Like banks, in order to set up a hire purchase company it must be approved from the Nepal Rastra Bank.The Nepal Rastra Bank grants permission to set up a hire purchase company after the requirement is fulfilled. It should be renewed time and again in accordance with law.
After the hire purchase company is established, it has the authority to purchase goods, machinery, land, houses and as well the machinery need for agro business. Another non-banking finance company that specialises in hire-purchase agreements and the financing of these transactions is the Hire-Purchase Company.
What exactly is a hire purchase company?
Hire-Purchase Company allows customers to purchase goods on an installment basis. This means that the hirer can purchase goods in exchange for making monthly installment payments (principal plus interest) over time. Retailers and wholesalers, hire-purchase financing firms, and banks and financial institutions are the primary sources of funding for the hire purchase company. A hire purchase company purchases any kinds of goods and it offers sales on the basis of installments.
The Hire-Purchase agreement is a type of lease agreement in which the hiree (lessee) acquires assets and transfers them to the lessor (lessor) in exchange for monthly installment payments. Why do you need a hire-purchase firm when a leasing company can do the same thing? Because a hire-purchase agreement is simply a lease agreement. This is due to the fundamental differences between the two businesses.
Consumers who want to buy assets, machinery, or white goods on a low-cost installment plan frequently turn to Hire-Purchase companies. Individuals who want to acquire a relatively expensive property, such as land or a building, go to a leasing company to obtain possession on a lease. Furthermore, because a hire-purchase agreement is shorter in duration than a leasing agreement, the credit standards for each are different.
How to Start a Leasing and Hire Purchase Company?
1. Set up a company: In order to be recognized as a hire purchase lending firm, you must first set up a company under the Companies Act of 2063.
2. Nepal Rastra Bank approval:
Following business registration, the firm seeking authorisation to provide a larger purchase loan for the same purpose must obtain Nepal Rastra Bank approval under Article 76 of the Nepal Rastra Bank Act.
What is the minimum amount of paid-up capital required to register a hire purchase company?
A higher purchase lending company’s minimum paid up capital (ordinary shares) is Rs. 300 million. The hire purchase firm must provide the following information and documentation for approval:
The Nepal Rastra Bank approves a loan for a hire purchase company.
The following documents are required for the operation of the Hire Purchase Company after it has been registered with the approval of Nepal Rastra Bank.
1. Photocopies of the Memorandum and Articles of Association, the Company Registration Certificate, and the PAN number
2. The details of the office building, which is fully equipped for the company’s operations, or, if the building is to be rented, a copy of the rental agreement and the rental property details.
3. The company’s shareholders’ personal information
4. Information about the company’s CEO and Board of Directors, as well as its organizational structure
5. The company’s hire purchase policy (the provision regarding interest rates and service fee determination must be clearly stated).
6. Documentation demonstrating the required minimum paid-up capital
7. Insurance and security provisions
8. The board of directors’ committee’s decision and power of attorney for hire purchase loan transactions for Nepal Rastra Bank’s approval.
9. Evidence of the applicant company and its shareholders not being blacklisted
10. Tax clearance or tax details from the previous year deposited with the Inland Revenue Office.
11. The previously registered company must provide the following documents in order to register a hire purchase company.
12. Any legally registered firm that is the promoter, company, or organized institution. Furthermore, the following company information must be supplied:
Details and documents are required for the renewal of the approval for a hire purchase Company?
The renewal of the hire purchase company registration requires the following documents.
1. Registration Certificate/ A photocopy of the previous organisation’s share record book, which is kept at the company registrar’s office.
2. If the company intends to rent the building for business purposes, a photocopy of the rental agreement.
3. Personal information about shareholders and promoters, such as father and grandfather names, citizenship number, and district where citizenship is issued
4. Evidence that the applicant company or its fundamental shareholders are not on the blacklist.
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Alpana Bhandari is a founding partner and CEO of Prime Legal Consultants and Research Center. She graduated from American University Washington College of Law. She specializes in corporate/arbitration and family law.