• Money Lending business

We are two friends who want to start money lending business in Mumbai, Thane and Navi Mumbai to give unsecured finance to small enterprises/individuals with a small startup capital of Rs 5L each. We dont have big startup funds to start an NBFC

Want to know the following
1. What type of company to be incorporated? LLP? Pvt Limited? other
Does the above mentioned incorporation support giving loans to Individuals/ Small Enterprises/Propritorship/Partnership firms

2. Is is mandatory to take Money Lending Licence? What is the scope of Money Lending Licence? Any area restrictions for the same? Is there a Money Lending Licence for the whole state?

3. I read that Pvt Limited companies cannot give loans to indivduals/companies? Is it correct?

4. Suggest a way to start a small startup with basic requirments to do Money lending business.
Asked 4 years ago in Business Law

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15 Answers

It's compulsory to have money lending license

Anwar Zaidi
Advocate, Mira Bhayandar
231 Answers

4.5 on 5.0

It is mandatory to obtain a money lending licence

2) you can obtain licence for state of Maharashtra

3) 10) "money-lender" means" (i) an individual, or

(ii) an undivided Hindu family; or

(iiia) a company, or

(iv) an unincorporated body of individuals, who Or which"

(a) carries on the business of money-lending in the State; or

(b) has his or its principal place of such business in the State; and includes a pawn-broke

4) you can establish a private limited company for carrying on business of money lending

Ajay Sethi
Advocate, Mumbai
87973 Answers
6207 Consultations

5.0 on 5.0

Below is money lender definition

10) "money-lender" means" (i) an individual, or

(ii) an undivided Hindu family; or

(iiia) a company, or

(iv) an unincorporated body of individuals, who Or which"

(a) carries on the business of money-lending in the State; or

(b) has his or its principal place of such business in the State; and includes a pawn-broker but does not include,"

(1) Government,

(ii) a local authority,

(iii) a bank,

(iv) the Agricultural Refinance corporation constituted under the Agricultural Refinance Corporation Act 1963; or

(v) any other banking, financial or any institution which The State Government may, by notification in the Official Gazette, specify in this behalf;

You can't form partnership firm its not allowed however you can individual do this business.

Ganesh Kadam
Advocate, Pune
12338 Answers
191 Consultations

4.9 on 5.0

application for licence shall contain the following particulars, namely

(a) the true name in which such money-lender intends to carry on business and the true name of the person proposed to be responsible for the management of the business;

(b) if the application is by or on behalf of"

(1) an individual, the true name and address of such individual;

(ii) an undivided Hindu family, the true names and addresses of the manager and the adult coparceners of such family;

(iii) a company, the true names and addresses of the directors, manager or principal officer managing it;

(iv) an unincorporated body of individuals, the true names and addresses of such individuals.

(c) the area and the place or principal, place of the business of money-lending in the State;

(d) the name of any other place in the State where the business of money-lending is carried on or intended to be carried on;

(e) whether the person signing the application has him self or any of the adult coparceners of an undivided Hindu family, or any director, manager or principal officer of the company or -any member of the unincorporated body on behalf of which such application has been made, as the case may be, has carried on the business of money-lending in the State in the year ending on the 31st day of. Ma immediately preceding the date of the application either individual or in partnership, or jointly with any other coparcener or any other person and whether in the same or any other name;

(f) the total amount of the capital which such person intends to invest in the business of money-lending in the year for which the application has been made;

(g) if the places at which the business of money-lending is to be carried on are more than one, the true names of persons who shall be in the management of the business at each such place;

Ajay Sethi
Advocate, Mumbai
87973 Answers
6207 Consultations

5.0 on 5.0

1. I always advise to form company if the capital or turn over of huge.

2.If not then LLP is good option.

3. Money lending license is for individual and not for any company. For this you need not forma NBFC for which permission from SEBI.

4.Yes company can not lend money unless it is formed as NBFC .

5.So unless and until you form NBFC you can do money lending business.

Devajyoti Barman
Advocate, Kolkata
22515 Answers
402 Consultations

5.0 on 5.0

Dear Client,

In case of Company desirous of doing finance business, must mandatory take License (Certificate) from Reserve Bank of India u/s 45 of the RBI Act. This is valid and applicable for whole of India. However, apart from above, a further "money lending licence" is to be obtained from "each & every" State, where money lending business is proposed to be conducted. In Maharashtra, the dept of Cooperatives is entrusted for granting of such "money lending licence".

