PRODUCERS COMPANIES RULES, 2021 AND ITS RELATION WITH INDIAN TRUST ACT, 1882

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.

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

“In a nutshell, the provisions of the Producer Companies Rules 2021 will supersede the provisions of the Producer Companies (General Reserve) Rules 2003. Also, these amended regulations prescribe the definition of the term Cooperative Society and specify the rules concerning the change in registered office and Investment of General Reserves of Producer Companies.”

Further, in case of any other doubt or issue, reach out to Swarit Advisors, our proficient and experienced Chartered Accountants, Company Secretaries, and Lawyers are ever ready to solve out your doubts and queries.

“A trust (under the Indian trusts act 1882) is a legal relationship that occurs when one man, for the benefit of a third person or himself, hands over all or some of his property to another. The author is known as the person who hands over the land, the person who receives it is known as the trustee, and the beneficiary is known as the person who profits from it. For example, a person will create a trust with the directive to provide for his old age from the proceeds of the land by handing over a portion of his land to a friend.

For instance, an individual may also create a trust by transferring those bonds he holds to a bank and ordering them to provide his wife with maintenance after his death from the dividends earned on the bonds. There are essentially two forms of laws regulating faith in India: 1) The Indian Trusts Act 1882, which deals with private trusts. 2) The Act of Public Trust of different States concerned with public trusts. These Acts are based on the Indian Trusts Act 1882’s general structure.”

“A Trust can be made for many purposes such as providing for the welfare of the child, for religious or charitable purposes, by providing medical assistance to the author, and so on. However, The Indian Trust  Act 1882 explicitly states that trust cannot be created for an unlawful purpose. Trust can be earned by anyone with a sound mind, who has reached the age of majority.”

“Any person capable of managing property may be appointed as trustee. One is not obliged to accept responsibility as a trustee. He must declare his purpose in words and deeds. It is the duty of the trustee to achieve the purpose of the fund. Anyone who can manage a property can be a trustee. Reliability can be caused by movable or immovable property.

Where possible, immovable property is required that the “trust instrument” be signed by the author or trustee and registered unless the trust is created at the will of the author or trustee The trust of a movable asset may be created in the manner described above by using a tool or by transferring ownership of the asset to a trustee.

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