Nidhi Company is a company registered under the Companies Act, 2013, which is incorporated with a sole objective of encouraging and cultivating the habit of savings amongst its members. It’s only objective is to borrow and lend money between their members.
A Nidhi company belongs to the Non-Banking Indian Finance sector and governed under section 406 of Companies Act, 2014. The Nidhi Company is the class of NBFC despite this fact the RBI has exempted them from the core of the directions and regulations of the RBI Act which are applicable on NBFCs.
It is allowed to accept deposit from its members and lend to its members only. Hence, the funds that are contributed in Nidhi company are only from its members and used only by its members.
Main Objectives of Nidhi Company -
Savings – Similar to banks, a Nidhi Company has a right to open Saving Accounts of its members in order to promote and encourage the habit of saving among members.
Ease of Fund – Just like banks a Nidhi Company can also raise funds. Nidhi Company is the safest way to raise funds from the general public (just by registering them as members) though deposits, RDs (recurring deposits), FDs (fixed deposits).
Loan – Nidhi Company is allowed to lend money to its members only. However they can provide only secured loans, unsecured loans are not.
Micro Banking – There are many remote areas which still devoid of nationalised banks and NBFs. Nidhi Company is the solution to this, as it can provides rural banking services to these locations.
Why to Choose Nidhi Company
No liability towards the creditors - The directors of a Nidhi company have no liability to the creditors of a Nidhi company.
A Nidhi company can own property and can also incur debts.
Change in management – It can be done easily just by filing forms to the Registrar of Companies of the respective state.
Perpetual Succession – Just like any other company, a Nidhi company being a separate legal entity also have a benefit 'perpetual succession', i.e. it continuous existence and is unaffected by the death or departure of any member until it is legally dissolved.
A Nidhi company being a juristic person, can buy, own property in its name.
A Nidhi company have better credibility when comparing with Mutual Benefit companies. Nidhi companies are registered and governed by the Central Government, on the other hand Mutual Benefits Organization are governed and supervised by State Governments.
Requirements for Nidhi Company:
The name must contain - Nidhi Limited as suffix
A minimum paid up capital of Rs. 5,00,000/- is required
It can’t issue preference shares.
The objective of Nidhi Company solely would be to develop habit of thrift and saving and the services of nidhi company is only restricted to its members.
The Documents Required for Nidhi Company Incorporation -
Identity proof of all Directors (Aadhar card, Driving License, PAN card, Passport)
Address Proof all directors (Voter ID card, Passport)
Address proof of company registered office (Rent agreement, Possession letter etc.)
Electricity Bill of the registered office building
It’s necessary to apply for a Digital signature of the designated partners before starting the Nidhi compan registration.
The DSC is important as all the documents before submission are required to be digitally signed.
Step 2: Apply for DIN (Director Identification Number)
The application for DIN is mandatory for each director.
The DIN application has to make in Form DIR-3.
Step 3: Name Approval and its Reservation
The Nidhi company name approval is an important step in order to establish a company.
RUN (Reserve Unique Name) form is filled for the reservation of the name given by Nidhi company.
Step 4: Preparation of form INC 33 and INC 34
This step involves the drafting of MOA and AOA. These are drafted under INC 33 and INC 34 respectively.
Step 5: Incorporation of Nidhi limited company
For the Incorporation of private limited company, the incorporation forms (INC 33, INC 32, AGILE) are uploaded with SPICe form INC 32. These are to be submitted with Registrar of companies of the respective state within which the registered office of the company is located.
Step 6: Approval of the documents
Once the SPICe form INC– 32 is approved, the registrar provides the company identification number (CIN) along with PAN and TAN of the company
Benefits of Nidhi Company Registration
Financial assistance (can be deposits or loans) with minimum documentation and formalities.
One can get the loans easily with minimum eligibility criteria
A Nidhi Company takes funds from its members and further sanction loan to its members only, which suggests that there is no external involvement of the other company or organisation in the working process of a Nidhi Company.
Limited Liability for the directors and share holders, which suggests their personal assets remain protected and can’t be used to clear the debts of the company.
Conditions to be Fulfilled -
The following conditions are to be taken care by the Nidhi Company within one year of its registration -
In Nidhi Company minimum of 3 directors and 7 members or shareholders are required.
Nidhi Company is required to have minimum of 200 members within one year from its incorporation
The net owned funds must be 10 lakh rupees or more.
Unencumbered deposits (free of dept of financial liability) must be 10% or higher of the outstanding deposits
The ratio of the deposits cannot be over 1:20 times of its net owned funds.
Compliance Have to be Done After Nidhi Company Incorporation -
Nidhi Company is regulated by Ministry of Corporate. MCA has provided a set of guidelines for Nidhi company’s operations which are all mentioned in Nidhi Company rule, 2014.
A nidhi company is a deposit-taking entity hence requires a higher level of diligence regulatory norms. Consistent with the Nidhi Rules, following are the compliances that are needed to be followed -
Form NDH-1 – Within 90 days after the Closure of Financial year
Form NDH-2- If a Nidhi company fails to complete 200 members in its 1st financial year, then this form is to be filled.
Form NDH-3- This is for the filling of half yearly returns, and this is submitted along with CA/CS Certificate
Board Meetings – Quarterly
Member Meetings – Annually
AOC 4 – Need to File one In a Year
MGT 7- Once in a Year
Accounting & Book Keeping – Every Month
Income Tax Return – by 30th September
Prohibited Activities for the Nidhi Company -
As far as Nidhi companies are involved in a non-banking financial transaction, they are prohibited from some activities, which are -
Leasing Finance and Hire-Purchase finances
Advertise themselves for deposits
Sell the assets of its members
Entering into a partnership firm so as to hold out lending and borrowing activities
Accepting deposits or lending funds aside from its members
Corpseed Additional Services For Nidhi Company
Tax Advice For Nidhi Company:
Prepare & file business taxes can be complicated. Our expert CA/CS will help you to prepare and file tax forms correctly with a minimal fee and on time for your Nidhi company
Annual Audits & Compliances For Nidhi Company:
Our expert CA/CS will complete annual audits and compliances for your Nidhi Company on time.
How to get Nidhi Company Registration?
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