How to Start a Small Finance Company in India?
India is a rapidly developing economy, with a diverse population and a large bank of talent. However, a significant portion of the country’s population resides in rural and semi-urban areas, where the traditional banking services are yet to make a mark. Individuals and businesses belonging to the lower-income group are unable to find secure channels of credit. Due to this shortage, they are forced to rely on informal financial sources that overcharge them significantly. The introduction of Non-Banking Financial Companies (NBFC) has reduced this gap to a large extend, and the introduction of small finance companies has further allowed lower-income groups to access quality credit for their requirements. This guide lays down the complete checklist on how to start a small finance company in India.
What is a Small Finance Company in India?
A small finance company or a microfinance institution is a private institution that extends financial services to businesses and individuals belonging to the lower income levels. Small finance companies provide credit services to individuals and businesses that form the lower levels of the income hierarchy.
Many individuals and business are unable to match requirements of traditional banking institutions that require a credit background and substantial disposable income. Micro or small finance companies provide financial resources to their customers for their personal or professional financial necessities. Individuals, self-employed professionals and businesses can fulfil their entrepreneurial dream or fulfil a personal financial emergency by availing small-size loan from a micro finance company.
About its author (SwaritAdvisors)
Swarit Advisors.com is technology motivated platform establishing the specialized legal & Financial advisory services in India. We are dedicated to helping startups and MNC in solving legal, Taxation and compliance related to starting and running their business around the world.
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Source: https://swaritadvisors.com/learning/how-to-start-a-small-finance-company-in-india/
Procedure for Patent Registration Certificate
It takes sweat, hard work and determination to create a unique masterpiece. Original work is priceless and needs to be preserved by its creator. The inventor can safeguard his work from any kind of infringement by attaining a Patent Registration Certificate. It grants legal protection of intellection property for 20 years. Therefore, a work which has Patent cannot be manufactured, copied, sold or imported without the permission of its inventor.
Procedure for Patent Registration Certificate
Follow the step by step process given below to register a Patent for your new creation:
- Check the Novelty Status: The first step is to ensure that your proposed invention is new and unique. Visit the official portal of Indian Patent Advanced Search System and do Patent search before applying.
- File an Application: Now you need to file the Application of patent registration which must entail the specification, legal document stating the scientific methods with the Patent rights. It is prudent to seek the guidance of an experienced Patent lawyer in the process.
- Provision Specification: It is better to file the provisional specification as it is given more priority and a period of 12 months will be provided to you to show up with full invention.
- Complete Specification: Within 12 months of filing the Provisional Specification, you have to file Complete Specification. If you fail to submit Complete Specification within the stipulated timeframe, then your invention shall be considered as abandoned.
- Submit Patent Application: Its time to file the Application with the Intellectual Property department along with all the essential documents.
- Publication of Patent: Your Application will be published in an official Journal within 18 months from the date of filing to raise objections (if any).
- Assessment of Application: Patent Office will conduct a thorough inspection to validate the provided information and then check if your invention is already registered or not.
- Issue of the Certificate: When all the conditions are met and the examiner gets satisfied by the information, the Patent Officer will then grant you Patent Certificate.
Source: https://swaritadvisors.com/learning/patent-registration-certificate-procedure/
About SwaritAdvisors
SwaritAdvisors is technology motivated platform establishing the specialized legal & Financial advisory services in India. We are dedicated to helping startups and MNC in solving legal, Taxation and compliance related to starting and running their business around the world.
Our Services
Microfinance Company Registration
Nidhi Company Registration Complete Guide
Nidhi company registration is regulated by the Companies Act, 2013. Nidhi companies are seen in relation to the nonbanking financial companies (NBFC) and the main objective of incorporating a Nidhi company is to encourage the saving habits and save those funds for the benefits of the members. In this article, we will discuss Nidhi Company Registration Online omplete Guide.
Nidhi companies basically save funds to promote the thriftiness and lend money to its members for their mutual benefit. Nidhi companies are prevalent now a day, as they do not require any approval from the RBI and Nidhi Company is relatively easier because it doesn’t require you to visit any Government office.
Swarit advisors are one of the companies in India who help clients to set up their own Nidhi companies. We have a team of young, exuberant and talented team of professionals who help a number of clients on daily basis. Whenever someone thinks about starting a Nidhi company, the first name that comes to their mind is Swarit advisors.
