally Single objective but could be multi purpose also

• Multi-objective

3. Governed by the Act / Rules

• Societies Registration Act 1960 & MACS or called MP Swayattata Adhiniyam 1999

• Under Company Amendment Act 1956 under Part X-A or called Producer Company Act 2002

3. Area of Operation • Restricted, discretionary • Entire Union of India 4. Formation • Any 10 or more individuals not

belonging to same family (under MACS) can form a Cooperative.

• Any 10 or more individuals & being producers or any 2 or more groups/ institutions can form a producer company.

4. Membership • Eligible Individuals as per the provision of the concern Act

• Any individual, group, association, producer of the goods or services

5. Share Transferability • Non transferable • Limited to members on par value 6. Sharing of Profit • Limited dividends on shares • Commensurate with volume of

business 7. Management Style &

structure • Democratic • Conventional

• Democratic • Professional

8. Interface with government

• Highly patronized to the extent of interference

• Limited to statutory requirements

9. Extent of Autonomy • Limited in “real world scenario” • Fully autonomous, self ruled within provisions of Act

10. Privileges • Many to the extent of making dependent

• Equivalent to Coops with sense of competitiveness

11. Patronage Bonus • Not any such provision in the act for motivation of active members.

• Act provides excellent provision of patronage bonus to the active members in respect of their contribution in institution’s business

12. Compatibility with trade and industry

• Compatible and comfortable with cooperative sector only

• Highly compatible with corporate, organized trade and industry


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Annexure 3

An Approximate Cost of Incorporation of a Producer Company (Minimum Authorized Capital is of Rs. Five lakh)

Particular Heads Amount (Rs)

1. Name availability Fees 500.00 2. Digital Signature Fees 2600.00

Memorandum of Association (MoA) 500.00 3. Stamp duty Article of Association(AoA) 1000.00 MoA 16000.00 AoA 300.00 Form-1 300.00 Form-18 300.00

4. Registration/ filing fees

Form-32 300.00 5. Fees of chartered

accounts Consultancy fees 7000.00

6. Stamps cancellation Charge 300.00 7. Affidavit expenses Fees of Notary 450.00

Total 29,550.00


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Annexure 4

A small write-up on Memorandum of Association

Memorandum of Association of a company is a fundamental document in its formation, which every producer company should have. It sets out the constitution and charter of the company. Thus, it defines the scope of its activity and the extent of its power it could exercise, so that its shareholders, creditors, bankers and other third parties, who deal with the company, could know the range of its enterprise.

Based on the provisions of section 13, the memorandum of association should state the following:

1) Name of the Company using following suffix “Producer Company Limited”1 2) Registered Office of the Company mentioning the State or Union Territory, in which the registered

office would be situated. 3) The objects for which the Producer Company is established

This section defines the very basic of its formation, existence and operations and powers, which a company has towards the attainment of these objectives. An act, other than mentioned in the memorandum is invalid and cannot be ratified even by all members of the company. In case the company is carrying out its operation in various States, then its should also mention the names of the all the State. There is, generally, no restriction on the objects of a company, except that these should be legal and lawful. However, the objects of a producer company shall be restricted to one or more of the objects specified in section 581 B of the Act.

This section is divided in three major divisions: i. The main objects

The objects intended to be pursued by the company on its incorporation and in the immediate foreseeable future are its main objects. The object should be widest coverage in precise and clear expression. The main objects should be drafted with caution and planning, as further alteration of the object will entail passing of Special Resolution.

ii. The objects incidental and ancillary The objects under this category are not independent objects and cannot be taken up by the company as business objectives, independent of its main objects. These objects are pursued for the attainment of the main objects set out in the memorandum of association by the company.

iii. Other objects The objects which are covered neither in main objects nor in ancillary or incidental objects but are important enough to enable the company to undertake all types of business activities, which the company may anticipate to pursue.

1 As per the Companies (Amendment) Act, 2002, Section No. 581F(a)


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4) Memorandum should state that liability of its members is limited. 5) Authorised Share capital with division into shares should be mentioned2. The authorised share

capital should be sufficient for carrying out the objects mentioned in the memorandum. It should be realistic in view of the intended objects of the company.

6) The names, address and occupations of the subscribers, who, being producers, shall act as the first

directors in the company. 7) The names and addresses of the persons who have subscribed to the memorandum along with the

number of shares taken by each subscriber.

AMENDMENT OF MEMORANDUM3

For a Producer Company, amendment in ‘object’ requires a special resolution of members. Further, the amendment should not be inconsistent with section 518B. A copy of the amended Memorandum, together with a copy of the special resolution duly certified by two directors, shall be filled with the Registrar within thirty days from the date of adoption of any resolution.

In the case of transfer of the registered office of a Producer Company from the jurisdiction of one registrar to another, certified copies of the special resolution certified by two directors shall be filled with both the Registrars within thirty days, and each Registrar shall record the same. The Registrar from whose jurisdiction the office is being transferred shall forthwith forward to the other Registrar, all documents relating to the Producer Company. The alteration of provisions of memorandum relating to the change of the place of its registered office from one State to another shall not take effect unless it is confirmed by the Company Law (sic Central Government) on petition.

2 A Producer Company can have only one type of Share Capital as per section 581ZB(1) of the Act i.e. ‘Equity Share Capital’. Thus, the amount of share capital should be stated with division thereof into shares of a fixed amount. 3 As per the Companies (Amendment) Act, 2002, Section No. 581H


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Annexure 5

Model Memorandum of Association

THE COMPANIES ACT, 1956 COMPANY LIMITED BY SHARES

MEMORANDUM OF ASSOCIATION

OF XXXXX PRODUCER COMPANY PRIVATE LIMITED

I The name of the Company is “XXXXX PRODUCER COMPANY PRIVATE LIMITED” II The registered office of the company will be situated in the State of Madhya Pradesh.

III The objects for which the Company is established are: (A) THE MAIN OBJECTS TO BE PURSUED ON ITS INCORPORATION ARE: 1. To carry on the business of production, procurement, marketing, processing, storage, bottling, packing,

marketing and trading of all agricultural, horticultural, vegetables, medicinal, spices crops, Handicrafts, poultry, goat-keeping, Beekeeping and trading of all Agro inputs like Seeds, Manure, fertilizers, pesticides, farm machinery and Farm Tools etc.

2. To undertake Organic production programme, processing & Certification, Export & trade business (as per

National and International norms & Standards) of all agricultural, Horticultural Vegetables Crops and Dairy products their allied forms, by the members of the company. It will include Import & hire of goods and services in all forms, for the benefit of the members.

3. To manufacture, sell or supply machinery, equipment or consumables mainly to the members and non

members also. 4. To render technical services, consultancy services, training, research and development and all other

activities for the welfare and promotion of the interests of its members. 5. To enable producers to get insurance for themselves, their family members, employees, and for the there

livestock and other productive assets as also for their primary produce. 6. To promote the techniques of mutuality and mutual assistance, including thrift and savings among member

and collaboration & linkage with similar organizations. 7. To undertake any welfare measures or provide facilities for the benefit of the members, as decided by

the Board. 8. To finance the production, procurement, processing, marketing and other activities mentioned above,

including the extension of credit facilities or any other manner of financial services to the members of the company.

9. Any other activity ancillary or incidental to any of the above mentioned activities (1-9) or other activities,

which promote the principles of mutuality and mutual assistance amongst the members in any other manner.


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The objects of the company shall not be confined to only one state and they shall extend to the whole of India and outside India also.

(B) THE OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT OF THE MAIN OBJECTS ARE: 1. To carry on the business of Agro input procurement and distribution, production related extension support,

produce storage, processing, Trading, marketing and selling, regarding all agricultural, Grain, cereal, Pulses and Oil Seeds crops like Rice, Soybean, wheat, Gram, Maize, Pigeon- Pea, Pea, Black & Green Gram, Lentil, Mustard, Groundnut etc, all vegetables like Tomato, Potato, Onion, Chilli etc, all Spices like Coriander, Turmeric, Ginger, fruits and medicinal crops grown by its members.

2. To undertake the activity of seed production (including nursery raising, plant saplings) and seed marketing of

various crops. 3. To contract/outsource some of the services like seed, seed procurement, ploughing, implements to other

bodies/agencies for the promotion of the interest of its members. 4. To acquire and take over any business or undertaking carried on, upon or in connection with/without any land

or building which the Company may desire to acquire as aforesaid or become interested in the whole or any of the assets and liabilities of such business or undertaking and to carry on the same or to dispose or remove or put an end thereto.

5. To acquire, purchase, start, run, erect and maintain lands, building, factories, workshop, nursery raising on

common lands or private lands, seed go-down, cold storage, warehouses, branch offices, depots and showrooms for the business of the company.

6. To acquire and/or give to/from any person, firm or body corporate incorporated whether in India or

elsewhere, technical information, know how, processes, engineering, manufacturing and operating data plants, layouts and blue prints useful for the design, erection and operation of plants required for any of the businesses of the Company and to acquire any grant of licenses and other rights and benefits in the foregoing matters and things.

7. To invest any money of the Company in the equity or preference shares or debentures of any company

where such investment fulfils the business objects of the Company and to invest any money of the Company not immediately required for the purposes of its business in such investments or securities as may be thought expedient including, but not limited to, securities issued and/or guaranteed by Central or State Government, Corporations, Trusts and Financial institutions.

8. To carry out in any part of the world all or any part of the Company’s objects as principal, agent, factor,

trustee, contractor either alone or any conjunction with any other person, firm, association, body corporate or government agency or the government department.

9. To secure or discharge any debt or obligations of or binding on the Company in such manner as may be

thought fit and in particular by mortgage, charges upon the undertaking and all or any of the assets and properties (present and future) and the uncalled capital of the Company or by the creation and issue on such terms as may be though expedient of debentures, debenture-stock or other securities of any description or by the issue of shares credited as fully or partly paid up.

10. To purchase or otherwise acquire, sell, dispose off, concerns and undertakings, mortgages, charges,

annuities, for certain period or on deferred basis, patterns, license, securities, concessions, policies, book debts and claims, any interests in real property and any claim against such property or against any person or company.

11. To amalgamate, enter into partnership or into any arrangements for sharing profits or losses, union of

interests, co-operation, joint ventures or reciprocal concessions with any person or company carrying on or engaged in or about to carry on or engage in or which can be carried on in conjunction there with or which is


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capable of being conducted so as directly or indirectly to benefit the Company and to give or accept by way of consideration for any of the acts or things aforesaid or properties acquired, any shares, debentures, debenture-stock or securities that may be agreed upon and to hold and retain or sell, mortgage and deal with any shares, debentures, debenture-stock or securities so received.

12. To become member of and to communicate with any Chamber of Commerce and other mercantile and public

bodies in India or abroad and to advise on, consult, promote and support measures for the protection, advancement, growth of commerce and industry and for protection and welfare of persons engaged therein.

13. To undertake and execute any trust or discretion the undertaking whereof may seem desirable and the

distribution amongst the beneficiaries, pensioners or other persons entitled to thereof, any income, capital, annuity or other sums or moneys or other properties whether the periodically or otherwise and whether in money or in specie in furtherance of any trust, discretion or other obligations or permissions.

14. To lend money to and guarantee the performance of the obligations of and the payment of interest on any

stocks, shares and securities of the company, firm or person in any case in which such loan or guarantee may be considered likely directly or indirectly to further the objects of this Company and generally to give any guarantee whatsoever which may be deemed likely, directly or indirectly, to bank to benefit the company or its members.

15. To apply for tender, purchase or otherwise acquire any contracts, sub-contract, license and concessions for

or in relation to the objects or business herein mentioned or any of them and to undertake, execute, carry out, dispose off or otherwise turn to account the same.

16. To dedicate, present or otherwise dispose off either voluntarily or for value any property of the Company

deemed to be of national, public or local interest to any national trust, public body, museum, corporation or authority or any trustees for or on behalf of the same or on behalf of the public.

17. To promote, assist or take part and appear or plead evidence before any commission, investigation, inquiry,

trial or hearing whether public or private relating to matters connected with any trade, business or industry. 18. To sublet all or any of the works, contracts from the time to time and upon such terms and conditions as may

be thought expedient. 19. To form, manage, join or subscribe to any syndicate, pool or cartel for the business of the Company. 20. Subject to the provision of the Companies Act, 1956 to distribute among the members in specie any property

of Company or any proceeds of sale or disposal of any property in the event of winding up. 21. To enter into any arrangement with any Government Authority, state, municipal, local or otherwise or any

person or company that may seem conducive to the Company’s objects or any of them and to obtain from any such Government authority, person or Company any rights, privileges, charters, license and concession, which the Company may think fit and desirable to obtain and to carry out, exercise and comply therewith.

22. To apply for, promote and obtain any act, charter, order, regulation, privilege, concession, license or

authorization of any Government, State or Municipality or any Authority or any Corporation or any Public body which may be empowered to grant for enabling the Company to carry on its objects into affect or for extending any of the powers of the company or for affecting any modification of the Company’s constitution or for any other purpose which may seem expedient and to oppose any bills, proceedings, applications which may seem calculated directly or indirectly to prejudice the Company’s interest and to appropriate any of the Company’s shares, debentures, debenture-stock or other securities and assets to defray the necessary cost, charges and expenses thereof.

