Looking to set up a factory and unsure about the process?
Don’t worry. We have got you covered. This article highlights the legal requirements for setting up a factory.
To determine the mandatory legal procedures for your factory, you need to understand what constitutes a factory as per the Factories Act, 1948.
A factory is defined as any premise with at least ten workers involved in the manufacturing process, a power source, and a site with at least 20 workers involved in the manufacturing process but no power.
The state government may require any factory or building to act in accordance with the safety, health, and welfare conditions mentioned in the act. However, the same does not apply to mines, mobile units of the armed forces, restaurants, or hotels.
Setting up a factory is a big decision. It is, therefore, necessary to examine the economics of establishing and running a factory before you take the final leap. Ensure that you plan your finances well. In case of a funding requirement, there are various loans available in the market that offer affordable business loan interest rates. Make sure that you check for the business loan eligibility conditions on your lender’s site before applying for a business loan.
While setting up a factory, the foremost step is to register your factory in the state of operation to obtain a factory license.
The registration procedure is given below:
The applicant needs to procure Form 2 or the common application form for factory registration and licensing.
The following details need to be filled in the form:
- Full name of the factory with license number (in case of renewal)
- Full postal address of the factory
- Nature of the manufacturing process carried out by the factory
- Number of workers proposed to be employed on any one day in a year
- Nature and the total amount of power installed or to be installed.
- Full name and address of the factory manager.
- Full name and address of the occupier, along with other personal details.
- Full name and address of the owner of the premises or building.
Once filled, you need to attach the prescribed documents to the form.
List of documents that need to be submitted along with Form-2:
- Management’s report on completion of construction according to the approved plan.
- A treasury challan in the relevant head of account stating the payment of fees as per the fee structure notified from time to time.
- A copy of the resolution passed stating the occupier nominated by the directors/partners.
- Original Stability Certificate from a recognized competent person.
- A safety and health policy for all factories of category 2(CB) or MAH – and factories employing 50 or more workers.
Post submission of documents along with necessary fees, the concerned officer shall scrutinize the same.
In case the documents are found correct, they are processed for approval by the competent authority.
If deficiencies are detected, the applicant must submit the corrected application promptly.
Upon receiving the correction from the applicant, it is processed in file to get approval from the Competent Authority.
As soon as the application is approved, a registration certificate and a license are mailed to the applicant along with a covering letter, duly signed by the competent authority.
If you opt for a business loan to fund the factory setup, you can apply for one online. The process is highly streamlined. Moreover, you can also determine the EMI by using a business loan EMI calculator.
It is vital to pay due attention to the documents to be submitted and the requirements mentioned in Form-2 while applying for a factory registration.