We can says that “Finance
is Blood of Business”. General Meaning of Finance is Money. And of Finance
Company as any Firm either Proprietor or Partnership Firm which deals in
lending of money. In India a no. of people do the business of finance specially
the LALA people which give the money on interest to their relatives or some
known persons. However, in the eyes of law, the same is not legal but however,
the people do this business at the back of eyes of law. When their business
grows from one known person to many other people, they think of getting their
firm registered and do the business legally.
But it has been seen
that due to not much awareness among the people, they get the name registered
with Trade Mark authorities or under Registration of Firm Act and take their
firms as registered for carrying on their business for objects of financing. Such
Registrations are not the Finance company registration under the law and these
firms violate the provisions of the RBI Regulations or the other allied acts
for carrying on the finance business.
So what are the basic
registrations required to get the finance company/ Firm as legal firm status
under the respective acts/ laws, to carry on the business with objects of
business of finance/ lending business is the main question. There may be a no.
of ways, but being a Chartered Accountant, in my point of view are the ways for
getting the firms registered for doing the business as Finance Company which
shall be valid under the respective acts and which shall allow the business
concerns to carry on the business of lending and taking deposits from the
general public. Following are the various types of Finance company
registration:
1. CO-OPERATIVE SOCIETIES
An Act to consolidate
and amend the law relating to co-operative societies, with objects not confined
to one State and serving the interests of members in more than one State, to
facilitate the voluntary formation and democratic functioning of co-operatives
as people’s institutions based on self-help and mutual aid and to enable them
to promote their economic and social betterment and to provide functional
autonomy ,was being felt necessary by the various cooperative societies, and
federation of various cooperative societies as well as by the Government. In
order to achieve the objective The Multi State Cooperative Societies Bill was introduced in the Parliament. The
bill having been passed by both the Houses of Parliament received the assent of
the President on 3rd July 2002 and it came on the Statute Book as The Multi
State Cooperative Societies ACT 2002 (39 of 2002).
2. NON BANKING FINANCE COMPANY (NBFC COMPANIES)
A Non-Banking
Financial Company (NBFC) is a company registered under the Companies Act, 2013 engaged
in the business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities etc. A non-banking institution which
is a company and has principal business of receiving deposits under any scheme
or arrangement in one lump sum or in installments by way of contributions or in
any other manner, is also a non-banking financial company (Residuary
non-banking company).
A Company registered
under Companies Act 2013 and desirous of commencing the business of Non Banking
Financial Institutions as defined under Section 45 (1)(a) of RBI Act, 1934
should have a minimum new owned fund of Rs. 2 crores. Companies are required to
submit its applications for registration in the prescribed format along with
necessary documents with Reserve Bank of India for their verifications and in
case the RBI is satisfied with the intention of promoters and the documents
being provided by them, the certificate of NBFC shall be issued to them which
comprises of two category.
Category A: These are those NBFC
Companies which deal in advancing of loan as well as accepting of deposits
Category B: These are those NBFC
Companies which deal in only providing of advances and loan to general public.
The permission of accepting the deposits is not allowed to such companies under
category B.
3. NIDHI COMPANIES
The Third and the
trending way to get the Finance Companies registered is incorporating of Nidhi
Companies. This is the trending way which is prevailing among a no. of
promoters to incorporate the Nidhi Companies and to start the business of
finance along with accepting the deposits.
Nidhi Companies were
existed even prior to the existence of companies Act 1913. The basic concept of
Nidhi is “Principle of Mutuality” (“Paraspara Sahayata”). Thus Nidhis function
for the common benefit advantage of all their Members/Share holders. These
companies are more popular in South India and 80% of Nidhi companies located
in Tamil Nadu.
A NIDHI COMPANY, is one that belongs to the non-banking
Indian Finance sector and is recognized under section 406 of the Companies
Act, 2013. Their core business is borrowing and lending money only between
their members. They are also known as Permanent Fund, Benefit Funds, Mutual
Benefit Funds and Mutual Benefit Company. It is regulated by Ministry of
Corporate Affairs. Reserve Bank of India is empowered to issue
directions to them in matters relating to their deposit acceptance activities.
However, in recognition of the fact that these Nidhis deal with their
shareholder-members only.
BENEFITS OF NIDHI COMPANIES
1. These are the
mutual benefit companies being incorporated to benefit the members/
shareholders of the company,
2. Company can accept
the deposits and can advance the loans subject to restrictions being imposed
under the act and allied rules,
3. Need not to have a
Huge Net Worth of Rs. 2 crores as required for running NBFC Companies,
4. Need not to follow
the stringent provisions issued by Reserve Bank of India from time to time as
being followed in NBFC Companies.
Conclusion: This is not exhaustive ways of register a finance company, there are a no. of ways where the intended
promoters who wish to start their finance business can get themselves
registered under various prevailing laws and acts.
