Cooperatives and Producer Companies

[Posted by Umakanth Varottil]

In this Mint column, Narayan Ramachandran calls for a shift in attention from the classic corporate model of limited liability companies to a cooperative model that involves “a voluntary agreement to share, for the mutual benefit of all parties”. Although India is no stranger to the cooperative model (as the author demonstrates), it is the co-operative societies legislation that is usually used to carry out such activity.

Strangely enough, the cooperative model finds its place in the Companies Act as well. The concept of “producer companies” was introduced by amendment in 2003 (Sections 581A onwards), but it is apparently yet to gain any popularity. There are, however, some examples of producer companies discussed in this article.