Swarit advisors is a reputable name in the market, our team has developed trust and faith in clients by delivering the projects on time. And these are our recurring clients who believe in the services we provide. Read more at: Nidhi Company Registration Complete Guide | Swaritadvisors
Loans under MSMEs - Classification & Eligibility
Micro Small and Medium Enterprises (MSMEs) are establishments that are categorized on the basis of investment made or equipment used. MSME loans are unsecured loans that are offered by banks and NBFCs to small businesses and startups to meet their working capital requirements or boost their cash flow. In this article, we will talk about various MSME loan schemes and other crucial aspects with regard to it.
Read also: What is Online MSME Registration?
What are the eligibility requirements for MSME loans?
In this section, we will talk about some crucial aspects that must be fulfilled by the applicant before filing an application for MSME loans.
- The business must be involved in either of the two categories -manufacturing or service sector.
- The investment limit must be maintained as per the requirements prescribed by the Government.
What documents are required for MSME loans?
Following are certain documents that must be submitted to qualify for loans for MSMEs:
- Identity proof such as PAN card, Voter’s ID, passport copy etc.
- Residence proof
- Address proof of the business
- The balance sheet for the last three years
- Income tax returns
- Sales tax returns
- Projected balance sheets
- Project report
- Copy of the title deeds/lease deeds
What is the process of application for MSME loans?
Filing the application form
Some details that must be filled in the application form are as follows:
- List of proposed credit facilities
- Current business activity
- Date of establishment
- Current credit facilities
- Project cost details such as land development, construction of the building, purchase of plant and machinery, purchase of vehicles, etc.
- Means of finance, which must include the owner’s contribution, unsecured loans, subsidies, and term loans
- Details of collateral offered and details regarding the third-party guarantee, in case there are any to be mentioned
- The status of statutory obligations such as registration under Shops and Establishment Act, registration under SSI. Drug license, Sales Tax Return filed, an updated file of the Income Tax Return, and any other dues that is outstanding
Which banks can offer loans to MSMEs?
All domestic scheduled commercial banks (except small finance banks and regional rural banks) and foreign banks that have more than 20 branches allocate 7.5% of their Adjusted Net Bank Credit (ANBC) or credit equivalent amount of off-balance sheet, to the MSME sector.
Read more at: https://www.articleted.com/article/307345/58463/Loans-under-MSMEs---Classification--amp;-Eligibility
What is Due Diligence of NBFC? When is This Required?
NBFC stands for Non-Banking Financial Company registered under section 45-I of Reserve Bank of India Act, 1934. This is an important part of the financial service industry in the country, creating and deploying fund for infrastructure to micro and small-medium sized industries in India. It’s a somewhere part of the alternative source of funding for various business and other needs of people.
As far as Due Diligence is a concern in terms of Buying and Selling of NBFC, most of the cases similar to as Normal Procedure of Due Diligence. First, it’s a company registered under Companies Act, 2013/1956, and the next is regulated by Reserve Bank of India, hence both the authority to note simultaneously as far as the operation of the company is a concern. Moreover the tax either Direct or Indirect, both as far as applicability need to be sound to have good remark due diligence report by independent Professional excising Due Diligence activities of concern NBFC.
What is Due Diligence?
The dictionary meaning of Due Diligence is an appraisal of the business, especially to establish its assets and liabilities and evaluate its commercial potential. According to the Institute of Chartered Accountants in England and Wales (ICAEW), there are major four types of due diligence i.e. Legal, Financial, Commercial& Other. In each segment, the entity is appraised based on the various questionnaire. Legal due diligence seeks to examine the legal basis of the transaction, legal structure, contracts, loans, property, employment, and pending litigation if any.
However, under Financial due diligence, the independent professional is focused on verifying the financial information provided and to assess the underlying performance of the business. It covers areas like earnings, assets, liabilities, cash flow, debt, and management. Further commercial due diligence considers the market in which a business sits, for example involving conversations with customers, an assessment of competitors, and a fuller analysis of the assumptions that lie behind the business plan. All of this is intended to determine whether the business plan stands up to the realities of the market. In the fourth perspective i.e. other, it includes areas such as Taxation, IT Systems, and Intellectual Property.