In ru case through Partnership firm -

AND Not being a company -- Every money-lender shall annually, before such date as may be prescribed, make an application in the prescribed form for the grant of licence to the Assistant Registrar of the area within the limits of which, the place where he carries on or intends to carry on the business of money-lending is

situated. When he carries on or intends to carry on such business at more than one place, a separate application in respect of each such place shall be made to such Assistant Registrar

Read Sec 5 of The Maharashtra Money - Lending (Regulation) Act, 2014

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

You need to take money lending licence. In case the capital is huge make it as a company. You can't from a partnership.

money-lender ” means,

(i) an individual ; or

(ii) an undivided Hindu family ; or

(iii) a company other than a non – banking financial company

regulated under Chapter IIIB of the Reserve Bank of India Act, 1934 ;

(iv) an unincorporated body of individuals, who or which,—

(a) carries on the business of money-lending in the State ;

or

(b) has his or its principal place of such business in the

State; and

includes a pawn-broker, but does not include,—

(i) Government ;

(ii) a local authority ;

(iii) a Bank ;

(iv) a Co-operative Bank ;

(v) a multi-state Co-operative Bank ;

(vi) a Non- Banking Financial Company ;

(vii) a primary credit society ;

(viii) a Regional Rural Bank ;

(ix) the Reserve Bank of India ;

(x) the Agricultural Refinance Corporation

constituted under the Agricultural Refinance Corporation

Act, 1963 ; or

(xi) any other banking or financial institution which

the State Government may, by notification in the Official

Gazette specify in this behalf ;

Swarnarka Chowdhury
Advocate, Mysore
1878 Answers
5 Consultations

5.0 on 5.0

You shall be governed by the BOMBAY MONEY LENDERS ACT, 1946 and other applicable laws if you go for incorporation into company.

You can either form a Limited liability partnership firm or a Pvt. LTd company based on your business size. Further when you are opting for a company then you have to follow the SEBI guidelines. Without NBFC licencing Pvt. Ltd company cannot give loan.

SECTION 06: APPLICATION FOR LICENCE

(1) Every money-lender shall annually before such date as may be prescribed make an application in the prescribed form for the grant of a licence to the Assistant Registrar of the area within the limits of which the place, where he carries on or intends to carry on the business of money-lending is situated. When be carries on or intends to carry on such business at more than one place; a separate application in respect of each such place be made to such Assistant Registrar. Such application shall contain the following particulars, namely

(a) the true name in which such money-lender intends to carry on business and the true name of the person proposed to be responsible for the management of the business;

(b) if the application is by or on behalf of"

(1) an individual, the true name and address of such individual;

(ii) an undivided Hindu family, the true names and addresses of the manager and the adult coparceners of such family;

(iii) a company, the true names and addresses of the directors, manager or principal officer managing it;

(iv) an unincorporated body of individuals, the true names and addresses of such individuals.

(c) the area and the place or principal, place of the business of money-lending in the State;

(d) the name of any other place in the State where the business of money-lending is carried on or intended to be carried on;

(e) whether the person signing the application has him self or any of the adult coparceners of an undivided Hindu family, or any director, manager or principal officer of the company or -any member of the unincorporated body on behalf of which such application has been made, as the case may be, has carried on the business of money-lending in the State in the year ending on the 31st day of. Ma immediately preceding the date of the application either individual or in partnership, or jointly with any other coparcener or any other person and whether in the same or any other name;

(f) the total amount of the capital which such person intends to invest in the business of money-lending in the year for which the application has been made;

(g) if the places at which the business of money-lending is to be carried on are more than one, the true names of persons who shall be in the management of the business at each such place;

(2) The application shall be in writing and shall be signed"

(a) (z) if the application is made by an individual, by the individual;

(ii) if the application is made on behalf of an un divided Hindu family, by the manager of such family;

(iii) if the application is made by a company or un incorporated body, by the managing director or any other person having control of its principal place of business in the territory of India except Part B Slates but including the Saurashtra and Hyderabad areas of the State of Bombay or of its place of business in the area in which it intends to carry on the business; or

(b) by an agent authorised in this behalf by a power of attorney by the individual money-lender himself, or the family, or the company or the unincorporated body, as the case may be.