23. To make donations to such persons or institutions either of cash or any other assets as may be thought

directly or indirectly conducive to any of Company’s objects or otherwise and in particular to remunerate any person or corporation introducing businesses to this also to subscribe, contribute or otherwise assist or


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guarantee money for charitable, scientific, religious or benevolent, national, public, cultural, educational or other institutions or objects or for any exhibitions of any public, general or other objects.

24. To refer or agree to refer any claims, demands, disputes or any other questions by or against the Company

or in which the Company is interested or concerned and whether between the Company and the member or members or his or their representatives or between the Company and third parties to arbitration in India or any places outside India and to observe and perform awards made thereon and to do all acts, deeds, matters and thing to carry out or enforce the awards in accordance with the provisions of law relating to arbitration from time to time.

25. To pay, out of the funds of the Company, all expenses which the Company may lawfully pay with respect to

the promotion, formation and registration of the Company. 26. To pay for any rights of properties acquired by the Company and to pay or to remunerate any person or

company for services rendered or to be rendered in placing or assisting to place or guaranteeing the placing of shares in Company’s capital or any debentures, debenture-stocks or other securities of the Company or in or about the formation or promotion of the Company or the acquisition of properties by the Company for the purpose of the Company whether by cash payment or by the allotment of shares, debentures, debenture-stocks or other securities of the Company credited as paid-up in full, part or otherwise as the case may be.

27. To open current or fixed deposit accounts with any bank, bankers, shroffs, or merchants and to pay into and

draw money from such accounts and to draw, make endorse, discount and execute all types of negotiable instruments.

28. To insure the whole or any part of the property and personnel of the Company either fully or partially, to

protect and indemnify any part or portion thereof either on mutual, principal or otherwise basis. 29. To employ experts to investigate and examine into conditions, value, character and circumstances of any

business, concerns and undertakings having similar objects and generally of any assets, property or rights. 30. To carry on any branch of business any where in India, which this Company is authorised to carry on by

means or through the agency of any subsidiary company or companies and to enter into any arrangement with such subsidiary company for taking the profits and bearing the losses of any business or branch so carried on or for finance any such subsidiary, guaranteeing its liabilities or to make any other arrangement which seems desirable with reference to any business or branch so carried on including the power and provision at any time either temporarily or permanently to close any such branch or business.

31. To take part in the management, supervision, conduct and control of the business or operations of any

company or undertaking having similar objects and for that purpose to appoint and remunerate the directors, trustees, accountants or other experts, personnel or agents for any such operations or purpose.

32. To accept as consideration for or on lieu of the whole or any part of the Company’s properties either land or

cash or Government security or securities guaranteed by the Government or shares in joint stock companies or partly the one and partly the other and such other properties or securities as may be determined by the Company and to take back or acquire the property so disposed off by repurchasing or taking lease the same at such price or prices and on such terms and conditions as may be agreed upon by the Company.

33. To let on lease or license or on hire purchase or to lend any properties belonging to the Company and to

finance for the purpose of any article whether made by the Company or not by way of loans or by hire purchase system.

34. To sell, purchase, mortgage, grants, easements and other rights over and in any other manner deal with the

undertakings, properties, assets both movable and immovable, rights, effects of the Company or any part thereof and whether real or personal for such consideration as the Company may think fit and in particular for share, debenture, debenture-stock, securities of any other company whether or not having objects altogether or in part similar to those of the Company and to make advances upon the security of land and/or buildings


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and/or other properties movable and/ or any interest therein and to take or hold mortgages, liens and charges, to secure the payment of the purchase price or any unpaid balance of the purchase price of any part of the Company’s property of whatsoever kind sold by the Company and money due to the Company from the purchaser and others.

35. To create any depreciation fund, reserve fund, sinking fund, insurance fund or any other special fund whether

for depreciation or for repairing, improving, extending or maintaining any of the properties of the Company or for redemption of debentures or redeemable preference shares or any other purpose whatsoever conducive to the interest of the Company.

36. To adopt such means of making known the business/activities of the Company as may seem expedient and

in particular by advertising in the press, by circulars, by purchase and exhibitions of works of art or interest, by publication of books and periodicals by employing audio-visual media or by granting prizes, rewards and donations.

37. To raise or borrow money from time to time for any of the purposes and objects of the Company by receiving

advances of any sum or sums with or without security upon such terms as the Directors may deem expedient and in any particular by taking deposits from or open current accounts with any individual or firms, including the agents of the Company, whether with or without giving the security or by mortgaging or selling or receiving advances on the sale of any lands, buildings, machineries, goods or other properties of the Company or by the issue of the debentures or debenture-stocks, perpetual or otherwise, charged upon all or any of the Company’s properties (both present and future) including its uncalled capital or by such other means as Directors may in their absolute discretion deem expedient.

IV. The liability of the members is limited.

V. The authorised share capital of the company is Rs. 1, 00,000/- (Rupees One Lakhs only) divided into 10000

(Ten Thousand) Equity Shares of Rs.10/- (Rupees Ten only) each.


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We, the several persons, whose names and addresses are subscribed, are desirous of being formed into a company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names:

Place: Date:

S. No

Name, Father name, address and Occupation of Subscriber

Number of Equity shares

Signature of Subscribers

Name, Father name, Addresses and Signature of Witness


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Annexure 6

A Small Write-Up on Articles of Association

The Articles of Association are the rules and regulations for managing the Company’s internal affairs and for achieving its specified objectives and purposes as mentioned in Memorandum of Association. Generally, it brings about clarification on anything contained in Memorandum. It also constitutes contract between the company and its members and members inter se.

These documents shall be presented for registration to the Registrar of the State in which the registered office of the Producer Company is, according to Memorandum of Association, situated. The articles shall contain the following mutual assistance principles, namely:

a). the membership shall be voluntary and available to all eligible persons who can participate or avail of the facilities or services of the Producer Company, and are willing to accept the duties of membership;

b). each member shall, have only a single vote irrespective of the share holding; c). the Company shall be administered by a Board of Directors consisting of persons elected or

appointed as directors in the manner consistent with the provisions of related Act and the Board shall be accountable to the members;

d). there shall always be limited a return on share capital in nature of dividend; e). the surplus arising out of the operations of the company shall be distributed in an equitable

manner by: (i). providing for the development of the business of the Producer Company; (ii). providing for common facilities; and (iii). distributing amongst the Members, as may be admissible in proportion to their respective

participation in the business, as bonus either in cash or by way of allotment of bonus shares in the company.

f). provision shall be made for the education of members, employees and others, on the principles of mutuality and techniques of mutual assistance;

g). the Producer Company shall actively co-operate with other Producer Companies (and other organisations following similar principles) at local, national or international level, so as to best serve the interest of their Members and the communities it purports to serve.

In addition to the conditions noted above, the Articles of Association of a producer company must further provide for the following matters4:

a). The qualifications for membership, the conditions for continuance or cancellation of membership and the terms, conditions and procedure for transfer of shares.

b). The manner of ascertaining the patronage and voting right based on patronage. c). The manner of constitution of the Board, its powers and duties, the minimum and maximum

number of directors, manner of election and appointment of directors and retirement by rotation, qualifications for being elected or continuance as such and the manner and the terms of office of the said directors, their powers and duties, conditions for election or co-option of directors, method of removal of directors and the filling up of vacancies on the Board, and the manner and the terms of appointment of the Chief Executive.

4 As per the Companies (Amendment) Act, 2002, Section No. 581G(3)


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d). The election of the Chairman, term of office of director and the Chairman, manner of voting at the general or special meetings of Members, procedure for voting, by directors at meetings of the Board, powers of the Chairman and the circumstances under which the Chairman may exercise a casting vote.

e). The circumstances and manner in which the withheld price is to be determined and distributed. f). The manner of disbursement of patronage bonus in cash or by issue of equity shares, or both. g). The contribution to be shared and related matters referred to Section No. 581ZI(2) of the

Companies (Amendment) Act, 2002. h). The matters relating to issue of bonus shares out of general reserves as set out in Section No.

581ZJ of the Companies (Amendment) Act, 2002. i). The basis and manner of allotment of equity shares of the Producer Company in lieu of the

whole or part of the sale proceeds of produce or products supplied by the Members. j). The amount of reserves, sources from which funds may be raised, limitation on raising of funds,

restriction on the use of such funds and the extent of debt that may be contracted and the conditions thereof.

k). The credit, loans or advances which may be granted to a Member and the conditions for granting the same.

l). The right of any member to obtain information relating to general business of the company. m). The basis of manner of distribution and disposal of funds available after meeting liabilities in the

event of dissolution or liquidation of the Producer Company. n). The authorisation for division, amalgamation, merger, creation of subsidiaries and the entering

into joint ventures and other matters connected therewith. o). Laying of the memorandum and articles of the Producer Company before a special/general

meeting to be held within ninety days of its registration. p). Any other provision, which the members may, by special resolution recommend to be included in

the articles.

AMENDMENT OF ARTICLES 1. Any amendment of the Articles shall be proposed by not less than two-thirds of the elected directors or

by not less than one-third of the Members of the Producer Company and adopted by the Members by a special resolution.

2. A copy of the amended articles together with the copy of the special resolution, both duly certified by

two directors, shall be filed with the Registrar within thirty days from the date of its adoption. 3. Every application under sub-section (1) shall be accompanied by—

(a). a copy of the special resolution, of not less than two-thirds of total members of inter-state co-operative society, for its incorporation as a Producer Company under this Act;

(b). a statement showing: (i) names and addresses or the occupation of the directors and Chief Executive, if any, by

whatever name called, of such co-operative; and (ii) list of members of such inter-state co-operative society;

(c). a statement indicating that the inter-state co-operative society is engaged in any one or more of the objectives specified in section 2.1;

(d). a declaration by two or more directors of the inter-state co-operative society certifying that particulars given in clauses (a) to (c) are correct.


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Annexure 7

Model Articles of Association

THE COMPANIES ACT, 1956 COMPANY LIMITED BY SHARES

ARTICLES OF ASSOCIATION

OF XXXX PRODUCER COMPANY PRIVATE LIMITED

I. PRELIMINARY 1. The regulations contained in table ‘A’ in the first schedule to the Companies Act, 1956 shall not apply to this

producer company. II. INTERPRETATIONS 2. (1) In these Articles unless there be anything repugnant to the subject or context

the following words shall have the meaning written against them:

b) “The Act” or “The Companies Act” means the Companies Act, 1956 and its statutory modifications from time to time and all rules made there under.

c) “The Company” or “this company” when used with reference to this company shall mean “XXXX

PRODUCER COMPANY PRIVATE LIMITED”.

d) “Articles of Association” means these articles, which may be amended by the Company with approval by a General Meeting and filed with the Registrar of Companies.

e) “The Seal” shall mean the Common Seal of the company approved by the Board of Directors from

time to time.

f) ‘Member’ means a person admitted as a member of the Company under the provisions of these Articles.

g) ‘Active Member’ means a member of this producer company, which fulfils all qualifications for active

membership as laid down in the Articles (Clause No. 6.5)

h) “Person” shall include any Association, Corporation, Company as well as individual.

i) ‘Chairman’ means a member of the Board who has been elected as Chairman by the directors of the Board under the provisions of these Articles.

j) ‘Board’ means the Board of Directors constituted under the provisions of these Articles

k) ‘Commodity’ includes Cereal, Pulses, Oilseeds, Fruits, Vegetables, Seed, grains, milk, handicrafts,

Milk Products and other allied prodcuts -raw or processed, other inputs, packaging material, equipment and machinery.

l) “General Meeting” includes annual and special general meetings.

m) ‘Managing Director’ an individual, who has been appointed by the Board as chief executive for the

management of the affairs of the Company.


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n) ‘Mutual Assistance Principles’ means the principles set out in these Articles.

o) ‘Patronage’ means the use of services offered by the Company to its Members by participation in its

business activities;

p) ‘Patronage Bonus’ means payments made to members of the Company from out of the resultant surplus income.

q) CIG/SHG means common interest and self help groups respectively formed by PRADAN under

MPDPIP or other similar government projects.

r) “Withheld price” means part of the price due and payable for various crop produces and inputs supplied by any Member to the Producer Company; and withheld by the Producer Company for payment on a subsequent date.

s) “Auditors” shall mean and includes those persons appointed as such for the time being by the

company.

t) “Special Resolution”, “Ordinary Resolution” and “Resolution requiring Special Notice” respectively by the Act shall have the meaning assigned thereto.

u) “The Office” means the Registered Office for time being of the company.

v) “The Registrar” means the Registrar of Companies with whom the company is registered for the

time being under section 2(4) of the Act.

w) “Proxy” includes attorney duly constituted under a power of attorney.

x) “Ex-Officio Director” means the Director appointed by some person by virtue of a power contained in these articles or in agreement between the company and the appointer.

y) Words importing the singular shall include the plural and the words importing the plural shall include

the singular.

z) Words importing the masculine gender include the feminine gender and vice versa.

(2). Unless the context otherwise requires, words or expressions contained in these Regulations shall bear the same meaning as in the Act or any statutory modification thereof in force.

3. THE COMPANY TO BE A PRIVATE COMPANY:

(a) The Company is a Private Company by virtue of provisions of section 581C(5) of the Part IX-A of the Companies Act 1956 and according to which there shall not be any limit to the number of members.

(b) The right to transfer shares of the company is restricted in the manner and to the extent hereinafter

provided.

