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.

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?