Nidhi Company

Nidhi Company Registration

Nidhi Company Registration has been in a highlight from the previous years. Middle and low- income groups have always been sufferers due to rising prices and low purchase power. Due to such financial burdens, it sounds impossible for these families to save a little amount of money for their well-being and future. Nidhi Company is the only savior that can help them in such extreme helpless conditions.

Most of the investment companies in India cater a large amount of money whereas banks provide very little scope for growth in savings. Nidhi Company here provides the most effective and easy way to save your money with a wide scope of monetary growth.

What is Nidhi Company Registration?

Nidhi Company is registered as a Mutual Benefit – Non-Banking Financial Company under the Companies Act, 2013. It works on the basic principles of mutual benefits that are regulated by the Ministry of Corporate Affairs. It performs various functions such as lending and borrowing money from its members.

Nidhi Company Registration is done as a public limited company and should mandatorily have “Nidhi Limited” at last of its name. These NBFCs were formed to cultivate the habit of savings in middle and low- income groups. The funds are collected from the group of members and are returned to them at fixed time duration. Thus, it helps them to save their money and use it at the time of needs and requirements. These companies are very minute when compared with traditional banks but are very beneficial for the people who want to save with a great scope of monetary growth.

What are the main Features of Nidhi Company?

  • Promotes the habit of saving amongst low and middle- income groups.
  • They accept term deposits for duly returns
  • Quite easy and flexible loans as compared to traditional banks and companies.
  • Secured investments
  • Minimum Documentation and formalities for taking loans

Nidhi Company provides loans and deposits to its members only. Members can apply for a loan against collateral (asset) and mortgage of their property. Even though Nidhi Company is registered under the Companies Act, 2013, it has various privileges and exemptions as compared to other companies due to limitations of their activities within their members. It does not require any approval from Reserve Bank of India to provide loans to its members.

What are the Benefits of Nidhi Company for People?

1. Fulfills the needs of middle and low -income groups

Investments made in Nidhi Company plays an important role in fulfilling the needs of middle and low -income groups by providing them financial help within minimum documentation and formalities

2. Loans within minimum eligibility criteria

It is quite impossible for the small wage earners to obtain loans from the traditional banks so for them Nidhi company is the only way to obtain loans within minimum eligibility criteria.

3. No external involvement

Nidhi Company takes funds from its members and further provides loans to its members only which means there is no external involvement in working of these companies. The investors/members themselves are the governing bodies in the company.

4. Limited Liability

The directors and managers of the company are benefitted with limited liabilities as their personal assets remain protected and cannot be used to clear the debt of the company.

5. Perpetual Successions

Nidhi Company has never-ending existence as it cannot be dissolved by the death, retirement, insanity or insolvency of any of its members or shareholders. Moreover, none of the member is liable for the wrong deeds of other member.

6. Better credibility

Nidhi Companies are regulated by the Ministry of corporate affairs and hence is considered more trustworthy and credible than the other institutions regulated by the state government.

7. Separate Entity

Nidhi Company is a separate entity that can acquire a property and incur debts at its own name.

What activities are prohibited for the Nidhi Company?

As far Nidhi companies are involved in non-banking financial activities, they are prohibited to perform following activities:

  • Advertise themselves for deposits
  • Chit funds
  • Lotteries
  • Insurance
  • Leasing Finance
  • Hire-Purchase finances
  • Sell the assets of its members kept as security for providing loan.
  • Entering into a partnership firm for carrying out lending and borrowing activities
  • Accepting deposits or lending funds to anyone except its members.

Minimum Requirements for Nidhi Company Registration

There are few requirements you need to fulfill to incorporate a Nidhi Company:

Before Incorporation After Incorporation
Minimum Shareholders: 7 Minimum Shareholders: 200
Minimum Directors: 3 Minimum Net Owned fund Limit: Rs 10 lakhs
Minimum Capital Income: Rs 10 lakhs Minimum Net owned fund to deposits ratio: >1:20
Director’s Identification number (DIN) for all the designated directors Unencumbered deposits shall not be less than 10% of outstanding deposits.

What are the documents Required for Nidhi Company Registration?

Here is full list of documents you will require to incorporate a Nidhi Company in India:

  • Id proof of all the designated directors and shareholders
  • PAN card of all the directors
  • Address proof of all the directors/shareholders
  • Residential Proof
  • NOC/ Rent agreement in case of rented property.
  • Pass-port Sized photographs of all the directors
  • Aadhar card of all the directors

PAN Card: it is mandatory for all the directors to submit a copy of their PAN card. It is a unique identification number provided by the Income tax department to the taxpayers in India. Indian nationals have to submit their PAN card during the registration process.

Address Proof: all the designated directors have to submit their address proof. The proof should have name and address of the director as mentioned in his PAN card. Make sure that the addree proof is not older than two months. Following given documents can be submitted as an address proof:

  • Ration Card
  • Aadhar card
  • Voter Card
  • Passport
  • Driving License
  • Any utility bill such as telephone, electricity, etc.

Residential Proof of the designated property: residential proof of the forming company has to be submitted while incorporation. In case the property is rented a rent agreement along with the NOC from the owner is requires. NOC is the proof that owner has no objection in incorporating a company at his place. Following given documents can be submitted as the residential proof:

  • Any Utility Bill such as electricity, telephone, etc.
  • Rent agreement
  • No Objection Certificate

Passport Size Photograph: Passport size photograph of all the directors is required at the time of registration.

What is the Procedure for Nidhi Company Registration?

Nidhi company is registered as a Public Limited Company as per the Provisions of Company Act, 2013. So, you have to follow the below given steps to get Nidhi Company Registration in India:

  • Obtain DSC (Digital Signature Certificate) and DINThe first step is to obtain DSC for the designated directors of the company. DSC is used to sign the entire document electronically and hence is called Digital Signature Certificate while DIN is issued by the ministry of corporate affairs and is referred as the Director’s Identification Number. DIN can be obtained directly through filing of incorporation form. If you already have DSC and DIN, you can skip this step and move ahead to next.
  • RUN Name ApprovalNext step is to select an appropriate name for your Nidhi Company and get it approved by the MCA. It is not as simple as it looks. The name should be unique and should not resemble to any other registered company. Moreover, the name of your company is the first impression of your works and objectives that helps to attract more and more shareholders. Make it relevant, attractive and of course suggestive. Make sure it’s not offensive or illegal.

    An applicant can provide 3 names to MCA out of which one would be selected by them. You yourself can search whether the name is unique or not by the free search name facility available at MCA portal.

  • Submission of Memorandum of Association (MOA) and Article of Association (AOA)Once name approval has been done, you have to submit MOA and AAO to the Ministry of Corporate Affairs along with the subscription statement. All the objectives should be clear and should be for charitable purpose.
  • Issuance of Certificate of IncorporationSubmit all the documents along with the SPICe form to get Incorporation certificate. All the documents are checked by the authorities and if all goes well they will issue you the certificate.

    Note: It usually takes around 15-25 days to complete the incorporation procedure. Incorporation certificate works as a proof that the company has been created and contains CIN i.e Corporate Identification Number.

Post Nidhi Company Incorporation Compliances

The process is not over yet. Here are the post incorporation compliances you need to follow:

  • Apply for PAN and TANOnce you have got your incorporation certificate you can apply for your company’s PAN number to carry out all the finance related activities.
  • Open Company’s bank accountAfter making PAN, you are now applicable to open a bank account at your company’s name and use it for all the transactions. Incorporation certificate, Memorandum of Association, Article of Association along with PAN are required to open a bank account.