Companies Act Section 378B

Companies Act, Section 378B: Objects of a Producer Company 

Section 378B of the Companies Act, 2013 outlines the permissible objectives and scope of activities that a Producer Company may undertake. These activities are designed to support and enhance the livelihood and economic well-being of its Member producers, particularly in the agricultural, horticultural, livestock, and related sectors. Below is an expanded and detailed version of this provision for a clearer understanding:

1. Scope and Nature of Permissible Activities

The objects of a Producer Company may encompass one or more of the following functions:

(a) Activities Related to Primary Produce

The Producer Company may engage in a wide range of activities connected to the primary produce of its Members. These activities include:

Production, Harvesting, Procurement, Grading, Pooling, Handling, Marketing, Selling, Export of the Members' primary produce, Import of goods or services for the benefit of its Members.
Proviso: The Company may undertake these activities either directly or through collaboration with other institutions, thereby providing flexibility in operations and partnerships.

(b) Processing of Produce: The Company may undertake value addition of Members’ produce through various forms of processing, including but not limited to:

Preserving, Drying, Distilling, Brewing, Vinting (wine-making), Canning, Packaging. These processes help in increasing the shelf life and market value of the produce.

(c) Manufacture and Supply of Inputs: The Company may be involved in:

Manufacturing, Selling, supplying machinery, equipment, or other consumables. Primarily, these goods and services should be for the benefit and use of its Members.
(d) Education and Awareness

The Company may provide education and training to its Members and others on the principles of mutual assistance, which is a core philosophy underpinning Producer Companies.

(e) Technical and Advisory Services: The Producer Company may render:

Technical services, Consultancy services, Training programs, Research and development, all these services must be geared towards promoting the economic and operational interests of its Members.
(f) Infrastructure and Resource Development: Activities in this category include:

Generation, transmission, and distribution of power, Revitalisation and sustainable use of land and water resources, Conservation initiatives, Communication infrastructure related to primary produce. These are aimed at building and improving the ecosystem in which the Members operate.

(g) Insurance: The Company may undertake:

Insurance services for producers (i.e., its Members), Insurance of the Members’ primary produce. This protects Members from potential losses and uncertainties.

(h) Promotion of Mutuality: The Company may actively promote:

Techniques and practices based on mutuality, the Principles of mutual assistance among Members. Such efforts reinforce the cooperative spirit and shared responsibility model of the Producer Company.

(i) Welfare Activities: The Board of Directors may identify and implement:

Welfare measures, Facilities aimed at improving the quality of life of the Members. These measures are discretionary and depend on the Board’s decisions.

(j) Ancillary or Incidental Activities: The Company may engage in:

Activities that are ancillary or incidental to the ones listed above (clauses (a) to (i)). Other initiatives that promote mutuality and mutual assistance, even if not directly linked to the specific clauses. This ensures flexibility and adaptability to changing Member needs and sectoral dynamics.

(k) Financial Support Services: The Company may provide financial assistance to its Members, including:

Financing procurement, processing, and marketing activities, extending credit facilities or other financial services. This helps ensure timely and adequate financial support for various activities covered in clauses (a) to (j).

2. Restriction on Dealings: Preference to Active Members’ Produce

As a guiding principle, every Producer Company must primarily transact with the produce of its active Members when pursuing any of the above-listed objects. This requirement is in line with the cooperative and Member-centric ethos of Producer Companies. It ensures that the benefits of the Company’s operations accrue primarily to those Members who actively contribute their produce and participate in the Company’s activities.