(c) No invitation shall be issued to the public to subscribe for any share or debenture of the Producer Company.

(d) No deposits shall be accepted from the public by the Company except from the members, directors or their relatives.


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4. MUTUAL ASSISTANCE PRINCIPLES:

The company shall adopt the following mutual assistance principles, namely: - (a) the membership shall be voluntary and is available to all eligible members of CIGs/SHGs who can

participate and avail the facilities or services of the Producer Company, or to persons engaged in providing any organizational, technical or financial assistance to CIGs/SHGs, and who are willing to accept the duties of membership;

(b) each member shall, save as otherwise provided in the Part IX A of the Companies Act, have only a

single vote irrespective of the share holding; (c) the Producer Company shall be administered by a Board consisting of persons elected or

appointed as directors in the manner consistent with the provisions of the Part IX A of the Companies Act and the Board shall be accountable to the Members;

(d) save as provided in the Part IX A of the Companies Act, there shall be limited return on share

capital;

(e) the surplus arising out of the operations of the Producer Company shall be distributed in an equitable manner by-

(i) Providing for the development of the business of the Producer Company;

(ii) Providing for common facilities; and (iii) Distributing amongst the Members, as may be admissible in proportion to their

respective participation in the business; (f) provision shall be made for the education of Members, employees and others, on the principles of

mutuality and techniques of mutual assistance; (g) the Producer Company shall actively co-operate with other Producer Companies (and other

organizations following similar principles) at local, national or international level so as to best serve the interest of their Members and the communities it purports to serve.

5. FUNDS: (i) Funds may be raised by:

a) Shares from new members; b) Additional shares in proportion to the business transacted with the Producer Company from time to time on the terms and conditions as decided by the Board of the Producer Company and communicated to the members c) Deposits and/or Debentures from members; d) Loans from any financial institution; e) Grants, aids and subsidies; f) Donations


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(ii) The Funds of the kind specified in c) and d) above to be raised, shall not exceed ten times the total of paid

up share capital and reserve fund less accumulated losses. iii) The Producer Company may accept funds from any development agency or any other financing institution in

the form of loans or grants or in any other forms except equity capital, as per the terms and conditions prescribed by such institutions as may be mutually agreed upon.

(ii) CAPITAL

1. The Authorised Share Capital of the Company is such that stated in clause V of the Memorandum of Association of the company or altered thereat, from time to time. The Company has the power from time to time to increase or reduce its capital. Any of the said shares and new shares hereafter to be created may, from time to time, be divided. The shares may have or confer such preferential or other special rights and privileges may be issued under such restrictions and conditions whether in regard to dividend, voting, return of capital or otherwise as shall have been assigned thereto by or under provisions of the Articles of Association but so that the special rights or privileges belonging to holders of any share issued with preferred or other rights shall not be varied or abrogated or effected except with such sanction as is provided for hereinafter.

2. The shares shall be under the control of the Board of Directors who may allot or otherwise dispose of the same to such institutions on such terms as the Board of Directors think fit and to give any persons any shares whether at par or at premium and for such consideration as the Board of Directors think fit.

3. Subject to these presents and the provisions of the Act, the shares of the Company whenever issued shall be under the control and the disposal of Board of Directors who may allot, issue or otherwise dispose of the same or any of them to such institutions or on such terms and conditions and at such times and at par or premium or discount as they may, from time to time, think fit and proper, may also allot and issue shares in capital of the Company in payment or part payment for any property sold or transferred to or for service rendered to the Company in or about the conduct of its business and the shares which may be so allotted may be issued as fully paid up shares and if so issued deemed to be fully paid up shares.

6. MEMBERSHIP: 6.1 The Producer Company shall consist of members of CIGs/SHGs(common interest group or self help group)

whether incorporated or not and to persons engaged in providing any organizational, technical or financial assistance to CIGs/SHGs.

6.2 A Producer Institution who fulfils eligibility conditions under the provisions of these Articles may apply for

membership in the prescribed form to the Board of the Producer Company undertaking to carry out the responsibilities of membership in writing.

6.3 Where admission is refused by the board, the decision with the reasons for refusal shall be communicated to

the concerned person by registered post within fifteen days of the date of the decision, or within thirty days from the date of application for membership, whichever is earlier.

6.4 Qualifications for obtaining membership:

A member of CIGs/SHGs desirous of becoming a member shall subscribe at least one share to the Producer Company


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7. BENEFITS TO MEMBERS: 7.1 Every Member shall initially receive only such value for the produces supplied to the Producer Company as

the Board may determine, and the with held price may be disbursed at a later date during the financial year, in cash or in kind or by allotment of equity shares, in proportion to the value of various produces supplied to the Producer Company to such extent and in such manner and subject to such conditions as may be decided by the Board.

7.2 The surplus, if any, arising after setting aside provision for payment of limited return and after making

provisions for reserves as per the provisions of Article No. 18 may be disbursed as patronage bonus amongst the Members, in proportion to their participation in the business of the Producer Company, either in cash or by way of allotment of equity share or both, as may be decided by the general meeting.

8. PROVISIONS FOR SPECIAL USER RIGHTS:

The Board of the Producer Company may from time to time, based on measurable criteria, issue special user rights valid for a specific duration to the active members, to promote the business interests of the Producer Company. Such user rights shall be issued in the form of appropriate instruments.

The instruments so issued shall, subject to the approval of the Board in that behalf, be transferable to any other active member of the Producer Company.

9. TRANSFER OF SHARES

(a) Subject to the provisions of Section 108 of the Companies Act, 1956, A member of the Producer Company may, after holding the shares for a period of at least one year, may transfer the whole or part of his shares along with any special rights, must notify to the Board of Directors of the number of shares and the value the Board of Directors must offer to the other active members, the shares offered at the fair value and if the offer is accepted, the shares shall be transferred to the acceptors. In case of any dispute, regarding the fair value of the share it shall be decided and fixed by the experts appointed by the board for this purpose, whose decision shall be final.

(b) The Board of Directors may refuse to register any transfer of shares (1) where the Company has a lien on the share, or (2) where the share is not a fully paid up share, subject to Section 111 of the Act.

10. SURRENDER OF SHARES: 10.1 If any member has ceased to be a producer institution, or has failed to retain qualifications to continue as a

member as specified, the Board shall serve with a written notice to the concerned member/s and provide an opportunity of being heard in the next Board meeting.

10.2 If the Board is satisfied it may direct the member for surrender of shares together with special rights, if any to

the Producer Company, at par value or the Board may determine such other value.

11. VOTING RIGHTS OF THE MEMBERS:

11.1 Newly admitted members shall have no voting right for at least one year. Every active member shall have a minimum of one vote.


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11.2 There shall be allocation of additional votes to each active member at the end of each financial year based on member’s patronage as given below:

11.3 The allocation of additional votes to the members shall be communicated by 15th May every year and shall remain valid during the year.

11.4 Members having earned at least twenty voting rights during the financial year preceding the date of Annual General Meeting shall be eligible to contest the election of Board of Directors.

12. GENERAL MEETINGS

12.1 The general meeting shall consist of the following:

a) Any person competent/authorized to represent and act on behalf of the producer institution

b) All members of the Board of the producer Company.

The Chairman of the Producer Company shall preside over the general meeting. In case of his absence, the

members present and entitled to vote shall elect one of them as Chairman for the meeting.

12.2. The first general meeting shall be held within 90 days from the date of its incorporation and have the same

powers as are given to the annual general meeting.

13. ANNUAL GENERAL MEETING: The Annual General meeting shall be called once in every year within quarter ending 30th June. However, not more than 15 months shall elapse between the date of one general meeting and that of the next.

13.1 The annual general meeting of the Producer Company shall be called by the Board with not less than

fourteen days’ notice, which shall specify the date, time, venue and the agenda. The notice of the annual general meeting shall be sent to each member along with the following documents.

(i) The agenda of the meeting; (ii) Minutes of the previous annual general meeting or extra ordinary general

meeting, whichever occurred later;

(iii) Names of candidates for election, if any, to the Board of Directors including a copy of a statement of qualifications in respect of each candidate;

(iv) 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 with respect to:

a) the state of the Producer Company’s affair,

b) the amounts proposed to be carried to reserves,


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c) the amount to be paid as return on share capital,

d) material changes and commitments, if any, affecting the financial position of the

Producer Company and its subsidiary, if any, 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 and

e) the text of the draft resolution for appointment of the auditors,

f) any other matter of importance relating to energy conservation and environmental

protection, foreign exchange earnings or outgo, etc.

g) The text of any resolution or proposed amendment to the Memorandum of Association or articles of association to be considered at the annual general meeting along with the recommendations of the Board with respect to each;

h) Any other matter that is required to be, or may be, specified by the board.

13.2 The proceedings of every annual general meeting along with Directors Report, the audited balance sheet

and the profit and loss account of the Producer Company and its subsidiary, if any shall be filed with the Registrar within thirty days from the date on which the annual general meeting is held, with an annual return along with the filing fees as applicable to a private limited Producer Company.

13.3 The notice of annual general meeting and extra-ordinary general meeting shall be placed on the notice board of

the Producer Company and will also be published atleast in one newspaper. 13.4 Attendance of one third of the total number of active members shall form a quorum for the general meeting.

If there is no quorum within half an hour from the time of meeting, the meeting shall stand dissolved if it was called upon requisition. But in other cases the meeting is automatically adjourned to reassemble on the same day in next week. And if at the reassembled meeting also quorum is not present within half an hour, as many members as are actually present shall constitute the quorum.

13.5 Functions of the General Meeting:

The annual general meeting shall, among other things, deal with the following: (i) Confirm the proceedings of the previous General Meeting.

(ii) Declare the names of Board of Directors elected as per the election rules.

(iii) Approve the excess expenditure over the sanctioned budget.

(iv) Receive from the Board the Annual report together with profit and loss

i. account and balance sheet as on 31st March of preceding financial year of ii. the Producer Company and sanction the appropriation of profits.

(v) Approve the budget and program of activities of the Producer Company for the next year as

recommended by the Board.

(vi) Consider and adopt the audit memorandum and audit rectification report.

(vii) The limit of the outside borrowings subject to the conditions specified in the Articles.


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(viii) Fix the allowances to be paid to the members of the Board and the members attending the Board

meeting and other meetings.

(ix) Appoint auditors and fix their remunerations.

(x) Amendment of the Articles as and when necessary.

(xi) To take note of admission of new member during the year.

(xii) Approve the expenditure incurred on any of the elected members of the Board.

(xiii) Remove member(s) of the Board by simple majority of the active members present and voting at the General Meeting in accordance with provisions of section 284 of the ACT.

(xiv) Consider any other business brought forward by or with the consent of the Chairman.

(xv) With the permission of 2/3rd of the members present at the General Meeting any member may bring

forward any matter not specified in the notice of the meeting provided that he may not propose an amendment in the Articles and removal of a director of the Board of the Producer Company.

14. EXTRA ORDINARY GENERAL MEETING:

An Extra Ordinary general meeting may be called at any time:

(I) by a majority of the Board or

(II) by the Chairman/Managing Director within one month of requisition in writing from not less than 1/3rd of the active members of the Producer Company;

An extra ordinary meeting of the Producer Company shall be called by the Board with not less than fourteen days’ notice, which shall specify the date, time, venue and the agenda.

15. BOARD OF DIRECTORS:

15.1 Board of Directors of the Producer Company shall consist of not more than 15 members as follows:

i) 5 members elected from amongst the members;

ii) There may be up to 3 co-opted directors drawn from amongst experts with relevant experience and proven competence in the main business dealt by the Producer Company and / or nominated by financing institution(s);

iii) Managing Director shall be the ex-officio director of the board;

iv) The Minimum and the Maximum number of Directors of the Company shall be 5 (Five) and 15 (Fifteen) respectively. The First Directors of the Company shall be:

1. Mr./Mrs. A 2. Mr./Mrs. B 3. Mr./Mrs. C 4. Mr./Mrs. D 5. Mr./Mrs. E

15.2The conduct of elections of directors to the board of the Producer Company shall be the responsibility of the incumbent board of the Producer Company, in the manner specified in these articles of association and


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election rules at least 10 days before the term of office of the outgoing directors comes to an end. The outgoing directors shall cease just after the expiry of the term and new directors shall takeover from the very next day.

15.3Election of directors shall normally take place at the annual general meeting. The election rules shall be formulated

by the Board and approved by the general meeting. 15.4The first election of the Board after its incorporation shall take place within one year but after 10 months of its

incorporation. The candidates for contesting the election shall have to fulfill all the qualifications required for obtaining the membership except in case of the first election of the Board after its incorporation.

15.5 Where a board fails to conduct elections before the expiry of the term of the directors or where there are no

directors remaining on the board, the chief executive of the Company shall call an extra ordinary general meeting, within twenty days after the expiry of the term of the directors for the purpose. If the Board is not constituted in the meeting, a three-member ad-hoc board shall be appointed from among members for the specific purpose of conducting elections and to perform all functions of the articles of association.

15.6 The term of the ad-hoc board so appointed shall not exceed three months and the ad-hoc board shall cease

to function as soon as a regular board is elected in accordance with the articles of association. 15.7 The term of the elected board shall be 3 years from the date of assumption of office, except for the first

Board. After the third year of incorporation, at the end of every two-year after the constitution of the Board, one third of the elected board members shall retire and be eligible for reappointment. For the first such retirement, the directors who shall retire shall be determined by draw of lots. Provided, however, that no member can be a member of the Board for a consecutive period of more than nine years.

