The Nidhi Company is a company registered under the Companies Act of 2013 with the sole aim of maintaining the habit of thrift and savings among its members. Nidhi companies are allowed to deposit a deposit from their members and only lend it to their members. Therefore, the funds donated to a Nidhi company come only from its shareholders (members ) and are only used by the shareholders of the Nidhi company.
The Nidhi Company is a class of NBFCs and the RBI is authorized to give instructions on their deposit-taking activities. The fact that the Nidhis only deal with their shareholders, RBI has exempted the Nidhi companies from the core provisions of the RBI Act & other requirements applicable to NBFCs. Therefore, the Nidhi Company is an ideal company to make a deposit from a certain group of people and to lend them.
Nidhi Company Registration
- Company Name Approval
- 3 DIN / 7 DSC
- Incorporation Certificate
- MOA & AOA
- PAN & TAN
- Documents Follow-ups
- Dedicate Relationship Manager for all Support pre & post Registration
Main reasons for registering a NIDHI company
- Separate legal entity: A Nidhi society is a legal person and a legal person that was founded under the law. Therefore, a Nidhi company has broad legal capacity and can own property and also incur debt. The members (directors) of a Nidhi company are not liable to the creditors of a Nidhi company.
- Easy administration: The board of directors of a Nidhi company can easily be changed by submitting simple forms to the Registrar of Companies. The board of a Nidhi company controls the activities of the Nidhi company.
- Uninterrupted existence: A Nidhi company has an “eternal succession,” that is, a continued or uninterrupted existence until it is legally dissolved. A Nidhi company that is an independent legal entity is not affected by the death or other resignation of a member but continues to exist regardless of membership changes.
- Better credibility: A Nidhi company is more credible than a mutual benefit organization. Nidhis are registered and monitored by the Central Govt. The organization for mutual benefits, on the other hand, is monitored & regulated by the governments of the states.
- Liability is limited: The liability of the directors and shareholders of Nidhi Company is limited. If the company suffers losses in the course of its business and gets into financial difficulties, the personal wealth of one of the directors or members is not at risk of being confiscated by banks, creditors and the government.
- Fewer regulations: Nidhi companies are subject to the 2014 Nidhi rules. The central government is the regulatory authority that controls their activities. There are very few guidelines that RBI imposes on Nidhis.
- A better option for savings: The main purpose of founding the Nidhi Company is to promote the habit of saving among members of society. In this way, the other goal of his registration is to be mutually beneficial. The Nidhi companies may only lend and borrow money to and from their shareholders/members.
- Easy access to public funds: Nidhi Company loans are cheaper than loans from banks and other NBFCs. For its shareholders. The process of lending and customized services is much more convenient and faster.
- Easy financing: The Nidhi Company is the safest and cheapest way to invite deposits from the public. You only have to add them as registered members.
- Micro Banking: Nidhis offers banking services to the remote and rural Indian public, which is still located in distant locations and therefore has no access to funding from national banks and NBFCs.
- Better credit union: The Nidhi Company is a close replacement for the credit union. And therefore more preferred by the small financier. Once a Nidhi company is registered, members can take full advantage of the credit union.
- Ease of processing: Loaning to and lending to known people in the same group is much less complicated than dealing with banks where the process is impersonal and fixed.
- Individual regulator: Following the amendment to the Companies Act 2013, Nidhi companies will be monitored by the Nidhi corporate rules.
- Low capital requirement: The Department of Business Affairs (MCA) orders that the minimum capital requirement of Rs. 5 lakhs for Nidhi. And within a year the capital must be increased to at least Rs. 10 lakhs. The fees, DIN, DSC, and other costs are approximately Rs. 25-30,000. This includes government fees, which vary from state to state.
- Meeting the necessities of low and middle-income groups: Nidhi companies play an important role in meeting the needs of low and middle-income groups by offering them financial help without complex formalities and documents.
- Eligible beneficiaries: Individuals who receive minimum wages and belong to lower strata cannot normally take out loans from traditional banks due to their high eligibility criteria. For them, the Nidhi Company is a good option to get funding due to the lower conditions.
- No external involvement: Nidhi companies take funds from their members and continue to lend only to their members All transactions are only carried out within this group. So there are no external factors that affect how these companies work. The investors/members themselves monitor the company’s business activities.
Documents required for registration
- Proof of registered office (property documents/rental or leasing contract)
- No Objection Certificate (signed by the owner/landlord)
- proof of identity
- Proof of address of the members
- Members’ photos
- PAN card copies of the members
- Digital signature (DSC)
- Director Identification Number (DIN) of the directors
- Certificate of incorporation of the company (MoA)
- Articles of Association
- The company’s letter of intent mentions only one subject: “Maintaining frugality and savings among its members, receiving deposits and granting loans only to its members for mutual benefit.”
Forms to be submitted
Two forms must be submitted.
Requirements for obtaining Nidhi status
Within one year of its registration
The Nidhi Company should have at least 200 members within one year of the start
Also, the net funds should be 10 lakh rupees or more. Net funds = equity capital + free reserves (-) accumulated losses (-) intangible assets
Time deposits not debited must amount to 10% or more of the outstanding deposits
The ratio of net funds to deposits should not exceed 1:20
If the Nidhi Company meets all of the above conditions, it should submit NDH-1 along with the required fees within 90 days of the end of the first fiscal year after its inception. The form must be duly certified by CA / CS / CWA.
After submitting NDH-2 to the Regional Director, the extension for another fiscal year can be claimed within 30 days from the end of the first fiscal year.