Collection of Information
The most required and question matter in terms of the Due Diligence process is information, the source of information, reliability, and accuracy. Hence Information of Target Company is most to gather and acquired in a systematic way to find the required compliance to mark to possess informed decision regarding any substantial decision regarding any entity of which due diligence is done. More or less information regarding entity can be accessed from Business News, Market Data, and Company Financial, directors of Company as well as an employee of the company too.
Matter to Check
As now, discussing on Due Diligence of NBFC matter to be check is long and as a process flow, the entire questionnaire session can be more or less categorized or synchronized under four heads i.e. Legal, Financial, Commercial and other. In each class, the information of Target Company is analyzed to form a decision. In brief, professional undertaking the due diligence of NBFC can categorize the questionnaire in a sequence of:-
- Corporate Matters
- Minutes of Meetings & Secretarial Compliance
- Foreign & Overseas Direct Investment, if any.
- Material Agreements
- Financing Matters
- Regulatory Matters i.e., in this case, RBI compliance records.
- Property
- Litigation
- Human Resources
- Insurance
- Intellectual Property Rights
- Taxation Compliance
Based on the above pointwise issue, still, the concerned person required to check the following points on NBFC Due Diligence:-
- Compliance with Section 45-IC i.e. Creation of Statutory Reserve @ 20% profit
- Registration to FIU-IND
- Membership of Credit Information Company (CIC)
- Auditor Report to Directors based on circular DNBS (PD) CC No. 129/03.02.82/2008-09 dated September 23, 2008 (now it's 2016) & Statutory Auditor Certificate (SAC)
- Registration of Company with Central KYC Portal
- Registration with information Utility set up under IBC, 2016
- Appointment of Nominated Counsel in Delhi High Court
What if Foreign Entity or Resident wants to acquire the existing NBFC business in India then the entire process of inward remittance of funding to be channelized through the Banking route in supervision and intimation of Reserve bank of India. The entire process should be read with FEMA, 1999, FDI Scheme, and RBI regulation for reporting. If the target company is of Purely Investment Nature, then the Foreign Entity/person requires approval from the Department of Economic Affairs under extant FDI policy and FEMA regulation.
In this way, the professional engaged in doing NBFC Due Diligence can have its report recommending the level of risk/opinion on entity information based on sufficient appropriate due diligence evidence collected from the entity.
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Micro, Small and Medium Enterprises, which are known as MSMEs are defined as small establishments and industries that are categorized on the basis of the sector. The most crucial aspect in the MSME establishment is registering MSME. MSME Registration is crucial and must be obtained by individuals that want to start any small business.
What is the classification of Micro, Small and Medium Enterprises?
MSMEs are divided into categories based on two sectors on the basis of which the classification of MSMEs is done - manufacturing/production sector and service sector.
Criteria: Investment in Plant and Machinery Equipment
|
Category |
Manufacturing / Production Sector |
Services Sector |
|
Micro Enterprises |
If the amount of investment is less than Rs 25 lakhs, it is considered as a micro enterprise |
If the investment is less than Rs 10 lakhs |
|
Small Enterprises |
If the Investment amount is above Rs 25 lakhs and less than Rs 5 crores |
If the investment is less than Rs 10 lakhs |
|
Medium Enterprises |
If the Investment amount is above Rs 5 crores and less than Rs 10 crores |
If the investment is less than Rs 5 crores |
Criteria: Investment and Annual Turnover
|
Category |
Manufacturing / Service Sector |
|
Micro Enterprises |
If the Investment amount is less than Rs 1 crores If the turnover is less than Rs 5 crores
|
|
Small Enterprises |
If the investment amount is less than Rs 1 crores If the turnover is less than Rs 5 crores |
|
Medium Enterprises |
If the amount of Investment is less than Rs 20 crores If the turnover is less than Rs 100 crores |
What are the benefits of MSME Registration in India?
MSMEs are major contributors and benefit the country in several ways. They, too, enjoy many benefits once they register as per the rules and regulations specified by the Government.
Certain benefits that the MSMEs enjoy after MSME registration are as follows:
- They are eligible to receive loans without any collaterals
- They receive subsidy on Patent Registration and Industrial Promotion
- Thy have an overdraft facility which includes an exemption on the Interest Rate
- They receive a concession on Electricity
- They have certain regarding protection against delayed payments
- ISO Certification Charges Reimbursement
What are the eligibility requirements for MSME Registration?