15.8 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.

15.9 The Chairman shall preside over the meeting of the board. In case of his absence, the directors present shall elect one of the elected director as the Chairman of the meeting.

15.10 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.

15.11 The Board meeting shall be called generally with seven days’ notice, but in case of exigencies it can be called at a shorter notice

15.12 The presence of at least three Directors or one third of its total strength, which ever is higher, shall form the quorum for the Board’s meeting.

15.13 Each member of the Board shall have one vote.

15.14 Decisions at the meeting of Board shall be arrived at by majority votes of the directors present. In case of a tie the Chairman of the meeting shall have a 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.

15.15 An elected member of the Board who absents from three consecutive meetings of the Board without obtaining the leave of absence shall cease to be a member of the Board.

15.16 No member shall be present at discussion or vote on any matter in which he has personal interest.

15.17 A person competent to represent CIGs/SHGs, shall not be eligible for election/continuance as a director of the Board unless the CIGs/SHGs, which he is representing:


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(i) has fulfilled all the obligations as mentioned in the articles of association as on 31st March of the preceding year;

(ii) is an active member of the Producer Company as on the day of election. (iii) has not withdrawn/cancelled the authority in writing given to him to represent in the general

meeting

15.18 The person representing the CIGs/SHGs shall also not be eligible for election and continue as such, if - i) he is convicted by a Court of any offence involving moral turpitude and sentenced in respect

thereof to imprisonment for not less than six months. ii) the Producer Company, in which he is a director, has made a default in repayment of any

advances or loans taken from any company or institutions or any other person and such default continues for ninety days.

iii) he has made a default in repayment of any advances or loans taken from the Producer Company

in which he is a director;

a) he has direct or indirect interest in any contract made with the Producer Company or any property sold or purchased by the Producer Company or any other transaction of the Producer Company except in any investment made in or in any loan taken from the Producer Company.

b) he is engaged directly or indirectly indulging in running the same type of business as that

of the Producer Company, or is having direct or indirect interest in such activities.

15.19 Vacation of office by the directors: The office of the director of a Producer Company shall become vacant if, the Producer Company, in which he is a director- i) has not filed the annual accounts and annual returns for any continuous three financial years

commencing on or after the 1st day of April, 2004; or. ii) has failed to, repay its deposit or withheld price or patronage bonus or interest thereon on due

date, or pay dividend and such failure continues for one year or more. iii) has defaulted in holding elections for the office of directors, in the Producer Company in which he

is a director, in accordance with the provisions of this Act and articles. iv) has failed to convene the annual general meeting or extraordinary general meeting of the Producer

Company in which he is a director, in accordance with the provisions of this Act except due to natural calamities or such other reason.

15.20 Powers and Functions of the Board of Directors:

Without prejudice to the generality of the foregoing, such power and functions of

the Board of Directors shall include:

(i) To admit members; (ii) To formulate a corporate mission; to establish specific long-term annual objectives to be achieved, consistent with the mission and the goals; to


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formulate and approve corporate strategies; (iii) To approve corporate strategies and financial plans ; (iv) To make periodic appraisal of operations of the Producer Company in relation to its mission and objectives; (v) To formulate, approve and periodically review corporate policies related

to major functional activities of the Producer Company; (vi) To appoint Managing Director/ as per the provisions of Articles.

(vii) To finalise the proposed annual budget, and supplementary budget, if any, for approval at the General Meeting; (viii) To cause –

a) Proper books of accounts to be maintained by the Producer Company, including in

computerised form as permitted by the Companies’ Act b) The annual accounts to be prepared for the financial year, c) The annual accounts to be duly audited by a qualified chartered accountant appointed for

that purpose by the General Meeting, and the duly audited accounts to be placed before the general Meeting at the annual general meeting.

(ix) to ensure the calling of annual and other meetings of the general Meeting including the delivery of

formal notice; the agenda of the meeting; the names of candidates for election to the Board and a statement of their qualifications; the text of any amendment proposed to the Memorandum of Association and/or articles of association and the rationale for such amendment; and the audited statement of accounts with comments on the auditor’s qualification or adverse remarks; and the proposed annual or supplementary budget to be considered by the General Meeting;

(x) to ensure that elections are conducted as provided in the articles of association; (xi) to determine the quantum of withheld price to be disbursed at the end of any year; (xii) to acquire or dispose property in the ordinary course of business; (xiii) to raise funds as provided in these articles. (xiv) To cause adequate security, insurance of the assets of the producer Company. (xv) if required, the Board may constitute Committee/s each for specific duration in framing

policies or seeking suggestions in any matter that Board may deem fit under section 581U of the Act. The advisory committee shall cease to exist after finalising its suggestions and recommendations in the matter for the Board.

The committee/s may be formed of the following members;

1. up to two members of the board

2. expert/s in concerned field from outside as decided by the Board,

3. the Managing Director of the Producer Company as member secretary,


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b) Institute conduct, defend, compound or abandon any legal proceedings by or against the Producer Company or its officer or otherwise concerning the affairs of the Producer Company and also allow time for payment or settlement of any debt due and settle any claims and/or demands by or against the Producer Company any arbitration or otherwise.

(xvi) delegate to the Managing Director any of its powers under these articles of association of the Producer Company. (xvii) to ensure compliances, terms and conditions of agreement with the financing institution

for loan and grant as mutually agreed upon. (xviii) the Directors shall exercise their powers regarding the affairs of the Producer Company

only at meetings of the Boar.

(xix) BORROWING POWERS.

Subject to Section 58A and 292 of the Act, and Regulations made there under and Directors issued by the RBI the Board of Directors shall have the power, from time to time and at their discretion to borrow, raise or to secure the payment of any sum of money for the purpose of the Company in such manner and upon terms and conditions in all respects as they think fit and in particular by the issue of debentures or bonds of the Company or by mortgage charged upon all or any of the properties of the Company both present and future including its uncalled capital for the time being.

16. MANAGING DIRECTOR:

16.1. The Producer Company shall have a full time Managing director who shall function as chief executive and shall

be appointed by the Board from amongst persons other than Members.

16.2 The Managing Director shall be ex officio director of the Board having voting rights equal to any other Director, but he shall not vote in the election of the Directors or Chairmen or on any matter in which he is an interested party. He shall not retire by rotation.

16.3 Save as otherwise provided in these articles, the qualifications, experience and the terms and conditions of

service of the Managing Director shall be such as may be determined by the Board. 16.4 The Managing Director shall be entrusted with substantial powers of management as the Board may

determine. 16.5 Without prejudice to the generality of sub-section (4) the Managing Director may exercise the powers and

discharge the functions namely: -

i) Do administrative acts of a routine nature including managing the day-to-day affairs of the

Producer Company. ii) Operate bank accounts or authorize any person, subject to the general or special approval of the

Board in this behalf, to operate the bank account; iii) Make arrangements for safe custody of cash and other assets of the Producer Company; iv) Sign such documents as may be authorized by the Board, for and on behalf of the company;


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v) Maintain proper books of account, prepare annual accounts and audit thereof; place the audited

accounts before the Board and in the annual general meeting of the Members; vi) Furnish Members with periodic information to appraise them of the operation and functions to the

Producer Company; vii) make appointments to posts in accordance with the powers delegated to him by the Board; viii) assist the Board in the formulation of goals, objectives, strategies, plans and policies; ix) advise the Board with respect to legal and regulatory matters concerning the proposed and on

going activities and take necessary action in respect thereof; x) exercise the powers as may be necessary in the ordinary course of business; xi) discharge such other functions, and exercise such other powers, as may be delegated by the

Board; xii) decide as per approved Board’s policies, procedures and limits, purchase price and sale price of

various products, purchase of materials, sale price of processed items, purchase of packaging materials, and all other items pertaining to the business and activities of the Union subject to budgetary provisions.

xiii) arrange to purchase machinery; equipment, and such capital items as are required for the

Business of the Producer Company as per policies and procedures set for the purpose and subject to approved budgetary provisions.

xiv) decide the charges on services rendered by the Producer Company. xv) arrange for adequate security against embezzlement, stealing, and misappropriation and for

damage by employees handling cash, goods and securities.

xvi) arrange for insurance against loss of property and take up agency for insurance work. xvii) shall make all the necessary arrangement for conduct of the business of the Producer Company. xviii) shall carry out negotiations with the Government and other organisations.

xix) shall arrange to keep in custody all documents, promissory notes, bonds, etc. xx) subject to the provisions of the articles of association, the Managing Director shall have full

authority to carry out the business of the Producer Company. xxi) in absence of the Managing Director, a senior officer authorised by him shall discharge the work of

the Managing Director. xxii) The Managing Director shall manage the affairs of the Producer Company under the general

superintendence, direction and control of the Board and be accountable for the performance of the Producer Company.

17. APPOINTMENT OF THE COMPANY SECRETARY: 17.1 If the average annual turnover exceeds five crore rupees in each of three consecutive financial years, the

Producer Company shall have a whole-time secretary.


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17.2. No individual shall be appointed as whole time secretary unless he possesses membership of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980.

18 APPROPRIATION OF NET PROFIT:

The Producer Company shall maintain a general reserve fund in which 10% of the Net profit or Rs. One lakh, which ever is more, shall be transferred to the general reserves

18.1. There shall be a limited return up to 3% per annum, or as may be specified by the Board and approved by the General Body from time to time, on fully paid share capital;

18.2 The surplus arising out of the operations of the Producer Company shall be distributed in an equitable manner by-

i) 5% for development of the business of the Producer Company on year to year basis; ii) 1% for common services; iii) 5% withheld price iv) distributing amongst the Members of the excess, as may be admissible in proportion to

their respective participation in the business;

v) 1% for the education of Members, employees and others, on the principles of mutuality and techniques of mutual assistance;

19. MISCELLANEOUS: 19.1 In addition to the sum as provided in the provision of these articles of association all subsidies, entrance

fees, receipts on account of forfeited shares and fines other than those collected from the employees shall be carried to the Reserve Fund.

19.2 Any other income other than normal trading income, excess provisions and reserves, donations other than

those for specific purposes etc. can be carried to a General Reserve Fund and shall be utilized with the permission of the Board from time to time.

19.3 The accounting year of the Producer Company shall be from 1st April to 31st March. The books of accounts

and other records shall be maintained as prescribed. 19.4 The Producer Company shall not alter the conditions contained in its memorandum except in the cases, by

the mode and to the extent for which express provision is made in the Act. 19.5 The Producer Company may, by special resolution, not inconsistent with section 581B, alter its objects

specified in its memorandum.

A copy of the amended memorandum, together with a copy of the special resolution duly certified by two directors, shall be filed with the Registrar within thirty days from the date of adoption of any resolution.

19.6 Any amendment of the articles shall be proposed by not less than two-thirds of the elected directors or by not

less than one-third of the Members of the Producer Company, and adopted by the Members by a special resolution. A copy of the amended articles together with the copy of the special resolution, both duly certified by two directors, shall be filed with the Registrar within thirty days from the date of its adoption.


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20. THE SEAL The Board of Directors shall select a common seal for the Company and provide by resolution for the safe custody and affixing thereof. Unless otherwise determined, the Director may use and affix the seal of the company to any document and the Director in accordance with these articles sign every document to which the seal is so affixed.

21. SECRECY CLAUSE

Subject to the provisions of the Act, no member shall be entitled to visit or inspect works of the Company without the permission of the Director or Managing Director or of the officer authorised by the Director to grant such permission or to require inspection of any books of accounts or documents of the Company or any discovery of any information or any detail of the Company’s business or trading or any other matter which is or may be in the nature of a trade secret, mystery of trade or secrete processor which may relate to the conduct of business of the Company and which in the opinion of the Managing Director or the Directors will not be expedient in the collective interest of the members of the Company to communicate to the public or any member.

22. DIRECTORS AND OTHERS’ RIGHT TO INDEMNITY: (a) Subject to the provisions of section 201 of the Act, every director and officer of the company shall be

indemnified by the company and it shall be the duty of the Directors to pay out of funds of the Company all costs, losses and expenses (including travelling expenses) which any such director, officer or employee may incur or become liable to by any reason of any contract, or deed entered into by him as such Director, Officer or servant or in any way in the discharge of his duties.

(b) subject to aforesaid every Director, Managing Director, Manager, Secretary, or other officers or employees of the company shall be indemnified against any liability incurred by him/them in defending any proceedings whether civil or criminal in which judgement is given in his favour or in which he is acquitted or in connection with any application under section 613 of the Act in which relief is given to him by the Court.


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We, the several persons, whose names and addresses are subscribed are desirous of being formed into a company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names: Names, Addresses, Descriptions, Occupations and Signatures of the Subscribers

No. of Equity Shares taken by each subscriber

Name/s and Signature/s of the Witness/es and their Address/es, Description/s and Occupation/s

Total

Place Dated


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Annexure 8

Liabilities of Members

The liability of a Company limited by shares is limited to the face value of the shares and the premium, if any, thereon subscribed by member or the amount guaranteed by him, as the case may be. Once the shares are fully paid up, he will not be liable for receiving further amounts. As long as the shares are not fully paid up, he will be liable if his name stands in the Register of Members, even though he has sold the shares. Before the shares are fully paid up and if the Company is wound up, the amount given will be liable only if he has ceased to be a member within one year prior to the winding up and to the extent of the unpaid amount on the shares held by him, if - (a). on the winding up, debts exist which were incurred while he was a member, and (b). the present members are not able to satisfy the contribution required in respect of those shares. The following are exceptions to the limited liability of members: (1). If the member agrees in writing, either before or after alteration is made to the Memorandum/Articles of

Association, to be bound by the alteration requiring him to take more shares increasing his liability. (2). If every member agrees in writing to re-registration of the Company as unlimited; and the Company is

re-registered as such.


