PRODUCER COMPANY RULES, 2021 – AN OVERVIEW

[Mr. M. GOVINDARAJAN]

Introduction

Section 20 of the Companies (Amendment) Act, 2020 inserted a new Chapter XXIA in Companies Act, 2013 dealing with the producer company with effect from 28.09.2020.  This Chapter contains 12 parts commencing from Section 378A to 378ZU.   Section 378ZU provides that the Central Government may make rules for carrying out the purposes of Chapter XXIA.

Vide Notification No. GSR 112 (E), dated 11.02.2021, the Central Government in supersession of the Producer Companies (General Reserve) Rules, 2003 made the Producer Company Rules, 2021 with effect from 11.02.2021.   The said Rules containing only 5 rules dealing with the following-

• Rule 1 – Short title and commencement;
• Rule 2 – Applicability;
• Rule 3 – Definitions;
• Rule 4 – Change of place of  registered office from one State to another;
• Rule 5 – Investment of general reserves.

Applicability

These rules shall be applicable to a Producer Company, a body corporate having objects or activities specified in section 378B and registered as Producer Company under this Act or under the Companies Act, 1956.

Change of registered office from one State to another State

Rule 4 provides that the rules 27, 30 and 31 of the Companies (Incorporation) Rules, 2014, including the forms stated therein shall be applied for the purpose of change of place of registered office of a Producer Company from one State to another.

Notice of change

Rule 27 of the Companies (Incorporation) Rules, 2014 provides for issue of notice and verification of change of situation of the registered office.  The said rule provides that the notice of change of the situation of the registered office and verification thereof shall be filed in Form No.INC.22 along with the fee and shall be attached to the said form, the similar documents and manner of verification as are specified for verification of Registered office on incorporation in terms of sub-section (2) of section 12.

Alteration of MoA

Rule 30 of the Companies (Incorporation) Rules, 2014 deals with the procedure of shifting of Registered Office from one State or Union Territory to another State.  For this purpose of the Memorandum of Association has to be altered.  An application for the purpose of seeking approval for alteration of memorandum with regard to the change of place of the registered office from one State Government or Union territory to another shall be filed with the Central Government in Form No. INC.23 along with the required fee.

Documents to be attached

The following documents are to be enclosed along with the application-

• a copy of Memorandum of Association, with proposed alterations;
• a copy of the minutes of the general meeting at which the resolution authorizing such alteration was passed, giving details of the number of votes cast in favor or against the resolution;
• a copy of Board Resolution or Power of Attorney or the executed Vakalatnama, as the case may be.

List of creditors and debenture holders

A list of creditors and debenture holders, drawn up to the latest practicable date preceding the date of filing of application by not more than one month, shall be enclosed along with the application.  The following details of creditors and debenture holders are also to be furnished-

• the names and address of every creditor and debenture holder of the company;
• the nature and respective amounts due to them in respect of debts, claims or liabilities:

The list of creditors and debenture holders, accompanied by declaration signed by the Company Secretary of the company, if any, and not less than two directors of the company, one of whom shall be a managing director, where there is one, stating that-

• they have made a full enquiry into the affairs of the company and, having done so, have concluded that the list of creditors are correct, and that the estimated value as given in the list of the debts or claims payable on a contingency or not ascertained are proper estimates of the values of such debts and claims and that there are no other debts of or claims against the company to their knowledge, and
•  no employee shall be retrenched as a consequence of shifting of the registered office from one state to another state and also there shall be an application filed by the company to the Chief Secretary of the concerned State Government or the Union territory.

A copy of the acknowledgment of service of a copy of the application with complete annexure to the Registrar and Chief Secretary of the State Government or Union territory where the registered office is situated at the time of filing the application shall be attached to the application. 

Advertisement

   The company shall, not more than thirty days before the date of filing the application in Form No. INC.23 –

• advertise in the Form No.INC.26 in the vernacular newspaper in the principal vernacular language in the district and in English language in an English newspaper with wide circulation in the date in which the registered office of the company is situated;
• a copy of advertisement shall be served on the Central Government immediately on its publication;
•  serve, by registered post with acknowledgement due, individual notice on each debenture-holder and creditor of the company; and
• serve, by registered post with acknowledgement due, a notice together with the copy of the application to the Registrar and to the Securities and Exchange Board of India, in the case of listed companies and to the regulatory body, if the company is regulated under any special Act or law for the time being in force.

Objections to advertisement

There shall be attached to the application a duly authenticated copy of the advertisement and notices a copy each of the objections received by the applicant, and tabulated details of responses along with the counter-response from the company received either in the electronic mode or in physical mode in response to the advertisements and notices.

Order

Where no objection has been received from any person in response to the advertisement or notice or otherwise, the application may be put up for orders without hearing and the order either approving or rejecting the application shall be passed within fifteen days of the receipt of the application.

Where an objection has been received the Central Government shall hold a hearing or hearings, as required and direct the company to file an affidavit to record the consensus reached at the hearing, upon executing which, the Central Government shall pass an order approving the shifting, within sixty days of filing the application.

Where no consensus is reached at the hearings the company shall file an affidavit specifying the manner in which objection is to be resolved within a definite time frame, duly reserving the original jurisdiction to the objector for pursuing its legal remedies, even after the registered office is shifted, upon execution of which the Central Government shall pass an order confirming or rejecting the alteration within sixty days of the filing of application.

Costs

The order passed by the Central Government confirming the alteration may be on such terms and conditions, if any, as it thinks fit, and may include such order as to costs as it thinks proper.  

Initiation of inspection or investigation

The shifting of registered office shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.   On completion of such inquiry, inspection or investigation as a consequence of which no prosecution is envisaged or no prosecution is pending, shifting of registered office shall be allowed.

Filing of Form with RoC

  The certified copy of the order of the Central Government, approving the alteration of the memorandum for transfer of registered office of the company from one State to another, shall be filed in Form No.INC.28 along with the fee as with the Registrar of the State within thirty days from the date of receipt of certified copy of the order.

Investment of general reserves

Rule 5 provides that a Producer Company shall make investments from and out of its general reserves in any one or in combination of the following-

• in approved securities, fixed deposits, units and bonds issued by the Central Government or State Governments or co-operative societies or scheduled bank; or
•  in a co-operative bank, State co-operative bank, co-operative land development bank or Central co-operative bank; or
• with any other scheduled bank; or
• in any of the securities specified in section 20 of the Indian Trusts Act, 1882; or
• in the shares or securities of any other inter-State co-operative society or any co-operative society; or
• in the shares, securities or assets of public financial institutions specified under clause (72) of section 2 of the Act.