If it still does not meet the requirements after the second financial year, it cannot accept deposits until it meets the requirements and a penalty is also imposed.
Procedure for registration of the Nidhi company
Although registering a Nidhi company is easy, a professional is advised to fill out, submit, and submit the various complex forms on time. Also, the government portals and language are somewhat difficult.
Step 1: Apply for DIN and DSC
First, the directors of the company must apply for Nidhi DIN (Director’s Identification Number) and DSC (Digital Signature Certificate). DIN is issued by the MCA and DSC is a digital signature that is used for all e-filing processes. This step can be skipped in case the director already has DIN and DSC.
Step 2: Name approval
Now you have to select and suggest MCA 3 different names for your Nidhi Company. Only one of these 3 names will be accepted by MCA for your company. The proposed names must be unique and may not match the names of other companies that are already registered. According to Rule 8 of the Company Law. The approved name is only valid for 20 days.
Step 3: MoA & AoA
Association) and AoA (statutes). These must mention the main goal of starting a Nidhi company as a charity. The MoA and the AoA must be submitted to the ROC (Registrar of Companies) together with the declaration of subscription.
Step 4: Certificate of incorporation (CIN)
It takes between 15 and 25 days to found a Nidhi company and receive the charter. This certificate indicates that a company has been established and the company identification number (CIN).
Step 5: PAN, TAN and bank account
Finally, you have to apply for PAN and TAN. The PAN and TAN are customarily received within 7 working days. You will later need to open a bank account by submitting the charter, MoA, AoA, and PAN to the bank.
Compliance for Nidhi Company
- NDH-3 form: In addition to the NDH-1 form mentioned above, a half-yearly return must also be submitted in the NDH-3 form.
- ROC Annual Return: Nidhi Company must submit their annual return to MCA using Form MGT-7.
- Income statement and balance sheet: The annual accounts and other related documents are to be submitted annually in Form AOC-4.
- Income tax return: Nidhi Company must file its annual income tax return by September 30 of the financial year.
Restrictions on the Nidhi Company
Even though the sole purpose of Nidhi companies is to engage in non-bank monetary activities, they are prohibited from taking risks, performing transactions that affect external factors and the public, etc.:
- Nidhi companies are strictly prohibited from participating in the following types of companies:
- Chit Fund, hire purchase, lease, insurance or purchase of securities issued by a company. Nidhi companies may not conduct any business other than borrowing or lending in their name. 2. General restrictions:
- Nidhi Companies cannot issue shares, bonds or other securities of any name or in any form.
- Nidhi Companies cannot open a current account with their members. Please note that the current account is limited so that you can still open a savings account with the members.
- Nidhi Companies cannot issue or cause advertising in any form to request a deposit.
- Nidhi Companies cannot pay brokerage fees or incentives to mobilize member deposits, use funds, or provide loans.
Other Forbidden activities:
- Promote deposits
- Chit funds
- Lease financing
- Hire purchase finance
- Sell, pledge or pledge the assets held with him as collateral for a loan.
- Entering into a partnership to carry out credit and credit activities,
- Make deposits or lend funds to people other than their shareholders,
- Issuance of preferred shares, debentures or other debt instruments,
- Issue of shares with a nominal value of over Rs. 10 / – each
- Provide depositors with shares over 10 or shares with a value of more than Rs. 100 / -,
- Open a current account with its members (although it is allowed to open a savings account),
- Borrow or take a deposit from a company
- Pay commission, fee or incentive to mobilize deposits,
- Do business other than lending and lending to its members.
- Hire a finance lender,
- Pay a broker to grant a loan to its members.
Frequently Asked Questions
What is the limit for deposits with the Nidhi Company?
A Nidhi company may not accept deposits greater than 20 times it is Net Owned Fund (NOF) by its last audited financial statements.
What is the maximum limit of the savings account?
The maximum balance in a savings account of a member of a Nidhi company should not exceed Rs. 1 lakh. The maximum interest rate that can be paid on deposits should not be more than 2% above the interest rate that nationalized banks have to pay for such deposits.
Can an employee open a Nidhi company?
No rules have been established that prohibit an employee from becoming a director of a Nidhi society. However, your employment contract may mention that you have some restrictions in this regard.
Is a separate office required?
No, the Nidhi Company can be opened at a residential address or a rented address. You do not need a marketplace for a registered address.
You only need:
- Rental agreement together with the last rental receipt (if space is rented).
- NOC from the owner.
- House tax revenue (if the premises are property)
- Electricity bill.
On what basis can the Nidhi Company make deposits?
- Deposits over 20 times his NOF cannot be accepted.
- The term for fixed deposits is at least 6 months to a maximum of 60 months.
- For recurring deposits, it is at least 12 months to a maximum of 60 months.
- The Nidhi Company can invest and continue to invest in unencumbered time deposits with a scheduled commercial bank (other than a cooperative bank or a regional rural bank) or postal deposits in its name, an amount that must not be less than 10% of the closing time on the last working day of the deposits outstanding in the second month before. In some emergencies, the 10% limit can only be lowered with the approval of the regional director.
Who can invest in a Nidhi company?
Only shareholders/members of the Nidhi Company who have a membership card can invest in the program.
How can I become a member/shareholder of Nidhi?
According to the proof of age, you must be at least 18 years old and be a citizen of India to become a member.
How many branches can a Nidhi company open?
A Nidhi company can only open three branches in its district if it has consistently generated after-tax profits in the past three financial years. For each additional branch, Nidhi is first applied for approval by the regional director.
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