It is crucial to be able to fulfill the criteria in order to be considered eligible for filing an application for registering:
- Any individual who is a part of a Hindu Undivided family
- Any individual who has a limited liability partnership
- Any individual who owns a partnership firm having another party
- Any individual who is a sole proprietor
- Any individual who is owns a One Person Company
- Any individual who owns a production company
- Any individual who own a cooperative societies
What is the registration process to obtain MSME Registration?
The registration process of Micro, Small and Medium Enterprises (MSME) contains certain steps that must be followed by individuals before the incorporation of MSME. The MSME Registration process is simple and involves a few steps, after completing all the steps the individual obtain MSME License after he can start the business.
- The first step in the registration process is to file an application form with the concerned authority or department of the Government
- Provide specific details about the industry and submit all the necessary documents within the stipulated time period
- The applicant must submit his Aadhar card number as an identity proof
- Crucial details of the applicant such as name, gender, PAN number, email ID and mobile number.
- The applicant must submit details of the enterprise which includes details such as the name, PAN number of the company, location of the plant where the production will take place, date of the commencement of business, number of employees
- A bank Account Number and IFS Code is a crucial requirement
- They must mention the primary business activity of the enterprise
- The applicant must provide a 2 Digit NIC Code to the concerned authority
- They must specify the amount that will be invested in Plant and Machinery and Equipment
What documents are required for MSME Registration?
Documents are an important part of the MSME registration process. All the documents must be submitted to the concerned authority within the stipulated duration by the applicant.
Below mentioned are some documents that must be submitted by the applicant:
- Verified copy of Aadhar card of the applicant
- NIC code of the employees
- Total number of employees who will be a part of the company
- Primary business activity of the business
- Address proof of the registered office
- Proof of ownership of the place
- Copy of purchase bill of all the raw materials that will be used in the production of the products
- A copy of partnership deed if it is a partnership firm
- Copy of Memorandum of Association (MOA), Articles of Association (AOA) and Certificate of Incorporation (COI)
- Bank account statement
What schemes are launched by the Government under Micro, Small and Medium Enterprises (MSMEs)?
- Udyog Aadhaar memorandum
- Zero Defect Zero Effect
- Quality Management Standards & Quality technology Tools
- Grievance Monitoring System
- Incubation
- Credit Linked Capital Subsidy Scheme
- Women Entrepreneurship
Conclusion
MSMEs have played a key role in the Indian economy and contributed immensely. If MSMEs continue to contribute in the country, the country’s economy will increase which will eventually have a positive impact on the country. The Government must ensure that they are not deprived of any benefits, which includes MSME Registration. They must ensure that the MSMEs receive benefits with regards to proper registration. The Government must also ensure all the requirements of the enterprises are fulfilled and the enterprises run in an effective manner. In spite of setting up different schemes, acts, rules, it is mandatory for the Ministry of MSME to ensure that the schemes and rules are followed in a consistent manner.
This Article has been contributed by Mahiya Ahmed who is a content writer. She have recently joined SwaritAdvisors. SwaritAdvisors is a legal & financial services provider with experts help such us- Register an NBFC, Online Nidhi Company Registration, FSSAI Registration in India, Section 8 Company Registration, Online LLP Registration, Online NGO Registration, Online GST Registration in India, etc.
Partnership Firm Registration: The process explained
A company is established after the successful completion of different steps involved in the company establishment/incorporation process. The Government mentions guidelines, laws to follow and rules and regulations that individuals follow before incorporating their businesses. In this article, we will talk about one of the most common types of companies, Partnership firms and Partnership Firm Registration. Understanding the process of formation of a partnership firm is important.
What are the different types of companies?
The first decision an individual or a group of individuals take is to select the types of company. We will talk about different types of companies in this section:
- Sole Proprietorship
- Partnership Firm
- Corporation or Company
- One person company
- Section 8 Company
- Company Limited by Guarantee
- Public Limited Company
What are the types of Partnership Firms?
A partnership firm or company is further divided into many categories, the selection of which is undertaken on the basis of many factors. Only after deciding on the type, the individuals can move on the Partnership Firm Registration.
