Introduction:-
Starting a microfinance company under Section 8 of the Companies Act is a significant step towards financial inclusion and empowerment. This legal provision allows for the establishment of non-profit organizations with the objective of promoting commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment, or any other useful object.
Why Choose Section 8 for Microfinance Company?:-
Section 8 companies are registered as non-profit organizations, and their primary motive is to promote charitable and not-for-profit objectives. Here are a few reasons why choosing this structure for your microfinance venture might be beneficial:
- Legal Recognition: Section 8 companies have a well-defined legal status and are recognized by law.
- Perpetual Succession: A Section 8 company has uninterrupted existence, regardless of changes in its membership.
- No Minimum Capital Requirement: Unlike other forms of companies, Section 8 companies do not have any minimum capital requirements.
- Tax Benefits: These companies are eligible for various tax exemptions and benefits.
Steps for Section 8 Microfinance Company Registration:-
- Name Approval: Choose a unique name for your microfinance company. Ensure it is not similar to any existing company name.
- Memorandum of Association (MOA) and Articles of Association (AOA): Draft and submit MOA and AOA, clearly stating the charitable objectives.
- Board Meeting: Conduct a board meeting to approve the registration process and appoint directors.
- Digital Signature Certificate (DSC) and Director Identification Number (DIN): Obtain DSC and DIN for the proposed directors.
- Application for License: Apply for a license from the concerned regulatory authority for a microfinance company.
- Application for Section 8 Company Registration: Submit the necessary documents to the Registrar of Companies (RoC) along with the prescribed fees.
- Verification and Approval: The RoC will verify the documents and, if everything is in order, grant the registration.
- Certificate of Incorporation: Once approved, you will receive a Certificate of Incorporation, indicating the creation of your Section 8 microfinance company.
- Commencement of Operations: After obtaining the Certificate of Incorporation, you can start your microfinance operations.
Compliance and Reporting:-
- Annual General Meeting (AGM): Hold an AGM within six months of the financial year-end.
- Financial Statements and Audit: Prepare financial statements and get them audited annually.
- Filing with Registrar of Companies (RoC): Submit the required documents to the RoC within the stipulated timelines.
- Maintaining Books of Accounts: Ensure proper maintenance of books of accounts and other statutory registers.
Conclusion:-
Setting up a Section 8 microfinance company is a noble endeavor. It not only helps in providing financial services to the underprivileged but also enjoys certain legal advantages. Following the steps outlined in this guide will set you on the path to achieving your microfinance objectives within the legal framework provided by Section 8 of the Companies Act.