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Annexure 9

Transferability of Shares Nomination and Attendant Rights

The shares of a Member of a Producer Company shall not be transferable except and to the extent and subject to the conditions, as provided hereunder. 1. A Member of a Producer Company may, after obtaining the previous approval of the Board, transfer the

whole or part of his shares along with any special rights, to an active Member, at par value. 2. Every Member shall, within three months of becoming a Member, nominate in the prescribed manner, a

person to whom his shares in the Producer Company shall vest in the event of his death. 3. The nominee shall, on the death of the Member, become entitled to all rights in the shares of the

Producer Company and the Board of that Company shall transfer the shares of the deceased Member to his nominee. In case where such nominee is not a producer/member of the company, the Board shall direct the surrender of shares together with special rights, if any, to the Producer Company at par value or such other value as may be determined by the Board.


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Annexure 10

Vacation of Office of Directors

The office of the director of a Producer Company shall become vacant if:

1. He is convicted by a court of any offence involving moral turpitude and sentenced in respect thereof to

imprisonment for not less than six months;

2. The producer company in which he is a director, has made a default in repayment of any advances or loans taken from any company or institution or any other person and such default continues for ninety days;

3. He has made a default in repayment of any advances or loans taken from the Producer Company in

which he is a director;

4. The Producer Company, in which he is a director - has not filed the annual accounts and annual return for any continuous three financial years commencing on or after the 1st day of April, 2002; or

5. He has failed to repay its deposit or withheld price or patronage bonus or interest thereon on due date,

or pay dividend and such failure continues for one year or more; 6. Default is made in holding election for the office of director, in the Producer Company in which he is a

director, in accordance with the provisions of this Act and Articles; 7. The annual general meeting or extraordinary general meeting of the Producer Company, in which he is

a director, is not called in accordance with the provisions of this Act except due to natural calamity or such other reason.

8. The provisions of sub-section (1) shall, as far as may be, apply to the director of a Producer institution

which is member of a Producer Company.


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Annexure 11

Election Rules for the Constitution of the Board of Directors

1. The election of the directors shall be conducted within a period of 90 days of the registration of the

Producer Company. 2. The conduct of elections of directors to the Board of the Producer Company shall be the responsibility

of the incumbent board of the Producer Company, in the manner specified in these articles of association and election rules at least 10 days before the term of office of the outgoing directors comes to an end. The outgoing directors shall cease just after the expiry of the term and new directors shall takeover from the very next day.

3. Every Active Member can cast his vote for election of Board of Directors/Chairman. However newly

admitted Members cannot contest the election of Board of Directors/Chairman, for a minimum of six months.

4. Every Active Member who has spent 1 year in the Company can contest the election of the Board of

Directors. However he needs support from minimum of five active members as introducer and supporter.

5. Preference to contest the election of Board of Directors should be given to those members who have

earned better patronage bonus. 6. The Board of Directors shall declare the date of election which shall need prior approval of Governing

Body also. 7. The CEO shall work as chief election officer for the company, after declaration of the date from Board of

Directors 8. The CEO shall execute the election process, scrutinise the forms and be solely responsible in ensuring

a free and fair election. 9. The CEO can also request higher services of government/ private reputed person for execution of

election process, if the need arises. 10. The CEO shall complete all formalities of the election like preparation, printing and supply of election

form to members, confirmation of venue, time and date of the election. 11. The CEO can demand for an independent observer to be present in case of possibility of any dispute. 12. The Board of Directors can also request for an independent observer to be present (requested by more

than 2/3 of majority). In this case, it shall be mandatory for the CEO to make the arrangement. 13. The election can be done either by a direct voting system or by raising hands. Again, the Board of

Directors can also request a particular procedure, where 2/3 of majority has voted for it.


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14. In case of any dispute amongst the Board of Directors regarding the election method, discretionary power shall lie with CEO for finalising the election process.

15. The CEO shall ensure participation and vote casting by each eligible voter. 16. The CEO is not allowed to cast his vote for electing BoD or Chairman of the company. However, s/he

can cast her/his vote in the business meetings or circumstances related to the business of the company.

17. The election of directors shall normally take place at the annual general meeting. The election rules

shall be formulated by the Board and approved by the general meeting. 18. The first election of the Board after its incorporation shall take place within one year. 19. The candidates for contesting the election shall have to fulfil all the qualifications required for obtaining

membership, except in case of the first election of the Board after its incorporation. 20. Every person shall hold office of director for not less than one year (except in cases where he has

resigned due to either personal reasons, legal issues or where desired by Board of Director due to extraordinary circumstances during the first year) but not exceeding five years or as specified in the Articles.

21. Where the Board fails to conduct elections before the expiry of the term of the directors or where there

are no directors remaining on the board, the CEO shall call an extraordinary general meeting within twenty days after the expiry of the term of the directors. If the Board is not constituted in the meeting, a three-Member ad-hoc board shall be appointed, for the specific purpose of conducting elections and to perform all functions of the Articles of Association.

22. The term of the ad-hoc board so appointed shall not exceed three months and the ad-hoc board shall

cease to function as soon as a regular board is elected, in accordance with the Articles of Association. 23. The term of the elected board shall be three years from the date of assuming office, including the first

Board. After the third year of incorporation, at the end of every three years after the constitution of the Board, one third of the elected board members shall retire and be eligible for reappointment. For the first such retirement, the directors who shall retire shall be determined by draw of lots. Provided, however, that no member can be a member of the Board for a consecutive period of more than 10 years except the person, who provided very visible and substantial support to the company (shall be assessed by the BoD and CEO) for making good business profit in his tenure.

24. However after every five years, reappointment or extension of tenure should be approved by the

General Body by more than two thirds majority (by direct voting).


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Annexure 12

Directors’ Liabilities

When the directors vote for a resolution, or approve by any other means, anything done in contravention of the provisions of this Act or any other law for the time being in force or articles, they shall be jointly and severely liable to make good any loss or damage suffered by the Producer Company. In addition to the above a Producer Company shall have the right to recover from its director, an amount equal to the profit made by the director personally or an amount equal to any loss or damage to sustained by the Producer Company as a result of any contravention of the provisions of the law for the time being in force. The liabilities of company directors are numerous but as per their civil and criminal liabilities, they may be grouped under following heads for convenience and consideration and discussion:

1. Liability to Outsiders; Directors of the Company may personally become liable to third parties in the following cases:

(a) When they enter into contracts on behalf of the company;

i. if the contracts are ultra vires the company; ii. if they act outside the scope of their own authority; iii. if they act in their own name and not ‘for and on behalf of the company’;

(b) When they issue a prospectus: i. in violation of the provisions of the Companies Act, 1956; ii. which contains mis-statements;

(c) When they are found guilty of fraud; (d) When they allot shares in an irregular manner; (e) When their liability has been made unlimited under Sections 322 and 323 of the

Companies Act. (f) When the Court orders that the directors are personally liable for all or any of the debts or

liabilities of the company for fraudulent trading on the part of the company.

2. Liability to the Company The directors are liable to the Company in the following cases:

(a) When they are negligent in the performance of their duty, and as a result the Company

suffers loss, damages etc. (b) When they commit an act or which is ultra vires their powers or ultra vires the company (c) When any illegal act or breach of trust is committed by them.

3. Liability to the Shareholders’

The position of the directors in respect of the Company’s properties and the rights conferred upon them to be exercised as directors is that of a trustee. If they commit any breach of trust or indulge in wrongful uses of their rights and the company suffers loss, due to the negligence of the directors, they are personally liable for the loss.

4. Liability for statutory defaults and violations.


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Under the Companies Act, 1956, the directors are required to ensure compliance with the provisions of the Act, and penalties have been prescribed for defaults and/or non-compliance. The directors of a Producer Company shall be liable for consequences in the following situation.

(a) The directors are liable to be punished with simple imprisonment and shall be liable to fine,

also if they fail to distribute dividend within 30 days of its declaration by the shareholders. (b) Every director who fails to comply with regard to disclosure of their interest at Board meetings

shall be liable to punishment which may extent to Rs. 50,000.

5. Director’s Liabilities For Acts of Co-Directors

A director is an agent of the Company and not of other Members of the Board. Anything done by the Board cannot make a director liable, who did not know of that action and did not participate in it. This is the case even if he attends the subsequent meetings at which the minutes recording wrongful action of the earlier meeting are confirmed. A director could not be held liable for the misconduct of another director unless he has joined with him in the preparation of the misconduct or has omitted to thwart the misconduct, due to his negligence. In the absence of reasonable grounds of suspicion, a director cannot be held liable for the fraudulent acts of a co-director on the grounds that he ought to have discovered the fraud. However, the position of managing director or chairman of the Board is different. He can not deny his/her responsibility for the misconduct of the director/s.

6. Liabilities As An Officer In Default

(a) The Companies Act, 1956 in a number of sections uses the term ‘officer in default’ when

affixing a person with liability for offences i.e. if default is made in complying with a section, the Company and every officer of the Company who is in default shall be guilty of an offence under the section.

(b) This is followed by the specified penalty consisting of fine and imprisonment in certain cases.

(c) It is in the context of persecution that determination of officer who is in default becomes essential5.

5 Under section 633 of the Companies Act, the Court has the power to relieve a director of any liability under the law. Moreover, for the purpose the court, after a serious and careful consideration, should be satisfied that the defaulting director acted honestly and reasonably. As per the new provision in the Companies Act, Section 621A, the liabilities of directors are regarded as compounding of offences.


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Annexure 13

Roles and Responsibility of the Accountant, Service Provider, Company Secretary and Go down

Keeper 1. SERVICE PROVIDERS

- S/He must be the farmer of the same or neighbouring village. - S/He shall also practice all agriculture activities in his field simultaneously, during extension

/demonstration of new agriculture practices amongst other member farmers of the company. - S/He shall work as extension and commission agent of the Producers Company. - S/He shall execute distribution and collection activities at the field level. - S/He shall also provide handholding support to the farmers for implementation of new/advanced

agricultural practices, as per requirement of the production processes to comply to the agreed quality standards with client companies.

- Different service providers for different services will be appointed and shall be trained by the Producers Company especially to render such services on full economic cost or as decided by the Producer Company for its members and non-members.

2. ACCOUNTANT

- Each Company shall have a full time Accountant who will maintain and update all accounts-related books and documents like cash book, ledger, voucher, stock register and other inventories etc.

- He shall make payment on behalf of the Producers Company through prior approval of CEO/ Chairman and as per the procedure laid down in the financial management system (refer to Section IV of this O & M Manual).

- During the absence of a full time Accountant, an arrangement could be made in consultation and with support from the sponsoring organisation (in this case MPDPIP). The AFM of the DPSU may depute an assistant for the same.

- The accountant shall not be the bank signatory of the Company. - S/He shall be responsible for managing the financial and inventory accounts, preferably on using

software such as Tally, that has been especially customised for the purpose of bookkeeping of Producers Company accounts.

- S/He shall be responsible for starting internal and statutory financial, process and inventory audits, by outsourcing to the chartered financial services available.

3. GODOWN KEEPER

- The Company shall also keep a go-down keeper/s for its major go-down/warehouses. - He shall maintain all go-down related records like stock register, incoming and outgoing register,

receipt book and delivery challan (dc) book etc. - He will never accept/ permit any receipts or delivery of any material / consignment without proper

entry in the respective register. - He shall be responsible for periodic physical verification of stock and all records, authorised by the

CEO or other authorised persons of the Company. - He shall be directly responsible for maintenance and care of all material kept in the go-down. - The number of go-down Keepers can be increased as per the business volume of the Company.


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- In case of small volumes or on a seasonal requirements basis, any known and reliable person can be hired as go-down Keeper on temporary/ daily-wage basis.

4. COMPANY SECTERTARY

If an average annual turnover exceeds five crore rupees for three consecutive years, then the Company have to employ a full-time company secretary The person appointed must possess a membership of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980. Violating it will subject to punishment with fine upto Rs.500 per day during which the default continues.


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Annexure 14

Model Business Plan of the Company

What is a business plan? A business plan is essentially a written description of a business’s future. It provides an in depth report on the environment in which the company functions, what the company plans to do in the near future and predictions on its performance. A business plan conveys your business goals, the strategies you’ll use to meet them, potential problems that may confront your business and ways to solve them, the organizational structure of your business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even. Characteristics of good business plan: 1. A good business plan follows generally accepted guidelines for both form and content. There are three

primary parts to a business plan. 2. The first is the business concept, where you discuss the industry, your business structure, your

particular product or service, and how you plan to make your business a success. 3. The second is the marketplace product, in which you describe and analyze potential customers: who

and where they are, what makes them buy and so on. Here, you also describe the competition and how you’ll position yourself to beat it.

