SRCC

Nidhi Company

What is the Nidhi Company and how does it function?

The structure of Nidhi Company is that of non-banking financial companies. By forming a Nidhi Company, a Nidhi is able to borrow from and lend to its members.

Nidhi Companies, which are based in India, were established to encourage members to practise thrift and save money. The funds that a Nidhi Company receives come solely from its members.

The Reserve Bank of India does not require a licence to incorporate a Nidhi Company. As a result, forming the Nidhi Company is simple. Nidhi Limited should be at the end of the name because Nidhi Companies are registered as Public Companies.

It’s also worth noting that Nidhi Companies are regulated by the Reserve Bank of India because their operations are similar to those of NBFCs.

What is the procedure for forming a Nidhi Company in India?

In order to form a Nidhi Company in India, it must have at least seven members, three of whom must be designated directors. The Nidhi Company, on the other hand, should have at least 200 members during the first year of operation.

A minimum equity share capital of Rs. 5 lakh is required for the registration of a Nidhi Company. However, within one year of registration, the Net Owned Funds (NOF) must be increased to Rs 10 lakhs. In order to register as a Nidhi Company in India, you must first form a Limited Company under the Companies Act of 2013.

It is vital to ensure that the purpose stated in the Memorandum of Association is to promote the habit of thrift and saves among the members, receiving and lending only for the mutual benefit of the members during Nidhi Company Registration.

After forming as a Limited Company, the Nidhi Company should be able to meet the following requirements:

  • There must be at least 200 stockholders (members)
  • Have a net worth of ten lakh rupees or more
  • Have encumbered deposits equal to or greater than 10% of total deposits.
  • Maintain a net-owned-funds-to-deposit ratio of no more than 1:20.
What are net-owned funds?

Accumulated losses and intangible assets in the most recent audited balance sheets diminish the total of paid-up equity capital and free reserves.

Assume the Nidhi Company is unable to achieve the above condition after one year of operation. In that situation, the Company may submit a Form NDH-2 to the Regional Director for a time extension within thirty days of the end of the first financial year.

Even after the second financial year, the Nidhi Company is still unable to meet the Nidhi Company’s standards. From the beginning of the second financial year until it conforms with the Provisions for operating as Nidhi Company, the Nidhi Company should not accept any more deposits.

What are the documents required to register a Nidhi Company?

The following documents are required to incorporate a Nidhi Company.

Directors Identification Numbers, as well as the shareholders’ PAN numbers and directors’ residential proofs

Rent agreement or leasing agreement of the registered office Photographs Identification documents such as the Aadhar card

If the office is privately owned, ownership information or the registered office address must be provided, as well as a letter of authorization (NOC).

What is the procedure for forming a Nidhi Company?

Following this 6-step procedure, an individual can register a Nidhi Company.

  1. The first stage is for the applicant to get a Digital Signature Certificate; after the DSC has been received, the applicant should apply for a Director Identification Number.
  2. The applicant must next submit an application for name approval to the MCA. The names given should be unique and should not violate any intellectual property rights laws.
  3. Following the submission of the application, the applicant must provide the required papers to the ROC. INC form 32 must be used to file the paperwork, which must be accompanied by MOA and AOA. While submitting the paperwork, the applicant must state the main purpose for forming the organisation.
  4. After examining the Incorporation Certificate, an incorporation certificate will be issued. The registrar issues this certificate within 15 days.
  5. The Nidhi Company will thereafter be needed to apply for a PAN and TAN.
  6. This is the final stage in the Nidhi Company Incorporation process. For any transaction, it is required to create a bank account on behalf of the company at this time.
What are the Nidhi Company's post-incorporation compliances?

Following the registration of a Nidhi Company, the applicant must comply with a number of requirements.

Within 90 days after incorporation, Form NDH 1 must be submitted with a list of members.

Form NDH 2 This is to be filed if the request is extended in order to fulfil the 200-member objective.

Half-yearly needs must be filed with Form NDH 3 in addition to Form NDH 1.

On a yearly basis, the profit and loss statement and balance sheets must be filed in accordance with the Company’s standards. Form AOC 4 is used to do this.

A Nidhi Company is obliged to submit Income Tax Returns in accordance with the Income Tax Act.

A Nidhi company must have at least Rs. 10 lakhs in net owned money. The ratio must be 1:20 on a percentage basis.

What are the advantages of registering a Nidhi business?

To begin, a Nidhi Company must be incorporated with limited capital. It should be emphasised, however, that forming a limited company is required first.

The primary goal of this type of company is to raise cash from the general population. This is another sort of NBFC that performs tasks including receiving deposits from members. As a result, a Nidhi Company may readily raise financing.

The Companies are built on the mutual benefit principle and are registered under section 406 of the Companies Act 2013. The members of the entity’s shareholders are the major beneficiaries.

This procedure can be carried out by a group of people chosen by the applicant. There is no need to bring in outside management after the Nidhi Company is created.

In comparison to other types of organisations, there are less Compliances. Nidhi businesses are exempted from a certain type of compliance under the RBI Act.

This type of entity would be granted limited liability status under the Companies Act. This type of company is also self-contained in terms of its members and directors.

Because Nidhi Companies are comparable to NBFCs, they must adhere to the NBFC’s specific Companies have fewer compliances than credit societies, which are governed by the Societies Registration Act. As a result, if a person wishes to comply with less regulations, he might choose Nidhi Company.

 

Nidhi Company is subject to restrictions.

Here are certain restrictions that Nidhi Companies face. A Nidhi Company may not: Carry on a business of chit fund, hire purchase financing, lease finance, or acquisition of securities issued by anybody Corporate, according to rule 6 of the Nidhi Rules, 2014.

issue preference shares, debentures, or any other type of financial instrument under any name or form

Open a current account for the organization’s members.

Unless it has passed a special resolution in the general meeting and also obtained the prior approval of the Regional Director having jurisdiction over such Nidhi Company, acquire another Company by purchasing securities or control the composition of the Board of Directors of any other Company in any manner whatsoever or enter into any arrangement for the change of its management.

Carry on any business in its name that isn’t related to borrowing or lending: Provided, however, that Nidhi’s that have complied with all of the conditions of these regulations may rent lockers to their members, subject to the rental income from such facilities not exceeding twenty percent of the Nidhi ‘s total income at any point during the financial year.

Accept deposits or provide loans to those who aren’t members;

As security, pledge any of the assets held by its members;

Take deposits or provide loans to anybody in the company;

Participate in any borrowing or lending cooperation arrangements;

Issue or cause to be issued any deposit solicitation advertising in any manner.

Any commission or incentive for mobilising deposits from members, deploying money, or providing loans should be paid.

SRCCs has a team of professionals Comprising Chartered accountants, Company Secretaries, lawyers, and finance professionals.

We have helped thousands of businesses register different forms of entities and maintain Post Incorporation Compliances.

Our business consultants’ team provides proper guidance and support with constant monitoring, which will help your business grow.

Contact Us