NIDHI COMPANY REQUIREMENTS AND REGISTRATION PROCESS
Updated: Sep 11, 2020
What is Nidhi Company ?
A Nidhi Company, is one that belongs to the non-banking Indian finance sector and is recognized under section “406” of the Companies Act, 2013. Their core business is borrowing and lending money between their members. Nidhi Companies are created for cultivating the habit of saving amongst the members.
Nidhi Companies can accept/lend funds only from/to its members. They are regulated by Ministry of Corporate Affairs, Section “406” of Companies Act 2013 and Companies (Nidhi Companies) Rules, 2014 govern Nidhi companies. Reserve Bank of India is empowered to issue directions to them in matters relating to their deposit acceptance activities, However as Nidhi Companies only accept/lend funds only from/to its members, RBI has exempted Nidhi Companies from the core provisions or regulations applicable on NBFC.
You can download Exemption Notification in this regard: https://rbi.org.in/scripts/NotificationUser.aspx?Id=225&Mode=0
Requirements for Nidhi Company:
(A) Requirements under Nidhi Rules, 2014
The name must contain “Nidhi Limited”;
Nidhi company that has to be incorporated under this Act shall be a “Public Company”;
We can register Nidhi company with minimum paid up equity share capital of Rs five laks but It must have a minimum net owned fund of Rs 1,000,000/- so it's better to register your Nidhi with initial equity capital of Rs 1,000,000;
There will be no issuances of preference shares by Nidhi Company. (If such shares had already been issued by a Nidhi Company before commencement of this Act, such preference shares are to be redeemed in accordance with the terms of issue of such shares);
The objective of Nidhi would be to imbibe in the members a habit of thrift and saving and the services would only be restricted to its members;
(B) General Requirements:
Minimum 7 subscribers/shareholders to incorporate and subscribe moa of Nidhi Company
Minimum 3 Directors (Directors and subscribers/shareholders can be same persons, so you need total 7 persons only)
DIN (Director Identification Number) of all directors if they have valid DIN otherwise it will be allotted during incorporation of Nidhi Company.
Make sure proposed directors aren’t disqualified by registrar.
Make sure proposed subscribers are eligible to become a member of company.
DSC (Digital signature certificates) of all directors and subscribers.
Valid premises address for communication and/or registered office.
Post Incorporation Requirements for Nidhi Company:
(A) Requirements under Nidhi Rules, 2014
Every Nidhi must, within a period of one year from the commencement meet all of the following criteria:
It must have minimum 200 members,
It must also ensure that net owned funds are Rs. 1,000,000/- or more, (‘Net owned funds’ mean the aggregate of paid up equity share capital and free reserved as reduced by the accumulated and intangible assets appearing in the last audited balance sheet),
It must also ensure that the ratio of net owned funds to deposit is not more than 1:20.
It must have unencumbered term deposits of not less than 10% of the outstanding deposits.
If the Nidhi Company satisfies above conditions, The Company shall within 90 days from the close of first financial year after incorporation, file NDH-1 duly certified by a Practicing CA/CS/CWA along with the prescribed fees.
In case at the end of first financial year Nidhi is not able to meet (1) and (4) requirements, Nidhi Company shall within 30 days from the close of first financial year, apply to the Regional Director for extension of time in form NDH-2 along with the prescribed fees.
If even after second financial year Nidhi is not able to meet the above requirements, then the Nidhi Company shall not accept any further deposits till it complies with the provisions, and Nidhi will be liable for penal consequences .
(B) General Requirements:
Appointment of Auditor and Opening bank account and deposit subscribtion amount.
Filing of business commencement form and appointment.
Printing of MOA/AOA, Share Certifiactes and Other books and stationery required under Companies Act, 2013.
Printing of Stationery required for operations of Nidhi. (Membership Application, Saving Account, RD Account, FD Account forms, deposit and withdrawal slips etc.)
Compliances (Annual and event based under Companies Act, 2013 and other applicable rules)
Filing of Nidhi Forms (NDH-1, NDH-2, NDH-3 and NDH-4)
Tax Returns and other applicable compliances.
Other applicable compliances
Required Documents for Nidhi Company Registration
· Copy of PAN of Directors and Shareholders.
· Copy of Aadhar
· Copy of ID Proof of Directors and Shareholders. (Voter ID, Driving License, Passport)
· Copy of Address Proof of Directors and Shareholders (Bank Statement/ Electricity bill/ Mobile bill/ Telephone Bill)
· Passport size Photographs.
· Mobile No and Mail IDs of Directors and Shareholders
· Property Ownership Documents of Registered office premises:
Ø If property is owned: Electricity bill + Ownership Documents + NOC (if required)
Ø If property is rented: Electricity bill + Rent Agreement + NOC
Apart from all these documents, Some other required documents will be prepared by your Corporate Professional i.e. CA/CS for submission to ROC.
Process of Registration of Nidhi Company
Usually Nidhi Company Registration Process takes upto 20 days, Registration of a Nidhi Company consists the following steps:
1. Minimum 7 Members and 3 Directors will be required to start the Incorporation of Nidhi Limited.
2. Apply for DSC.
3. After getting DSC, Start an application under SPICe+ mechanism and submit Part-A to MCA for reservation of name of Nidhi Company.
4. Once the name is approved, Prepare Memorandum of association and Articles of Association according to Nidhi objects and all other required documents carefully.
5. Apply for Incorporation under SPICe+ mechanism and submit Part-B
(Part B ofSPICe+offers following services viz. (i) Incorporation (ii) DIN allotment (iii) Mandatory issue of PAN (iv) Mandatory issue of TAN (v) Mandatory issue of EPFO registration (vi) Mandatory issue of ESIC registration (vii) Mandatory issue of Profession Tax registration(Maharashtra) (viii) Mandatory Opening of Bank Account for the Company and (ix) Allotment of GSTIN (if so applied for).)
6. Get Incorporation Certificate and other intigrated registrations.
Restrictions on Nidhi Companies
There are some restrictions on Nidhi Companies under Nidhi Rules, 2014. According to Rule ‘6’ of Nidhi Rules, 2014, a Nidhi Company shall not:
1. Carry on the business of-
· Chit Fund,
· Hire Purchase finance,
· Leasing Finance,
· Insurance or Acquisition of Securities issued by anybody corporate.
2. Issue Preference Shares, Debentures or Any other debt instrument by any name or in any form whatsoever.
3. Open any Current Account with its members.
4. Acquire another company by Purchase of securities or control the composition of Board of Directors of any company in any manner whatsoever or enter into any arrangement for the change of its management unless it has approved by a Special Resolution in its general meeting and also obtain the prior approval of Regional Director.
5. Carry on any business other than borrowing/lending in its own name.
(Nidhi which have adhered to all the provisions of Nidhi Rules may provide locker facilities on rent to its members on rental basis, but the rental income from such facilities not exceed 20% of the gross income of the nidhi at any point of the time.)
6. Accept deposits from or lend to any person, other than its members.
7. Pledge any of the assets that have been lodged by its members as security,
8. Take Deposits from or lend money to any body corporate,
9. Enter into any Partnership Arrangement in its borrowing or lending activities,
10. Issue or cause to be issued any advertisement in any form for soliciting deposit,
(Private circulation of the details of Fixed Deposit Scheme among the members of Nidhi carrying the words “ For Private Circulation to Members only” will not be considered as an advertisement.)
Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans.
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