4. Finally, the financial section contains your income and cash flow statement, balance sheet and other

financial ratios, such as break-even analyses. This part may require help from accountant and a good spreadsheet software program.

5. Breaking these three major sections down even further, a business plan consists of six key

components:

I. Executive summary II. Business description III. Marketing Plan IV. Production Plan V. Operation and Management Plan VI. Financial Analysis

I Executive Summary:

Within the overall outline of the business plan, the Executive Summary will follow the title page. The Executive Summary should get straight to the point and in a nutshell convey the value of your proposition. Most Business Plan Competitions have a screening round where entries are judged on the basis of their Executive Summary.


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Key elements that should be included are:

1. Business Concept, the business and market: Describes the business, its product and the market it will serve. It should point out just exactly what will be sold, to whom and why the bushiness will hold a competitive advantage.

2. The management team: A brief summary of the business team composition, special skills

required to operate the proposed business successfully should be provided in the executive summery of the business plan. The nature and type of deployment of the key personnel and in case of specialized needs who would support the key business preposition.

3. Business rationale - why the proposal is different: A statement of business rationale

establishing how and why the proposal is different than other businesses of the same nature in the prevailing industry. This will prompt the financial institutions and others watching and planning to support the business.

4. The proposal: State clearly the intent of the proposal and what precisely you are planning to do

and achieve the intended output.

5. Basis for its success: State your logic as to why you think the proposed business would succeed in the present circumstances and how it will meet the intended outputs. Strength – Opportunity matrix may help summarize the logic.

6. Profitability and financial feature: Highlights the important financial points of the business

including sales, profits, cash flows and return on investment.

7. Financial requirements: Clearly state the capital needed to start the business and to expand. It should detail how the capital will be used, and the equity, if any, that will be provided for funding. If the loan for initial capital will be based on security instead of equity, you should also specify the source of collateral.

8. Risk assessment and mitigation strategies: The executive summery may also include a brief

sketch of the potential and killer risks assessed while analyzing the business proposition vis-à-vis industry and the potential competitors. How the risks would be mitigated should form the body of the risk mitigation or aversion strategy.

9. Current business position and prospects: Provides an overview of the market in which the

startup is to function. In brief, it focuses on the proposed strategy to beat the competition.

10. Future Prediction as to the targeted market share, profitability and return on investment

11. Key conclusions: Based on above the key conclusions may be drawn for a quick snap shot vision of the whole business plan.

12. Statement of Purpose:

The Executive Summary is followed by the Statement of Purpose. When writing your statement of purpose, don’t waste words. Convey what you expect from a VC funding the venture and indicate what you hope to achieve. The statement of proposes may be done away with for Business Plan Competitions.


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II Business Description: 1. The business background: The business description is an extended version of the Executive

Summery, where you must convey the crux of your proposition and provide some depth of knowledge regarding the plan to the VC.

2. Location and operational area: The business description usually begins with a short description

of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business. Base all of your observations on reliable data and be sure to footnote sources of information as appropriate.

3. Method of operation: When describing your business, the first thing you need to concentrate on is

its structure. By structure we mean the type of operation, i.e. wholesales, retail, food service, manufacturing or service oriented. Also state whether the business is new or already established. A very major part of the Business Description is detailed information about the team.

4. Defining the prospective market and the customers: You should also mention, who you will sell

to, how the product will be distributed, and the business’s support systems. Support may come in the form of advertising, promotions and customer services.

5. Type of business and services offered: Once you’ve described the business, you need to

describe the products or services you intended to market. The product description statement should be computed enough to give the reader a clean idea of your identification. You may want to emphasize any unique features or variations from concept that can typically be found in the industry. Be specific in showing how you will give your business a competitive edge. The revenue model you propose must also be touched upon in the business description.

6. Statement of viability: This section deals with financial analysis of the proposal and depicts the

viability of the business which enables the resource institutions, shareholders and others assess and allocate resources.

III Marketing plan:

1. The marketing plan is the result of the meticulous analysis of the market analysis. A market analysis forces the business entity to become familiar with all aspects of the market so that the target market can be defined and the company can position its product and or services in order to garner its share of market.

2. The market analysis also helps to understand market dynamics, enables to work out pricing,

packaging, promotion and positioning strategy vis-à-vis its potential competitors. It helps understand ad apprise competitive environment and competitive advantage it could have or generate through strategic business decisions.

3. Begin your market analysis by defining the potential target market its size, structure, growth

prospects, trends and the potential for foreseeable future. The aggregate business volume of the competitors may provide a fairly accurate estimate of the potential market and shall help precisely define the proposed market share.


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4. The target market narrows down the total market by concentrating on the segmentation factor that

will determine the total addressable market – the total number of users within the sphere of the business’ influence. The segmentation factor can be geographic, customer-attribute or product oriented.

Competition analysis:

• The competition analysis is a statement of the business strategy and how it relates to the competition. The purpose of the competitive analysis is to determine the strength and the weaknesses of the competitors within the proposed market, the strategies that will provide the proposed business a distinct advantage the barriers that can be developed in order to prevent competition from entering your market, and any weakness that can be exploited within the product development cycle.

• The first step in a competitor’s analysis is to identify the current and potential competition. There are

essentially tow ways you can identify your competitors. The first is to look at the market from the customer’ view point and the group all your competitors by the degree to which they contend for buyers’ perception value in terms of money or satisfaction by its use. The second method is to group competitors according to their various competitive strategies so you understand what motivates them.

• Once you have grouped your competitors, you can start to analyze their strategies and identify the

areas where they’re most vulnerable. The aim is to get a competitive advantage over them. The analysis could be carried out on the parameters like (1) reasons behind their success or failure; (2) prime customer motivator; (3) major component costs and (4) industry mobility barriers.

• The strategy for negotiating the proposed market share may focus on (1) product (2) distribution (3)

pricing (4) promotion and (5) advertisement. Arriving at a projection of the market share for a business plan is very much subjective estimate. It is based on not only an analysis of the market share but on highly targeted and competitive distribution, pricing and promotional strategy. The market share should have a time horizon, to estimate this, factors like industry growth which will increase the total number of users and conversion of users from the total feasible marketing.

• This section of business plan should include strategies for successful positioning of the business in

the competitive business environment. The strategic issues like how the competitors are positioning themselves, what specific attribute your product have that competitors’ do not and what customers needs does your product fulfill.

• The success of the business significantly depends on pricing policy, to keep the pricing policy

competitive either of the following method could be used:

• Cost-plus pricing- it assures that all costs both fixed and recurring or variable are attained with desired percentage of profit;

• Demand pricing- the pricing based on demand;

• Competitive pricing – this strategy is implied by the companies tat are entering in to the market

where there are already established pricing exists and it is difficult to differentiate one product from another;


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• Mark-up pricing – used mainly by retailers, mark-up pricing is calculated by adding your desired

profit to the cost of the products. Each method listed above has several strength as well as weakness.

• Distribution includes the entire process of moving the product from the place of manufacturing to the

end users. The type of distribution network chosen will upon the industry and the size of the market. A good way to make your decision is to analyze your competitors to determine the channels they are using, and then decide whether to use the same type of the channel or an alternative that may provide you with a strategic advantage. Some of the more common distribution channels include direct sales, retailers, wholesalers etc….

• The promotion strategy in its most basic form is the controlled distribution of the communication

designed to sell your product or services. In order to accomplish this, the promotion strategy encompass every marketing tool utilize in the communication efforts. This includes advertising, packaging, public relations, sales promotion etc.

IV Production plan

1. The purpose of the production plan section is to provide a detailed overview of how the actual production will be carried out in the case of a manufacturing concern, or the service performed in the case of service industry.

2. The production plan is very crucial for a manufacturing concern. In the case of a service company,

it may be done away with and the relevant issues would be covered in the operation and management plan. The production plan should include – production process adopted, capacity planning and task scheduling and cost estimation.

V Operation and management plan

1. The operation and management plan is designed to describe just how the business functions on a continuing basis. The operation and management plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operation and management of the business.

2. There are two areas that need to be accounted for when planning the operations of your company.

The first area is the organizational structure of the company, and the second is the expense and capital requirement associated with its operation.

3. Organizational structure: The proposed organizational structure of the producers company is

placed at page #?. The organization structure of the company is an essential element within a business plan. In the present structure, there are three cadres of personnel supporting the Producers Company. The personnel deployed by the producers company like Chief Executive Officer, Accountant, Service Providers, the personnel from the supporting agency for the technical skills like agriculture technologies and marketing. The officials and personnel from sponsoring agency like MPDPIP.

4. Details of the key personnel should be appended with the business plan to foster confidence in the

financial agencies.


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5. Depending upon the organization structure, the personnel requirement at various levels of the

organization is estimated. In addition to this, the costs of support services required for the functioning of the organization are estimated. These costs are then used to compute the overhead costs which, are used in the calculations involved for the financial statements.

VI Financial Management plan and analysis

1. The financial analysis is extremely important, in most case it is the decisive factor. The single most significant analysis is the profitability promised by the proposed business; similarly cash flow statement provides insight in to the sustainability of the proposed business. The business plan should contain income statement, balance sheet and the cash flow statement.

2. The financial statement should accompany financial analysis like break even analysis, return on

investment, return on assets, return on equity, profit margin analysis and debt equity ration etc….

3. Profitability Analysis Ratio:

Return on Investment (RoI) = Net Income / Average Total Assets Average Total Assets = Total asset in the beginning + Total asset at the end /2 Return on Equity = Net Income /

Average Stockholder’ Equity Average Stockholder Equity = total stockholder’ equity in the beginning + End Equity / 2 Profit Margin = Net Income / Sales Earning per share = Net Income / Number of common share outstanding


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Annexure 15

Augmenting and Managing Financial Resources

The most important of all the resources to carry the proposed key businesses of the Producers Company would be finance. The financial resources could come from following streams: 1. Medium and Long Term Loan from the Commercial Banks - the producers companies shall develop

their business plans as discussed in the previous section and could approach the commercial banks for the funding such financially viable plans;

2. Funding from the Department of Rural Development and Panchayats under SGSY (Special) Schemes –

Both the GoI and GoMP has agreed to consider the Producers Companies as community based organizations and could provide large funding in tandem with terms loans from the commercial banks / cooperatives banks or RRBs. Special projects have to be developed for garnering such funding for the financially viable proposed key businesses.

3. NABARD under its rural innovation scheme in collaboration with Swiss Development Cooperation

(SCD) could also provide funds for initiating many of the activities of the Producers Companies; 4. World Bank has shown great interest in these institutions and has assured financial support to these

institutions based on the merit of the proposed business plan. Such funds could be available through MPDPIP. This could be obtained by developing a financially viable business plan duly verified by a commercial bank for considering it for a term loan.

5. MPDPIP through its “Z” category activities could support many infrastructural needs like storage and

warehouses, buildings, approach roads, plan and machinery sheds, processing units etc….The DPSU could assess the viability of the proposal and forward it competent authority for its approval. The Producers Company can build, own, operate and manage (BOOM) the assets so created on behalf of its shareholders, who are primarily the target beneficiaries of the MPDPIP.

6. The support organizations (NGOs) involved in this initiative could garner resources through bilateral/

multilateral donor agencies on project basis for all such activities which could support proposed business initiatives of the Producers Companies. The example case may be the funding from AKF under their rural innovation fund scheme for the coming year or the Toyota Foundation for Environmental sustainability.

7. The Projects could be submitted to Ministries of Agriculture and Cooperation or Horticulture or Food

Processing GoI and or GoMP under various schemes like National and State Horticulture Mission, Small Agribusiness Consortium, NAIP and Service Providers schemes to receive appropriate funding for the key business initiatives proposed by the Producers Companies and spelt in their business plan.

8. The family budget wherever available could also be a source of funding some of the activities in the

start-up phase of the small business initiatives. In case where a business plan is in making, the Company may seek financial support from the SPU/DPSU through PFT on special request. In such cases the modus operandi of MPDPIP as per WB approved policy shall apply. However, the SPU may approach the appropriate authority within MPDPIP or WB to fine tune the modus operandi as per the demand of the Producers Company on due scrutiny and merit of the case.


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9. For all practical purposes the Producers Company should be considered as a MEGA CIG and the sub-project proposals should be developed according to the existing process applicable for the MEGA CIG. The purchase procedure especially the decentralized purchases directly by the beneficiary groups from the open local market following the stipulated procedure of competitive rate biding by quotations could be handled by the Company.

10. The Producers Companies could generate financial resources from within their shareholders by issuing

credit bonds. Such bonds could be issued while dealing with family budget either through their respective CIGs or the MEGA CIG as the case may be. This arrangement could continue during the start-up phase till the time the Company gets its business plan fully developed, duly ratified by a commercial bank as per the desire of MPDPIP/ WB and receives required funds through term loans, grants and or a combination of both.

11. The resources like land could be allocated by the local district administration for developing common

facilities like work-sheds, warehouse, approach road processing units etc…. The Company should approach the local administration through DPSU and its support agency for the same.

12. The human resources for the start-up period could be provided by MPDPIP under its consultancy

agreement with support agency, or through PFSO as the case may be. This arrangement may continue for a period of say 2-3 years and the Company on gaining financial autonomy and robust business acumen could deploy its own personnel. The funding of the business plan through MoRD & P GoMP, SGSY (S) and other such schemes could also have provision for hiring the human resources as per the need of the proposed and agreed business for all such funding.

