Microfinance institutions play a crucial role in providing financial services to the underserved and marginalized sections of society. One of the ways to establish a microfinance company in India is by registering it under Section 8 of the Companies Act, 2013. This legal framework allows companies to be formed for charitable or non-profit purposes. If you're considering setting up a Section 8 Microfinance Company, this step-by-step guide will help you navigate through the registration process.
Step 1: Understanding Section 8 Company
A Section 8 Company, also known as a not-for-profit company, is formed with the objective of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or any other beneficial activity. These companies do not distribute profits among their members but reinvest them into their objectives.
Step 2: Identifying Eligibility Criteria
To register a Section 8 Microfinance Company, certain eligibility criteria must be met. The proposed company's objectives should align with the noble causes specified in Section 8. Additionally, the promoters should not have any personal gains from the company's operations.
Step 3: Name Approval
Choose a unique name for your microfinance company. Ensure that it aligns with the rules and regulations governing company names in India. Once you have a name in mind, apply for Name Approval through the Ministry of Corporate Affairs (MCA).
Step 4: Drafting the Memorandum and Articles of Association
The Memorandum and Articles of Association (MOA and AOA) are crucial documents that outline the objectives, rules, and regulations of the company. In this case, they must reflect the non-profit nature of the microfinance company.
Step 5: Obtaining Digital Signatures
All directors and subscribers of the company need to obtain digital signatures, which are essential for filing documents online with the MCA.
Step 6: Applying for Director Identification Number (DIN)
Directors must apply for a unique Director Identification Number (DIN) from the MCA. This is a mandatory requirement for anyone intending to be a director of a company in India.
Step 7: Filing for Incorporation
Submit the application for incorporation along with the necessary documents such as MOA, AOA, and other required forms to the Registrar of Companies (ROC) in the state where the company will be registered.
Step 8: Approval from Registrar of Companies
The ROC will review the application and, if satisfied, issue a Certificate of Incorporation. This certificate legally establishes your Section 8 Microfinance Company.
Step 9: Obtaining Tax Exemptions
To avail tax benefits under Section 12A and 80G of the Income Tax Act, the company must apply separately to the Income Tax Department.
Step 10: Complying with Annual Compliance Requirements
A Section 8 Microfinance Company must adhere to annual compliance requirements such as filing annual returns, conducting board meetings, and maintaining proper accounting records.
Conclusion
Setting up a Section 8 Microfinance Company Registration involves a systematic process that requires attention to legal and procedural details. By following this step-by-step guide, you can navigate through the registration process and contribute positively to the financial inclusion and development of marginalized communities. Remember to consult with legal and financial experts for advice specific to your situation.