Nidhi Companies belong to the Non-banking financial companies structure. Registering a Nidhi Company allows a Nidhi to borrow from its members and lend to the members.
Nidhi Companies are registered in India are created to cultivate the habit of thrift and savings among its members. The funds that are contributed to a Nidhi Company are only from its members.
For Incorporating a Nidhi Company, no license is required from the Reserve Bank of India. Hence, the formation of the Nidhi Company is easy. Nidhi Companies are registered as Public Companies and should have Nidhi Limited at the last of the name.
It should also be noted that the Nidhi Companies fall under the purview of the Reserve Bank of India as the functioning of Nidhi Companies is similar to NBFCs.
To incorporate a Nidhi Company in India, at least seven members are mandatory, out of which three should be the designated directors. However, the Nidhi Company should acquire at least 200 members within one year of commencement.
For registering a Nidhi Company, it is necessary to have a minimum equity share capital of Rs. 5 lakh. But it is to be noted that the Net Owned Funds (NOF) must be increased to Rs 10 lakhs within one year of registration. While Registering as a Nidhi Company in India, it is necessary to first incorporate into a Limited Company under the Companies Act, 2013.
While Nidhi Company Registration, it necessary to ensure that the objective mentioned in the Memorandum of Association is to cultivate the habit of thrift and savings among the members, receiving and lending to its members only for its mutual benefit.
Post incorporation as a Limited Company, the Nidhi Company should meet the following capacities:
The aggregate of paid-up equity capital and free reserves is reduced by the accumulated losses and intangible assets appearing in the last audited balance sheets.
Suppose at the end of one year from commencing, the Nidhi Company cannot meet the above requirement. In that case, the Company may apply to the Regional Director in Form NDH-2 for an extension of time within thirty days close from the first financial year.
Even after the second Financial year the Nidhi Company is unable to meet the requirements for a Nidhi Company. The Nidhi Company should not accept any further deposits from the commencement of the second financial year until it complies with the Provisions for operating as Nidhi Company
The following documents are required to incorporate a Nidhi Company.
An individual can get Nidhi Company registration by following this 6 step guide.
The first step begins with acquiring the Digital Signature Certificate of the applicants; after the DSC is obtained, the applicant should apply for the Director Identification Number.
Next, the applicant has to make an application to MCA for name approval. The names provided should be unique and should not go against any provisions relating to intellectual property rights.
Once the application is made, the applicant must file prescribed documents to the ROC. The documents must be filed through INC form 32, and along with this, MOA and AOA should be submitted. the applicant has to intimate the main objective of forming the entity while submitting the documents
An incorporation certificate will be provided after reviewing the Incorporation Certificate. This certificate is issued by the registrar within 15 Days.
The next step is when the Nidhi Company is required to apply for PAN and TAN.
This is the final step while Incorporating a Nidhi Company. At this stage, it is necessary to open a Bank account on behalf of the business for any transaction.
After the Registration of a Nidhi Company is done, there are different compliances which the applicant must be aware of
The list of members has to be submitted within 90 days of Incorporation.
This to be filed when there is an extension of the request to meet the target of 200 members.
It is necessary to file half yearly requirements to be filed along with form NDH 1
The profits and loss statement and Balance sheets are to be submitted as per the requirements of the Company on an annual basis. This is done through form AOC 4
A Nidhi Company is required to file Income Tax Returns as per the Income Tax Act requirements.
A Nidhi Company must have Net Owned funds that are more than Rs. 10 lakhs. The ratio must be in the proportion of 1:20 Basis.
Firstly, to Incorporate a Nidhi Company Limited Capital is required. But it should be noted that it is necessary to first incorporate as a limited Company.
The major objective of this form of entity is to raise funds from the public. This is also a type of NBFC that carries out activities such as accepting deposits from the members. So, a Nidhi Company can raise funds easily.
The Companies are registered under section 406 of the Companies Act 2013; this form of entity is based on the mutual benefit principle. The primary beneficiaries are the members of the shareholders of the entity. Hence, a Nidhi Company easily provides loans to its members.
An applicant can select a group of members to carry out this process. Once the Nidhi Company is registered, there is no need to involve any external management.
There are fewer Compliances as compared to other forms of entities. Under the RBI act, Nidhi companies are exempted from carrying out a different form of Compliances.
Under the Companies act, this form of entity would secure the status of limited liability. Also, this form of entity is independent of the members and Directors.
As the Nidhi Companies are similar to the NBFCs, they have to comply with the requirements of the NBFC, and the entities are exempt from a specific provision of the RBI act.
Compared to the credit societies that are regulated by the societies registration Act, there are fewer Compliances for Nidhi Companies. Hence, when an individual wants to adhere to fewer compliances, he can opt for Nidhi Company.
Here are some limitations for Nidhi Companies. As per rule 6 of the Nidhi Rules, 2014, a Nidhi Company shall not :
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Last updated: Dec 10, 2021