13. May provide the contract staff working presently in the promoting agency's project as member

consultant, VRPs or personnel of the PFSO on secondment to the Producers Company in their respective clusters, districts. The cost of such employees on secondment in the planning, production, procurement and marketing divisions of the company could be met from the funds received from MPDPIP under a special agreement.


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Annexure 16

Matters to be Disclosed in the Fixed Assets Register

Following matters must be disclosed in the Fixed Assets Register: 1. Detail of vouchers and date; 2. Bill no. and date; 3. Supplier name and address; 4. Description of asset and no. of units; 5. Code of the asset; 6. Cost of asset including incidental charges incurred in the course of acquiring a particular asset; 7. Opening balance of asset; 8. Sale/adjustment if any; 9. Opening accumulated depreciation and depreciation for the year; 10. Written down value of the asset as at close of accounting year; 11. Location of the asset; 12. Identification of the assets by numbering which should also be recorded in FAR 13. Remarks if any. 14. The Stock inventory of capital goods shall be maintained by the Administration department and all items

shall be numbered. For the items stationed at the other locations the inventory number should be provided.

15. Physical stock verification shall be done twice a year (March & September). The in-charge of

administration shall be responsible to carry out the exercise and prepare status report duly endorsed by the Accounts Officer.

16. For any damage or loss of assets, it should be informed immediately with detailed information of the

incidents, reasons etc. 17. Assets worth Rs. 5000 and above shall be capitalized.


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Annexure 17

Procedure to Be Adopted For Procurement of Agriculture Inputs

1. Demand assessment shall be accomplished by production division, on the basis of compilation of

demand collected from individual members/farmers of the Company. 2. An indent should be made by production division to the procurement division initially on the basis of

either shareholder farmer’s confirmed demand collected by production division, or demand articulated by marketing division for the supply of specific product/material demanded by buyers/processors; for that specific parent material like seeds and variety/ fertilizers /pesticides are prerequisite, and it has to be demanded by production division through written indent which shall be also approved by marketing division.

3. This demand collection exercise should ideally be completed within one-and-half months in advance of the season (e.g. Rabi demand should be collected and confirmed before September, and Kharif demand before May each year).

4. This should be intimated to procurement division in a written Indent Letter (in prescribed format) signed by the Head of production division or any other person authorized for the same.

5. The procurement division should ensure the supply of all indented material especially seeds, fertilizers, pesticides and farm machinery to its members well in time. The authorized dealership from the supplier producers or manufacturer companies should seek following the stipulated procedure laid down by these companies.

6. In case of very limited quantity or unavailability of dealership due to unavoidable circumstances (justifiable explanation should be given), procurement division shall followed the process of quotation if limit is more than limit described below.

7. For procurement of agriculture inputs already demanded by production division and approved by district procurement committee, amounting to more than Rs. 5000/-, 3 quotations of a similar type are required from supplier/companies. However for the procurement of the material costing less than Rs. 5000/, no quotations are required.

8. Collection of quotation or cross verification of rates shall be the responsibility of procurement division. 9. In case of procurement of seeds/fertilizers/farm machineries or other agriculture inputs from recognized

State/National Agriculture Research Centers/ SAUs or ICAR’S institutions, no quotation is required. 10. Similarly, for the procurement of goods/material and technical services of any particular Brand (well

established in market for a minimum of 15 years and internationally certified from any certification bodies like ISO etc) preferred by the members producers, and proper justification and demand given by production division to the procurement division, in such cases quotation requirement can be exempted. In these circumstances, only supply price alone shall not be the criteria for the finalization of supplier.

11. In cases where suppliers are not available for any particular goods or services, the purchasing norms can be liberated by the Chief Executive Officer with prior consultation of BoD or minimum 3 members of BoD as the case may be.

12. The purchasing procedure will be initiated by procurement division that must include the accounts section and 2-3 persons from the BoD, total person not less than 5 in any case. This constituted committee shall finalize the purchase agreements.

13. A comparative chart has to be prepared before finalization of input supplier/ company as described in the following table. Evaluation shall be done by procurement committee in parameters mentioned in the table.

14. Final purchase approval will be given by the Chief Executive Officer or by the person nominated by BoD.


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15. In general. the project staff would not be allowed to get involved in the purchasing except when extraordinary situations arise and the same is decided by either BoD or by Chief Executive Officer, with the written consent and or approval of the BoD.

Table

Sr. No.

Parameters Credit point / Weight

Company A Company B

Company C

i Product’s salient features in case of seed /pesticides / fertilizers: Yield/ nutrient availability Insect Diseases resistance/ effectiveness Market demand Other extra quality

+- 1 +- 1 +- 2 +- 1

ii Farmer’s demand +- 2 iii Dealership commission +- 1 iv Product history +- 2 v Product age +- 1 vi Product price +- 1 vii Supply price +- 1 viii Supply volume +- 1 ix Organization’s age +- 1 x Organization’s history +- 1 xi Payment terms +- 1 xii Cash discounts +- 1 xiii Turnover discounts +- 1 iz Offer of extension Services +- 1 iiz FoR Delivery +- 1 z Buy back offer +- 3 zi Timely supply +- 1 zii Other offer (if any) +- 1 ziii Remain stock return facility +- 1 Total

I. Maximum marks for each character shall be = 3 (or shall be equal to the number of companies), Poorest shall be denoted as 1 and best as 3

II. Number shall be given in common consensus basis in case of any dispute, majority’s decisions shall be accepted. III. Final marks for each character shall be put after multiplication with respective credit point. IV. Final marks shall be written with their sign also V. If any company is not providing any facility mentioned in parameters shall be given minus mark for particular traits.

VI. Highest marks Obtainer Company can be considered as the best suited company PURCHASE OF TRADABLE GOODS AS PER THE APPROVED BUSINESS PLAN UP TO: 1. From regular sources of the supplies on approved dealership basis, of a reputed limited

company or manufacturer up to Rs. 500,000/- (Rs. Five Lakh Only)


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2. From regular sources of supplies on approved dealership basis of a reputed company/ firm up to Rs. 50,000/- (Rs. Fifty Thousand Only)

3. On confirmed demand from the shareholder members or non member from any approved

sources up to Rs. 25,000/- (RS Twenty Five Thousand Only). Note:

i. The repeat purchase in case of # I and II with prior approval of the purchase committee of the BoD. ii. The repeat purchase on a single day should be discouraged iii. The repeat purchase of III on prior approval of the BoD iv. All dealerships to be approved by the BoD.

4. In case of technical and other services the CEO is delegated with the financial powers up to Rs. 5000/- in a year following the stipulated purchase procedure.

Note:

i. The services exclude all statutory requirements to carry the approved business as per the business plan.

ii. The value of the procured service should not exceed 1% of the total business volume in that particular business initiative in a financial year.

5. The Purchase Committee of the BoD of the Company shall be entitled to purchase all

consumable goods above Rs. 5001 (RS Five thousand one only) up to Rs. 200,000/- (Rs. Two Lakh only) following the purchase procedure.

6. In case of tradable items the purchase committee of the BoD shall be eligible to purchase all

tradable items on dealership basis from an approved supplier a limited company or manufacturer up to Rs. 15,00,000/- (Rs. Fifteen Lakh only), while from an approved company or firm Rs. 250,000/- (Rs. Two Lakh Fifty thousand only). The purchase of such items from an approved supplier on confirmed demand from the shareholder members or non members the Purchase Committee may purchase up to Rs. 100,000 (Rs. One Lakh only).

7. The Purchase Committee of the BoD shall be eligible to purchase technical and other services

up to the limit of Rs. 25,000/- (Rs. Twenty Five thousand only) in a financial year following the stipulated purchase procedure of the Producers Company. The Conditions as narrated in para # 4.11.4.3 applies.

8. The Board of Directors (BoD) of the Producers Company shall be delegated financial powers

to purchase all consumable items up to Rs. 200,000/- (Rs. Two Lakh only) following the stipulated purchase procedure of the Producers Company.

9. The BoD shall be eligible to effect purchases of all tradable items from approved sources as

per the approved business plan up to any extent keeping in view the business interest of the Producers Company. However, in case of goods or services on confirmed demand from the shareholder members or non members shall be limited to Rs. 250,000/- (Rs. Two Lakh Fifty thousand only). The conditions as per the para # 4.11.4.3 apply.


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10. In case of purchase of technical or other services required to operate the approved business of the Company, the BoD may exercise full powers. However, the approved purchase procedure shall apply.

PURCHASE PROCEDURE FOR PROCUREMENT OF NORMAL GOODS AND SERVICES 1. For procurement of goods and services, already approved, amounting up to RS 1000/- from a

single sources from open market with all purchase documents like bills / cash memo / vouchers, delivery challan, valid documents confirming make, model, quality and quantity.

2. The repeat purchase on a single day within above limit should be avoided. 3. Purchases above the value of RS 1001 up to RS 20,000/- (RS Twenty thousand only) need 3

quotations from the authorized manufacturer/supplier from the local or regional market. For the goods and services of any particular Brand preferred by the Company, there will be no need of quotation. The quotation comparative statement (QCS) shall be prepared by the authorised purchase committee after due verification of the facts vis-à-vis the requirements notified by the Company on an enquiry letter.

4. The purchase committee should comprise of at least three members, of which one member

should be the member of BoD. The purchasing procedure will be initiated by the accounts section and at least 3 persons either from the BoD or the special committee constituted for the purpose should be included and should finalize the purchase agreements.

5. Final purchase approval will be given by the Chief Executive Officer or by the person

nominated by BoD. The QCS should be approved by the competent authority as per the delegation of the powers given in the para # 4.11. In cases where the suppliers are not available for any particular goods or services, the purchasing norms can be exempted by the Chief Executive Officer or the BoD as the case may be.

6. For purchases above RS 20001/- (RS Twenty thousand and one only) and up to 250,000/- (RS

Two Lakh Fifty Thousand only), the Company shall issue a Notice Inviting Tender (NIT) in the local newspaper with satisfactory circulation perceived by the BoD. In case of purchases above 250,001/- (RS Two Lakh Five Thousand and one only), the NIT should be published in statewide or nationwide newspapers.

7. The QCS of such purchases should be approved by the BoD or the constituent committee

thereof. 8. For purchase such as seeds, fertilizers, agrochemicals, farm machineries, tools, implements,

packaging material like cloth bags, gunny bags, threads for stitching, sealing wax, printing, stationary, promotional material, cement, bricks, hiring contract employees, purchasing plant and machineries, etc. of any amount, the Chairman and three members of BoD should be involved in the process. In no case would project staff be allowed to get involved. Chief Executive Officer with the written consent and or approval of the BoD may finalize purchases.


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9. All dealerships to be approved by BoD however, the Expression of Interest (EoI) can be submitted with the approval of especially constituted Business Committee of BoD.

10. The purchase of goods or services, both consumable or tradable, on specific confirmed

demand from the shareholder member or non members from authorized sources exceeding the business limits of the smallest business volume in the previous / current financial year, should be converted into regular business of the Company by opting for the authorised dealership of all such goods/ items and or services from such suppliers, producers, manufacturers and agencies.

11. The finalisation of the agencies, institutions, individuals, and approval thereof precedes the

process of calling EoI from all interested parties followed by technical biding. On approval of EoI and technical bids thereafter, following pre-decided selection/rejection criteria, the BoD or its constituent committee e.g. business committee, purchase committee should call the financial bidding and or workout financial implication for a negotiated approval. In such cases, the BoD or its constituent committee thereof may/should seek the help of external experts e.g. sponsoring agency (MPDPIP), financial institutions (Banks) or technical support agency (ASA/PRADAN/SRIJAN/BAIF/LUPIN).


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Annexure 18

Reports and forms to be filed in ROC Office

Form Name Event for which form is

required to submit Due date of filing

FORM 18 Registered office Change Notice With in 30 Days of event FORM 29 Consent to act as Director With in 30 Days of event FORM 32 Changes In Director /Manager With in 30 Days of every

FORM 5 Increase in Share Capital /Members

With in 30 days of event

FORM 23 Registration of Resolution / Agreement

With in 30 days of event

SCHEDULE V Annual Return Within 60 Days of AGM SCHEDULE VI Balance Sheet and Profit & Loss

Account Within 30 Days of AGM

FORM 21 Notice of Court / CLB Order FORM 2 Return of Allotment Within 30 days of event FORM 3 Particular of Contract Relating

to Share allotted With in 30 days from event

FORM 23AA Address at which Books of Accounts of Company are maintained

With in 30 days from event

FORM 1AA Director/Person responsible under section 5(f/g)


FORM 15 Notice of Appointment of / Appointment of reviver/Manager



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Annexure 19

List of Annexure to Be Attached With the Balance Sheet, Which Has To Be Laid Before the

Shareholders In Annual General Meeting

1. A copy of the balance sheet of the subsidiary 2. A copy of directors report 3. A copy of profit and loss account 4. A copy of auditors report 5. A statement containing the following particulars:

i. the extent of holding company’s interest in the subsidiary at the end of the last financial year

ii. the net aggregate amount of profits or losses in the subsidiary so far as it concerns the members of the holding company and is not dealt with in the holding company’s account

iii. any change in the company’s interest in the subsidiary iv. details of any material change occurring between the end of the financial year

of the holding company in respect of - the subsidiary’s fixed assets, - its investments, - the money lent by it, and - the money borrowed by it for any purpose other than that of meeting liabilities.

