Registration of Company and micro finance company registration in India under Section 8

 When you want to start a business in India that works on the social welfare topics or financial inclusion, it is necessary to understand the legal provisions under which such a business may operate. Microfinance companies and Section 8 companies are two common types of easy structures of such venture. We are a specially trained law firm that can take an entrepreneur and other organizations through the intricacies of Section 8 Company registration and micro finance company registration. This paper will give an overview of the two and explain their purpose, eligibility, the registration procedures, the compliance requirements and how Lawgical India can help to set up both entities effectively.

The 8 Companies Section

section 8 company registration under the Companies Act, 2013 is a kind of non-profit organization established to push charitable purposes, whether it be education, art, science, social welfare, religion, or even environmental protection or anything in the same line. Other companies make their profits and pay them to members, but a Section 8 company does not pay its members since any money earned is reinvested on its growth. They are the perfect type of company to choose when there is no profit motive, but an urge to make a difference in the society.

Important Characteristics of Section 8 Company

• Non-Profit Purpose: This means it is not to make its shareholders earn money but rather to be useful in social welfare.

• No Dividend: When there are profits they are channeled towards progressing the goals of the company.

• Tax Exemptions : Section 8 companies can be exempted of taxes by Section 80G and 12AA of Income Tax Act provided it is approved.

• Limited Liability: The members have limited liability whereby the personal assets will be shielded by the business liabilities.

• Credibility: These ones are considered reliable owing to non-profitable status and close governments regulation.

Conditions to carry out Section 8 Company Registration

Conditions to become Section 8 company registered in India are:

• They have to be a distinct purpose of a company in promoting cause that is charitable.

• It will have a least of two directors and the same directors are allowed to be also the shareholders (two).

• It does not have a minimum capital requirement and thus it is available to the startups.

• The business has to be in operation in India but the directors of this company can be foreigners who should have the necessary documents.

The procedure of Section 8 Company Registration

The procedure of registering a Section 8 company has its number of steps, which Lawgical India simplifies to its clients:

1. Get Digital Signature Certificate (DSC): Every director should take a DSC to make an online filing process secure.

2. Apply for Director Identification Number (DIN): Every director must have his own DIN issued by the Ministry of Corporate Affairs(MCA).

3. Name Reservation: Register one or two namesuggestions using the RUN (Reserve Unique name) of the MCA. It must include the non-profit goal in its name and should also be finished with words such as Foundation, Association or Council.

4. Register as a licensing entity: The license under Section 8 has to be obtained using Form INC-12 filed with the MCA. This would demand a draft Memorandum of Association (MoA) and articles of association (AoA).

5. File SPICe+ Form: Fill in Simplified Proforma for Incorporating Company Electronically (SPICe+ ) form, MoA, AoA, and other necessary documents.

6. Certificate of Incorporation: After the approval, MCA issues a Certificate of Incorporation, and a company is provided with a Corporate Identification Number (CIN).

7. Take PAN and TAN: An application should be made to register a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) when taxes are to be paid.

8. Tax exemption registration: Register as exempted under 80g and 12aa as the case may be.

Compliance Requirements

A Section 8 company must observe the following after making a Section 8 registration:

• Filing of the financial statements and returns annually to MCA.

• Holding not less than two board meetings in a year.

• Keeping acceptable books of accounts and subjecting to statutory auditing.

• The minimization of spending the money on other things that are not mentioned.

What this all means is your Section 8 Company is built and supported, through to post-registration compliance, at Lawgical India, sources of DSCs, and more besides.

Owing to the economic downturn, there is a need to understand the Micro finance Companies.

A microfinance institution is an institution that offers finances or related services to underprivileged groups of people especially in rural or impoverished regions, and services in the form of small loans, savings accounts, and insurance. They are critical financial inclusion agents that enable people and small enterprises to exercise their rights and capabilities, which would not otherwise be served by conventional banking. The microfinance corporations in India are regulated mainly by means of the Reserve Bank of India (RBI) and can either appear in the form of Non-Banking Financial Companies (NBFC-MFIs) or another form, such as Section 8 companies (non-profit microfinance).

Main Characteristics of a micro finance company registration

• Financial Inclusion: Is aimed at those with low income, women and small entrepreneurs.

