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What are the Essential Documents Required for Micro Finance Company Registration?

Documents Required for Micro Finance Company Registration
Karan Singh
| Updated: Mar 11, 2021 | Category: Microfinance Company, RBI Advisory

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.

Conclusion

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.

Also, Read: How to Start a Micro Finance Institution in India?

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Karan Singh

A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.

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