What are the Essential Documents Required for Micro Finance Company Registration?
If anyone wants to choose any business model requires registration under the appropriate authority. If you wish to establish a manufacturing unit or form a finance company, registration is essential for all business nature. In this blog, we discuss the vital documents required for Micro Finance Company Registration. Micro Finance Company is the single-stop destination for the poor and unemployed individuals searching for financial aid without any security. Individuals are interested in setting up this business model to go through a suggested registration procedure that attracts plenty of documentation. Microfinance companies can be formed in two different ways:
- NBFC governed by the RBI regulation.
- Section 8 Companies regulated by the Companies Act, 2013.
Features of Micro Finance Company
- Microfinance companies must be included as per the Companies Act 2013 or 1956.
- Must obtain the necessary license or permit.
- Minimum net worth as suggested by the authority.
- Involvement in the low amount of financing to the need one of the society.
- To provide some financial support to an individual who works under transportation, carpentry, plumbing, fishing, etc.
- Provide access to quality healthcare.
- It increases the participation of women in generating sustainable livelihood.
- It offers banking assistance at small monetary amounts.
What is the Eligibility Criteria for Micro Finance Company Registration?
Microfinance institution as a Section 8 Company
- The limit of loan for Microfinance institutions under Section 8 Company is up to Rs. 50,000.
- The number of members is two.
- There is no minimum net worth or NOF (Net Owned Funds) that have to be maintained by the microfinance companies.
Microfinance institution is an NBFC
- The minimum experience of the directors in the field of finance is for ten years.
- Prior approval is mandatory from the RBI.
- The minimum net worth or net owned funds of the microfinance institution is Rs 50 Crores.
- For a private company, members’ requirement is two, and for a public company- a minimum of seven members.
Documents required for Micro Finance Company Registration as NBFC
NBFC or Non-Banking Financial Company business model is more of a legitimate version of the financial company as most third-party lenders are regarded as Non-Banking Financial Companies. If you want to choose this business model to start a microfinance company, you need to submit all the documents required for Micro Finance Company Registration as NBFC.
- Submit a copy of the board resolution generated during the AGM in the presence of the board members.
- Submit fixed deposit receipt issued by the bank.
- Submit a copy of MOA (Memorandum of Association) showing the goal, identity, and work methodologies of the company.
- Submit Certificate of Incorporation issued by MCA (Ministry of Corporate Affairs).
- No Lien Certificate declaring details of NOF or Net Owned Fund issued by the bank.
- KYC (Know Your Customer) of the present director.
- Submit a copy of AOA (Articles of Association) containing the rule, management, internal working, and hierarchical information of the company.
- Submit the net worth certificate of the director certified by a CA (Chartered Accountant).
- Submit any professional proof and academic qualification proof of the directors.
- Submit any income proof of the director, such as Income Tax Return (ITR) receipt or bank statement.
- Document showing working experience of the current directors in the financial sector.
- Structure plan of the business where applicants planned to conduct the business activities.
- The current credit report of directors issued by particular bank showing present credit information.
- Submit a confidential report of the banker briefly describing the track record of the company related to banking activities.
Documents required for Micro Finance Company Registration as Section 8 Company
In this case, if any individual wants to establish a microfinance company under the shade of Section 8 of the Companies Act, 2013, but for that, you need to submit the following documents required for Micro Finance Company Registration as Section 8 Company.
- Submit a copy of PAN Card of all the directors of the company.
- Documents regarding the identification and address proof of the core members of the establishments, i.e. promoters and directors.
- Submit Rental Agreement, Lease Deed, Ownership documents of the property.
- In the case of the rented office, submit a NOC or No Objection Certificate issued by the owner.
- Applicable stamp duty as directed by the state.
- In some case, you may need to submit additional documents.
Some important facts about Micro Finance Companies
- Department of Revenue is responsible for the issuance of a corporate lien certificate, and it shows the liabilities of the companies in the context of corporate tax.
- Under the business model of Non-Banking Financial Company, the applicant must furnish a copy of Memorandum of Association (MOA), Articles of Association (AOA) and Board Resolution as a part of the documentation for Micro Finance Registration.
- Micro Finance Companies facilitate rural employment at a larger scale.
- Most of the financial lending services at microfinance companies are collateral-free.
- The rate of interest could be strict as compared to other financial organizations.
- These companies could generate noteworthy employment.
- They have large loan portfolios with undercover conditions that are spiteful in nature.
- Usually, these companies provide low repayment rates when contrasted with trading lending companies.
It’s now clear that registering a microfinance company has a more accessible process; however, you are advised to take the assistance of a professional before proceeding. You must take into consideration all the facts and make a wise decision. The above-mentioned list of documents required for Micro Finance Company registration should be kept ready for sailing through the process.