(3) The application shall also contain such other particulars as may be prescribed.

(4) Every application shall be accompanied by a licence fee of one hundred rupees-:

Provided that, where an application is made after -the expiry of the period prescribed by rules, ft shall be accompanied by a licence fee of two hundred rupees.

(5) The fee payable under this section shall be paid in the manner prescribed and shall not be, refunded, notwithstanding the fact that the application is withdrawn.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

You can start with a limited liability partnership firm there are less legal implications and filings than a Pvt. limited company.For company there are guidelines of SEBI are to be followed regular yearly filings with registrar, and there is more liability in company.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Dear Sir,

My answers are as follows:

1. What type of company to be incorporated? LLP? Pvt Limited? other

Does the above mentioned incorporation support giving loans to Individuals/ Small Enterprises/Propritorship/Partnership firms

Ans: You have to run your business under Partnership Act only to avoid future complications and get necessary licenses from appropriate authorities under the provisions of Money Lending Act.

2. Is is mandatory to take Money Lending Licence? What is the scope of Money Lending Licence? Any area restrictions for the same? Is there a Money Lending Licence for the whole state?

Ans: No, money lending licenses will be limited to particular area of the State.

3. I read that Pvt Limited companies cannot give loans to indivduals/companies? Is it correct?

Ans: Yes, it has a big procedure which you cannot comply.

4. Suggest a way to start a small startup with basic requirments to do Money lending business.

Ans: Just start the business and better close the transactions within 24-36 months and take promissory notes and blank cheques and Id proof’s of customers along with third party personal guaranty, if possible take blank cheque from guarantor also.

Kishan Dutt Kalaskar
Advocate, Bangalore
6050 Answers
381 Consultations

4.8 on 5.0

A registered Pvt. Ltd. company having proper MOA & AOA pertaining to business of borrowing and lending, should be compulsorily be registered with Registrar of Companies.

Pvt. Ltd. company desirous of doing finance business, must mandatorily take Licence (Certificate) from Reserve Bank of India u/s 45 of the RBI Act. This is valid and applicable for whole of India. However, apart from above, a further "money lending licence" is to be obtained from "each & every" State, where money lending business is proposed to be conducted. In Maharashtra, the dept of Cooperatives is entrusted for granting of such "money lending licence" .

Mandatory documents like MOA, AOA, Company Incorporation certificate, PAN card, S&E license and others are required to obtain licence & conduct business of finance.

T Kalaiselvan
Advocate, Vellore
78131 Answers
1543 Consultations

5.0 on 5.0

1. The limitated liability partnership would be the best one for the purpose. Yes a firm can give loan to individual there no restrictions.

2. Yes it illegal to charge interest and lend money. Yes it is compulsary otherwise penalty can be imposed under bombay money lender act and also there can be problem at time of recovery of amount in court.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Is it legal to do Money lending business without taking Money lending licence?

you cannot carry on money lending business without a licence .

2) it is mandatory requirement . Maharashtra Money-Lending (Regulation) Act, 2014 makes business in money lending without licence an offence under Section 39 of the Act.

3) SECTION 05: MONEY-LENDER NOT TO CARRY ON BUSINESS OF MONEY-LENDING EXCEPT FOR AREA UNDER LICENCE AND EXCEPT IN AC CO WITH TERMS OF LICENCE

.

No money-lender shall carry on the business of money-lending except in the area for which he has been granted a licence and except in accordance with the terms and conditions of such licence;

4) you can carry on money lending business by establishing a firm . the firm should be registered with registrar of firms

Ajay Sethi
Advocate, Mumbai
87973 Answers
6207 Consultations

5.0 on 5.0

1. Even LLP cannot lend money to individuals.

2. If you are intending to do money lending business then you have to get license for that Without which it will be termed as illegal.

T Kalaiselvan
Advocate, Vellore
78131 Answers
1543 Consultations

5.0 on 5.0

1. DULY register a LLP and obtain Money Lending License for conducting business in Maharashtra. This would suffice all legal purposes, without having to conduct any more documentary procedures.

Keep Smiling .... Hemant Agarwal

Hemant Agarwal
Advocate, Mumbai
5612 Answers
25 Consultations

5.0 on 5.0

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