The Companies (Second Amendment) Act, 2002 has been passed considering the role of cooperatives, with the main objective to provide for conversion of cooperative business into companies, especially the producing cooperative businesses. The amendment would enable establishment of cooperative business as regular companies and transform existing cooperative business into companies under a regulatory framework like that for private limited companies. It was referred to the Standing Committee of Parliament.
Some of the features of the Companies (Second Amendment) Act, 2002 are:
To offer a statutory and regulatory framework that creates the potential for produce owned enterprises to compete with other enterprises.
To provide for the establishment and registration of producer companies, which include the mutual assistance and cooperative principles within the more liberal regulatory framework, afforded by the Company Law, with suitable adjustments.
To provide an opportunity to cooperative institutions to voluntarily transform themselves into new form of producer companies.
Under the Bill conversion of cooperatives to producer companies is purely voluntary.
Members' equity may not be publicly traded, but may only be transferred, with the approval of the Producer Company's Board of Directors. Producer companies would not be vulnerable to the takeover by multinationals or other companies.
The option of the cooperative society to convert itself into a producer company can be availed only if two-thirds of the members of the concerned society vote in favor of a resolution to that effect.
The new form of company is designated as "Producer Company" to indicate that only certain categories of persons can participate in the ownership of such companies. The members of a producer company have necessarily to be primary producers, that is, persons engaged in any activity connected with or related to primary produce.
The objects of a producer company have been defined to include, among other things, production, processing, manufacturing and sale of goods of primary producer as well as allied matters.
The Central Government has established an Investor Education and Protection Fund in exercise of the powers conferred by Section 205-C of the Companies Act, 1956. The Fund will get contributions from companies having unpaid dividend, matured deposits and debentures and share application money. This Fund shall be utilized for promotion of investors' awareness and protection of their interests. A Committee to administer this Fund has also been constituted.
