Introduction:-
Microfinance plays a crucial role in fostering financial inclusion and empowering the economically disadvantaged sections of society. For entities aiming to establish a microfinance company, understanding the legal framework is paramount. One critical aspect of microfinance company registration is compliance with Section 8 of the Companies Act. In this article, we will delve into the significance of Section 8 in the context of microfinance company registration.
Section 8 Microfinance Company Registration: A Primer:-
Section 8 of the Companies Act, 2013, governs the incorporation of companies for promoting charitable or not-for-profit objectives. This section is particularly relevant to microfinance companies as they primarily operate for the betterment of society and the upliftment of financially underserved communities.
Importance of Section 8 in Microfinance Company Registration:-
Legal Structure for Non-Profit Entities: Section 8 provides a legal framework for the incorporation of companies with non-profit objectives. This is crucial for microfinance institutions, as their primary goal is to provide financial services to the marginalized sections of society.
Tax Exemptions and Benefits: Companies registered under Section 8 are eligible for various tax benefits and exemptions. This includes exemption from paying income tax on the surplus generated from their activities. This can significantly enhance the financial sustainability of microfinance institutions.
Enhanced Credibility and Trust: Registration under Section 8 imparts a certain level of credibility and trustworthiness to the microfinance company. This can be instrumental in attracting investors, partners, and donors who are more likely to engage with registered entities due to the assurance of regulatory compliance.
Access to Funding and Grants: Section 8 companies have greater access to funding from government schemes, NGOs, and international organizations. They are also eligible for grants and subsidies that are specifically earmarked for non-profit organizations.
Limited Liability Protection: Like any other company, a microfinance company registered under Section 8 enjoys limited liability protection. This means that the personal assets of the founders or members are shielded in case of any legal liabilities incurred by the company.
Flexibility in Operations: Despite being a non-profit entity, a microfinance company registered under Section 8 has the flexibility to engage in commercial activities, provided the profits are reinvested into the objectives of the company.
Conclusion:-
In conclusion, understanding the importance of Section 8 in the context of microfinance company registration is vital for anyone looking to establish a non-profit entity aimed at financial inclusion and empowerment. Compliance with Section 8 not only provides a legal framework for operation but also offers a host of benefits including tax exemptions, enhanced credibility, access to funding, and limited liability protection. Therefore, it is imperative for aspiring microfinance institutions to navigate the registration process with a thorough understanding of Section 8 and its implications.