[Opinion] Producer Company and Its Directors Penalized for Not Filing AGM Proceedings Along With Financials & Board Report

Prof R Balakrishnan – [2024] 161 taxmann.com 801 (Article)

1. Background of this case

A producer company is a company incorporated under the Companies Act 2013 and the Producer Company shall carry on prescribed activities as mentioned in Section 581B of the erstwhile Companies Act 1956. Thus, under the Act, a Producer Company can be formed by 10 individuals (or more) or 2 institutions (or more) or by a combination of both (10 individuals and 2 institutions) having their business objective as specified under the provisions of the Companies Act. Section 52 of the Companies (Amendment) Act 2020 inserted Chapter XXIA in the Companies Act 2013 (after section 378) related to Producer Companies.

Section 66 of the Companies (Amendment) Act 2020 deals with an amendment in section 465 of the Companies Act 2013 to repeal certain enactments and savings. One could say that a farmer-producer company is a hybrid between private limited companies and cooperative societies, registered under the Companies Act. They have democratic governance and each member or producer has equal voting rights irrespective of the number of shares held. Since the Producer Company is registered under the provisions of the Companies Act, it has to fulfil the compliance requirement and there are around fifteen compliance requirements mandatorily applicable to this company. Apart from the above, there could be some more requirements which are event-based. One of the compliance requirements is that of filing of proceedings of annual general meetings along with the financial statements and board of director’s reports soon after the annual general meeting is held.

M/s SP Global Kisan Producer Company Limited is a producer company that failed to file the proceedings of annual general meetings along with the financial statements and board of director’s report soon after the annual general meeting held right from the year 2014-15 to 2021-22 – for a period of financial years. The Registrar of Companies/ Adjudicating Officer of Patna initiated the action against the company and its directors upon his scrutiny and finally passed the adjudication order penalizing the company and five of its directors to the tune of Rs. 14.93 lakh. We will go through this case in detail in order to understand the provisions relating to this company, and the default committed by the company which had resulted in a severe penalty upon the company and its directors.

2. Provisions under the Companies Act 2013 relating to filing of documents/filing the proceedings of an annual general meeting of the Producer Company.

In Part IV relating to general meetings, Sub-section (10) of section 378ZA of the Companies Act 2013 stipulates that the proceedings of every annual general meeting along with the report of the board of directors, the audited balance sheet and the profit and loss account shall be filed with the Registrar of Companies within sixty days of the date on which the annual general meeting is held, with an annual return along with the filing fees as applicable under the Companies Act 2013.

Click Here To Read The Full Article