• Small-Ticket Loans: It provides smaller loans also called microloans, and the amounts of 10,000 INR to 50,000 INR, do not need a guarantee.

• RBI Regulation: The NBFC-MFIs have to stick to the RBI guidelines lastly covering capital adequacy norms, lending norms.

• Social impact: helps in poverty reduction and growth of the economy.

• Profit Motive: As compared to Section 8 companies, NBFC-MFIs has the ability to conduct profitably in the name of social interest.

Conditions to qualify as a micro finance company registration

The following criteria shall apply in regard to registration as an NBFC-MFI:

• The company should be registered with companies act, 2013 as either a public or a private limited company.

• The required minimum net owned fund is: 5 crore (2 crore to companies located in the North-Eastern states).                                                     

• The company should possess the articulate business plan of microfinance operations.

• To the RBI norms, at least 85 percent of the non cash assets of the company should be made up of qualifying assets.

How to Register micro finance company registration

The process of registering a microfinance company as NBFC-MFI is elaborate and Lawgical India is thoroughly skilled to provide the same:

1. Registration of Company: MCA: Register the entity as a non public or public limited company.

2. Take DSC and DIN: Acquire DSCs and DINs with all the directors.

3. Name Approval: Secure a non duplicate name through the run service offered by the MCA making sure that the name reflects the nature of financial services.

4. Company Incorporation Filing: Fill the SPICe+ form and include the MoA, AoA and other documents to receive Certificate of Incorporation.

5. Apply to become an NBFC-MFI: Approach the RBI and apply to become an NBFC-MFI including:

O An elaborate business plan.

O Evidence of the minimum net owned funds.

O Director and shareholder KYC documentations.

O Financial forecast, and compliance plan.

6. RBI Approval: RBI inspects the application and upon approval, certification in form of Certificate of Registration (CoR) will be issued.

7. Apply PAN, TAN, Open bank account: Open a bank account and once CoR is provided, within 7-10 days apply for PAN, TAN to start operations.

8. Adherence to RBI Norms: Avoid breaching of interest rate norms, loan disbursal norms and client protection norms of the RBI.

Compliance Requirements

The microfinance companies should abide with:

• Periodic filing of the finance reports with the RBI.

• Ensuring that the capital adequacy ratio is 15 percent.

• Complying with the regulations of fair lending and interest rates clarity.

• Making annual returns to the MCA, and carrying out statutory auditing.

Lawgical India takes care of all your legal necessities in terms of licensing and maintenance by RBI and MCA so that you need not worry about operating your microfinance company and can concentrate on your clients.

What Makes Lawgical India Different?

We here at Lawgical India have realized that both the legal and statutory framework that governs Section 8 and microfinance companies may be confusing. Our experienced personnel will provide simplified solutions to the process. The following is why we are different:

• Expert Advice: We have trained consultants who are familiar with the Companies Act, 2013, advice and RBI regulations, this leads to proper registration.

• End-to-End Support: Our function embraces name reservation, through the post registration compliance.

• Made-to-Order Services: Being a non-profit or getting involved in microfinance, we offer made-to-order services as it is necessary.

• Fast Delivery: Our main priority lies in fast delivery observing the quality.

• Low Cost: Our rates are low, and therefore startups and social businesses can start.

Major Diversities between Section 8 and company registration

Aspect                               Section8 Company                      Microfinance Company (NBFC-MFI)

Purpose                            Not-for-profit, charity                    Financial inclusion, may be profit-making

Regulation                       MCA, Companies act, 2013           RBI, NBFC genera Regulation

Minimum Capital            No minimum requirement             five crore rupees (two crore rupees in the

                                                                                                     North-East)

Profit Distribution          No                                                    Yes

TAX Benefits                  Tax Benefit 80G/12AA Benefits      Standard corporate taxincome

Conclusion

Regardless of the purpose of starting a non-profit organization by a Section 8 company or bringing in greater financial inclusion by engaging a micro finance company registration, it is vital to know about the registration process and compliances. We are dedicated at Lawgical India to ensuring that you get the results you desire to get through well-coordinated and expert-driven solutions. Schedule a call with us today to embark on the process of making our organizing an impactful socially conscious organization in India.