Introduction:-
Section 8 Microfinance Companies play a crucial role in facilitating financial inclusion by providing microcredit services to economically disadvantaged sections of society. To ensure the seamless operation and credibility of such entities, it is imperative to adhere to the legal compliance requirements stipulated by the regulatory authorities. This article provides a comprehensive checklist for Section 8 Microfinance Company registration, outlining the essential steps and considerations.
1.Eligibility Criteria
Before applying for Section 8 Microfinance Company registration, ensure that your organization meets the following eligibility criteria:
- The primary objective should be the promotion of charitable activities.
- Profits, if any, should be utilized for promoting the objectives of the company.
- The company should not pay dividends to its members.
2. Name Approval
Choose a unique name for your Section 8 Microfinance Company that reflects its charitable nature and complies with the Companies Act, 2013. The name should not be similar to any existing companies.
3. Memorandum of Association (MOA) and Articles of Association (AOA)
Draft the MOA and AOA, clearly stating the charitable objectives and operations of the company. Ensure that they comply with the provisions of the Companies Act, 2013.
4. Board of Directors
Appoint a minimum of three directors who are individuals and not companies. At least one director should be a resident of India.
5. Registered Office
Have a registered office address within India from the date of incorporation. This address will be used for all official communications.
6. Application for License
Apply for a license from the Reserve Bank of India (RBI) to commence microfinance activities. This step is essential as per the Microfinance Institutions (Development and Regulation) Bill, 2012.
7. Share Capital
Section 8 Microfinance Companies can issue only equity shares, and there should be a minimum of three shareholders. Ensure compliance with the prescribed share capital requirements.
8. Income Tax Exemption
Seek approval for income tax exemption under Section 12A of the Income Tax Act, 1961, by submitting the necessary documents and application to the Income Tax Department.
9. Section 8 Declaration
Provide a declaration in the MOA stating that the company intends to operate for promoting charitable activities and not for profit.
10. Statutory Filings and Returns
File the necessary documents with the Registrar of Companies (RoC) and other regulatory bodies as required under the Companies Act, 2013. This includes annual returns, financial statements, and other statutory filings.
11. Regulatory Compliance
Adhere to the guidelines and regulations set forth by the Reserve Bank of India (RBI) and other relevant authorities governing microfinance activities.
12. Audit and Financial Reporting
Conduct regular audits of the company's financial statements by a qualified Chartered Accountant and submit the reports to the appropriate authorities.
Conclusion:-
Adhering to the legal compliance checklist for Section 8 Microfinance Company registration is essential for the smooth and lawful operation of such entities. By following these steps diligently, you can ensure that your organization remains in compliance with the applicable laws and regulations, thereby contributing to the overall growth and development of the microfinance sector in India.