Where the Board of Directors is unable to obtain the necessary information for the above said list, then a report to that effect should be annexed to the balance sheet of the holding company.


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Annexure 20

Sample format of a. Cash Voucher for cash transaction

Form A-1 ...................................................................PRODUCERS COMPANY LTD

Cash Voucher For account use

Name----------------------------------------------------------------------------------- V. No---------------------- Date -----------------------

Unit ------------------------------------------------------------------------------------- Head-------------- Line Item ------------------

Amount Sr. No. PARTICULAR Bill No Date

RS Ps.

Rupees in words------------------------------------------------------------------------ TOTAL

Narration --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Received Payment Submitted by Accountant Chief Executive

Officer


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b. Bank Voucher for bank transaction

Form A-2 ...................................................................PRODUCERS COMPANY LTD

Bank Voucher For account use

Name----------------------------------------------------------------------------------- V. No---------------------- Date -----------------------

Unit ------------------------------------------------------------------------------------- Head-------------- Line Item ------------------

Amount Sr. No. PARTICULAR Cheque No Date

RS Ps.

Rupees in words------------------------------------------------------------------------ TOTAL

Narration --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Received Payment Submitted by Accountant Chief Executive

Officer


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c. Journal Voucher

Form A-3

.......................................................PRODUCERS COMPANY LTD Journal Voucher

Head/ Activity/ A/c -------------------------------------------------------------------------------------------------------------

Date ----------------------

Line Item --------------------------------------------------------------------------------------------------------------------------

V. No -------------------

Debit Amount Credit Amount S. No. Particulars Rs. Ps. Rs. Ps.

Rupees in words…………………………………………….…………………………………………………………………………………………...…... Accountant Chief Executive Officer


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Annexure 21

The Process of Keeping Records of Cash Transaction and Sample Format to Record it

1. For recording of cash transactions, the Producers Company should maintain a cash book. 2. A sample format for vouchers of Cash Payment & Cash receipt are given in Appendix 20 3. The Cash book should be updated for all receipts & payments as and when a transaction takes

place. 4. The Cash book should be closed at the end of each day. The cash balance as per cash book

should be cross verified with physical cash in hand on a daily basis. The cashier or the person responsible for handling the cash has to maintain the multicolumn cash book for consolidated, as well as project-wise cash book. It has to be signed on daily basis by Accounts Officer and periodically by Chief Executive Officer.

5. The cash in hand limit should not exceed Rs._________/- (Rupees _________ thousand only)

or may be revised by the Chief Executive Officer from time to time as per the need of the Producers Company.

6. All payments should be made through cheque. However, cash payment may be made used for

petty expenses up to Rs.500/-. Payments such as to labourers, staff advances, can be made in cash depending upon the circumstances.

7. Cash should be kept in the safe custody of the concerned official. 8. Necessary insurance cover should be taken for cash custody in transit and fidelity. In normal

course cash withdrawals should not exceed the next 3-4 days requirement.


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Annexure 22

The Process of Keeping Records of Bank Transaction and Sample Format to Record it 1. For recording of Bank Transactions, Producers Company should maintain a Bank Book, along

with the Bank Register. The sample format for Bank Payment Bank Receipt and Bank Register are given in Appendix 20

2. The bank book should be updated for all bank receipts and payments as and when a transaction takes place.

3. Bank book should be reconciled with the bank statements on a monthly basis. 4. Cheque books should be kept in the safe custody of the concerned official. 5. Any cancelled cheque should be defaced and the portion where the cheque number is written

should be cut and pasted with the counterfoil of the cheque. 6. Any fresh cheque against a stale cheque should be issued only after obtaining specific

approval of the authorized official. 7. All transactions for cash & bank up to Rs. 500/- shall be approved by the Chief Executive

Officer and above Rs. 500/- be approved by BoD.


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Annexure 23

Accounting for Purchases

• Purchases should be recorded at actual cost of Goods; • Cost of Goods includes any other expenses paid till Goods are actually put to use; • Record all the expenses carefully in related account heads (viz. cartage, loading and un-loading,

insurance, commission, brokerage etc) • Ensure that all the expenses have been properly accounted for; • Verify the invoice/ challan for rate, quantity and credit period allowed, as per the Purchase Order/

Work Order/ Agreement; • Ensure that advance given (if any) to the supplier has been credited in the bill; • The receiver of the Goods must acknowledge supplier's invoice/ challan with reference of Stock

Book/Asset Register folio also • Credit should be given to the supplier only when, the Goods/ item(s) has/have been accepted by

the user/ user department; • At the time of passing the bill, please ensure that the Goods receipt note is attached with supplier's

invoice/ bill, and authorized for payment. • Make sure that stores-in-charge and purchase department/ purchase officer has verified and

passed the Goods receipt note; • Prepare voucher giving full detail of supplier and bills; • Mention correct account heads.


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Annexure 24

Qualification and Disqualification of Auditors

Qualification of Auditors Section 226 provides that only a Chartered Accountant as defined in Chartered Accountants Act, 1949 can act as an auditor of a limited company. A firm, where of all the partners are practicing Chartered Accountants, can be appointed by its firm name as auditor in which case any partner may act in the name of the firm. Though the auditor should be a Chartered Accountant, all Chartered Accountants cannot act as auditors of a company. Disqualification of Auditors Under Section 226(3); none of the following shall be qualified for appointment as auditor of a company; 1. A corporate body; 2. An officer6 or employee of the company. 3. A full-time employee or officer elsewhere. 4. A person who is a partner or who is in the employment of an officer or an employee of the company; 5. 4. If on date of appointment or reappointment, the person is an auditor of twenty companies each of

which has paid-up share capital of less than Rs. 25 Lakhs. 6. A person who is indebted to the company for more than Rs. 1,000 or who has guaranteed the

repayment of any debt of more than Rs. 1,000 due to the company by a third person 7. A person is disqualified for appointment, as auditor of the company’s subsidiary or holding or a

subsidiary of its holding company. 8. A person holding any security with voting rights of that company.

6 Officer includes director, manager or secretary


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Annexure 25

Appointment of Auditors

The appointment of an auditor can de divided into three categories7 –

(a) First auditor; (b) Subsequent auditor; (c) Filling a casual vacancy

Appointment of First Auditors The first auditor or auditors are to be appointed by the Board of Directors within one month of the date of Company registration. The auditors so appointed are to hold office until the conclusion of the first annual general meeting of the Company. However, the auditor or auditors so appointed may be removed earlier, if the Company at a general meeting, appoints another auditor, of whose nomination by any member’s notice has been given to the members not less than 14 days before the meeting. This means that the first auditor(s) can be removed at any general meeting prior to the first auditor or auditors. Special notice is not required for the removal of the first auditor(s).

Subsequent Appointment of Auditors

Every company must appoint an auditor or auditors at each annual general meeting to hold office from the conclusion of that annual general meeting until the conclusion of the next annual general meeting, and must, within 7 days of the appointment given intimation thereof to the auditor so appointed, unless he is a retiring auditor. Also, every auditor appointed must, within 30 days of the receipt from the company of the information of his appointment, inform the Registrar in writing in Form No. 23B that he has accepted the appointment or refused it.

Automatic Re-Appointment of Auditors

An auditor appointed shall be re-appointed (after finishing his/her term) unless:

1. not qualified for re-appointment ; or 2. s/he has given to the company, notice in writing of his unwillingness to be re-appointed; or 3. a resolution has been passed at that meeting appointing somebody instead of him/her or providing

expressly that s/he shall not be re-appointed; or 4. where notice has been given of an intended resolution to appoint some person in the place of a

retiring auditor, but owing to that person’s death, incapacity or disqualification, the resolution cannot be proceeded with and so must be dropped.

Filling Casual Vacancy

A casual vacancy in the office of auditor may be filled by the Board. But where the vacancy is caused by registration of auditor, such vacancy shall only be filled by the Company in general meeting. The

7 As per the Companies Act, 1956, Sections 224 and 224A


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remaining auditor or auditors may act notwithstanding the casual vacancy. The auditor appointed in the casual vacancy holds office till the conclusion of the next annual general meeting.

Any auditor, appointed in an annual general meeting or by the Board to fill a vacancy, may be removed from office before the expiry of his term, only by the Company in general meeting8. POWER OF THE CENTRAL GOVERNMENT TO APPOINT AUDITORS If no auditors are appointed or re-appointed at the annual general meeting, the Central Government may appoint a person to fill the vacancy. The Company is required to give within one-week, notice to the Central Government that the power has become exercisable. If a Company fails to give such notice, then the Company and every officer of a Company, who is a default, shall be punishable with fine up to Rs. 5000. An auditor appointed by the Central Government, may be removed from office before the expiry of his term, only by the Company in general meeting, after obtaining the previous approval of the Central Government in that behalf. REMUNERATION OF AUDITOR If the Board of Directors appoints an auditor, the Board may fix his remuneration, and if the Central Government makes an appointment, it may fix the remuneration. Apart from this, the Company must fix remuneration, or determine the way in which it will be fixed. This has to be done by the Company at its annual general meeting when the appointment of the auditor is made. The expenses of the auditors are included in the remuneration. If these are to be paid separately it has to be sanctioned specifically by the sanctioning authority i.e. the Company, Board of directors or the Central Government, as the case may be.

Annexure 26

Liabilities, Power and Duties of Auditors

Apart from liabilities under the common law, the statutory liabilities of an auditor could be:

1. Civil Liability

◊ An auditor may be held liable to the Company for negligence where loss is caused to the Company due to the failure of the auditor to perform his duties with reasonable care and skill.

◊ He is also liable for (i) breach of trust regarding any money or property of the company, or (ii)

breach of trust regarding any money or property of the company or (iii) breach of duty i.e. for not using the best of his skill and diligence in carrying out his task.

2. Criminal Liability

◊ An auditor is liable under criminal law when he makes a report otherwise than in conformity

with the requirements of Sections 227 and 229. ◊ An auditor is liable for the destruction, mutilation, alteration, falsification or fraudulent

concealment of any books, papers or documents belonging to the Company with an intent to

8 As per the Companies Act, 1956, Sections 224(7)


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defraud or deceive; and also where he makes intentionally any statement in any report or document prepared by him.

POWER AND DUTIES OF AUDITORS9 1. Every auditor of a Company has a right of free and complete access at all times to the books of

accounts and vouchers of the Company. 2. S/he may require from the officers of the Company any information s/he thinks necessary for the

performance of his/her duties. 3. S/he is further entitled to receive notice of and to attend the general meetings of the Company and be

heard on any part of the business, which concerns him as an auditor10.

In his/her report, the auditor required to state: - whether, in his/her opinion, proper books of accounts as required by law, have been kept

by the company, - whether, in his opinion and to the best of his information, the accounts of the company

give the information required by the Act in the manner required - whether, the balance sheet gives a true and fair view of the company’s affairs at the end

of financial year, and - whether, the profit and loss account gives a true and fair view of the profit or loss of the

company for the financial year.

The auditor is also duty bound to ensure that: - proper books of accounts and other records are maintained, - the balance sheet and profit and loss accounts are drawn up in a format and in

accordance with the provisions of the Act and the Schedule thereto, - the financial position and working results of the company are stated clearly, there should

neither be an over-statement nor be ab under-statement in this regard, - any material change in the method of accounting and the effect of thereof on the financial

position of the company is clearly indicated, and - there is a proper and full disclosure of the financial position of the company, - every balance sheet of a company shall give ‘true and fair view’ of the state of affairs as at

the end of the financial year and every profit and loss account should give true and fair view of the profits and losses of the company for the financial year.

Special Duties of Auditors of Producer Company The auditor shall report on the following additional matters to the Producer Company namely -

1. The amount of debts due along with particulars of bad debts if any. 2. The verification of cash balance and securities. 3. The details of assets and liabilities. 4. All transactions which appear to be contrary to the provisions of this Part. 5. The loans given by the Producer Company to the directors. 6. The donations or subscriptions given by the Producer Company.

9 As per the Companies Act, 1956, Sections 227 10 As per the Companies Act, 1956, Sections 231


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7. Any other matter as may be considered necessary by the auditor.


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Annexure 27

Legal Position of Auditors

An auditor is not an officer of the Company within the meaning of section 2(30), except where he is deemed to be an officer for specified purposes. An auditor, therefore, is deemed to be an officer of a Company for the purposes of the following eight sections:

1. Section 477 Power of the Court to summon officers or persons suspected of

having property or books or papers of the Company, examine them on oath and require them to produce books and papers in their custody.

2. Section 478 Power of the Court to order public examination of any person or officer of the Company.

3. Section 539 Penalty for falsification of books by any person or officer or contributory.

4. Section 543 Payment for damages for losses to company arising out of misfeasance or breach of duty of any officer, etc.

5. Section 545 Prosecution of delinquent officers 6. Section 621 Cognizance of offences against the Act. 7. Section 625 Payment of compensation to any officer by a person who falsely

accused such officers 8. Section 633 Power of the Court to grant relief in certain cases

Documents

Manual for Producer Company: Volume IIasaindia.org/pdfs/MPC_II.pdf · Manual for Producer Company: Volume 2 2 ANNEXES. Annexure 1 . Definitions of Important Terms Related To the Producer