- General Partnership
- Limited Partnership
- Limited Liability Partnership
- Public Private Partnership
Who are the different types of Partners in a Partnership firm?
It is important to understand the different types of partners that a part of partnership firms.
- Minor partner
- Working partner
- Sleeping partner
- Limited Partner
- Partner by holding out
- Sub-Partner
What are the features of Partnership Firm?
Partnership Firm Registration is a crucial process, thus understanding the characteristics of a company is important before applying for its registration.
Some features of a Partnership Firm are as follows:
- Mutual contribution
- Division of Profits or Losses
- Co-ownership of contributed assets
- Mutual agency
- Limited life
- Unlimited liability
- Partners’ Equity Accounts
- Fewer Compliances to follow
- Minimum legal compliances
What are the benefits of Partnership Firm?
A partnership firm has several advantages in comparison to other types of companies, which will be talked about in this section.
Simple form of business structure
The business structure of the partnership company is simpler as compared to the structure off other companies as there are only 2 individuals required as partners.
Easy process of decision making
As there are rules and regulations involved in a partnership firm, the decision making process is easier.
Ease of raising funds
It is easier to get loans and advances for a partnership firm as compared to other firms such as large corporations.
Easy management
The managing of the business activities is easier in a partnership firm as all the duties and responsibilities are assigned to the partners.
What is the process of Partnership Firm Registration?
The registration process of partnership firms involves steps that are necessary for the individuals to follow in order to receive partnership firm registration and start business activities.
Selection of an appropriate name
The first step in the Partnership Firm Registration process is the selection of the name of the company. Certain guidelines are mentioned with regards to name selection which must be followed by the applicants. The name of the company must not include emperor, empress, crown, empire etc.
File an application
In this step, the partners must file an application for Partnership Firm Registration in Form 1 and mention all details of the form. Once the application form is filled, it must be submitted to the Registrar along with the fees.
Preparation of Partnership Deed
The next step is to prepare a partnership deed for the partnership firm. In the deed, the partners must specify all details with regards to the business, agreement made by the partners, profit-loss sharing ratio and other important details.
Submission of documents
All the documents must be prepared and submitted to the Registrar along with the form and fees before the prescribed duration. The details mentioned in the documents submitted must be true as verification of the documents will be conducted. The partnership deed must also be submitted along with all the documents.
The concerned authority for registration conducts a verification process that is conducted for a maximum of 3 -5 days.
Issuance of Registration Certificate
After the form and all the documents are considered satisfactory, they will be approved by the authority and the registration certificate will be issued to the partners.
What documents are required for Partnership Firm Registration?
The documents are a mandatory requirement for individuals and they need to submit all the documents in the manner that is required by the authority.
Partnership deed
A partnership deed is a document that contains all the details with regards to the partnership firm. Before preparing a final partnership deed, the partners must prepare a draft so that the errors can be minimized when the final draft is prepared.
PAN Card
A PAN card serves an identity proof of the individual and thus PAN cards must be submitted to the authority.
Address Proof
A copy of the address proof is a mandatory requirement for the partners to present it to the authority. Documents such as ration card, voter ID, driving license etc. can be submitted as an address proof.
Office Address proof
The place where the partnership firm will be operating its business activities must also be submitted to the authority.
What is a Partnership Deed and why is it important for Partnership Firm Registration?
A partnership deed is a crucial aspect of the partnership firm and a significant document to be submitted in the Partnership Firm Registration. As all the details are mentioned in the deed, it is easy to understand several aspects of the company.
Components in a partnership deed are as follows –
- Details of the partner and firm such as names, addresses, qualifications etc
- Nature of the firm and business activities that will be undertaken
- Shares of all the partners in the partnership firm
- Profit/loss sharing ratio among all the partners
- Details of loans provided by partners
Conclusion
Partnership Firm Registration must be undertaken by following the process in a manner which is predefined by the authority. A Partnership firm has many benefits which is the reason why it is considered by many individuals and the reason why it is one of the most common types of companies.
This Article has been contributed by Mahiya Ahmed. She is working for SwaritAdvisors. SwaritAdvisors is a legal & financial services provider with free expert’s help such as- Private Limited Company Registration, Section 8 Company Registration, NBFC Registration, Nidhi Company Registration, Sole Proprietorship Registration, Patent Registration, NGO Registration, etc.
