Section 8 Microfinance Company

Overview

A Section 8 microfinance company is a non-profit company incorporated under the Companies Act, 2013, to provide small-value loans and financial support to low-income and underserved groups. Because it operates on a not-for-profit basis, it can carry out limited microfinance activity within the conditions set by the Reserve Bank of India without the full licensing required of a microfinance NBFC. Profits must be applied only towards the company's objects and cannot be distributed to members.

Objective

To incorporate a Section 8 non-profit company that provides microfinance and financial inclusion services within the limits permitted by law.

Characteristics

• Incorporated as a non-profit company under Section 8 of the Companies Act, 2013
• Focuses on small loans and financial inclusion for low-income groups
• Prohibited from paying dividends, with surplus reinvested in its objects
• Enjoys a corporate structure with limited liability and perpetual succession
• Must operate within lending limits and conditions prescribed by the Reserve Bank of India

Eligibility

• At least two directors for a private company or three for a public company
• A minimum of two shareholders or members
• At least one director resident in India
• A non-profit object of promoting microfinance and social welfare
• Directors with valid Director Identification Numbers and digital signatures

Governing law

• Section 8 of the Companies Act, 2013
• Companies (Incorporation) Rules, 2014
• Ministry of Corporate Affairs / Registrar of Companies
• Reserve Bank of India regulations on microfinance

The process

1. 1
   Prepare directors and name approval

   We obtain digital signatures and Director Identification Numbers where needed and reserve the company name through the MCA portal.

2. 2
   Apply for the Section 8 licence

   Our experts draft the Memorandum and Articles of Association with the microfinance and welfare objects and apply for the Section 8 licence in the prescribed form.

3. 3
   File incorporation documents

   We submit the incorporation application with declarations and supporting documents to the Registrar of Companies and address any queries.

4. 4
   Receive incorporation and set up operations

   On approval, we collect the certificate of incorporation, PAN, and TAN, and guide you on operating within the applicable microfinance conditions.

Documents required

• Identity and address proof of all directors and members
• Passport-size photographs of the directors
• PAN of the directors and members
• Proof of the registered office address and utility bill
• No-objection certificate from the property owner if premises are rented
• Draft Memorandum and Articles of Association with the objects and projected activities

Benefits

• A credible corporate structure for financial inclusion work
• Limited liability and perpetual succession for the organisation
• A recognised platform to raise donations, grants, and social capital
• Eligibility to apply for 12A, 80G, and CSR-1 registration
• A framework to serve underserved borrowers within legal limits

Frequently asked questions