A Nidhi Company is a financial company that is not a bank (NBFC). It was founded to allow members to borrow and lend money. It operates on the mutual benefit principle and instils the habit of saving among its members. Southern India is home to the majority of these enterprises. It is a public company. Therefore the last words in its name should be "Nidhi Limited."
Did You know
Nidhi Company does not require a license from the Reserve Bank of India (RBI), making it simple to establish.
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Activities Prohibited in a Nidhi Company
The following are some of the prohibitions that must be obeyed by Nidhi Companies in their activities:
• Nidhi Companies are not allowed to deal with chit funds.
• They are prohibited from providing hire-purchase financing.
• They are unable to deal with leasing finance.
• They are prohibited from doing insurance business.
• They are unable to conduct securities business.
• They cannot accept deposits from anyone other than members.
• They cannot lend money to anyone other than their own members.
Minimum Requirements for Nidhi Registration
There are some minimum requirements that must be met to be eligible to register as a Nidhi Company. These include the number of members, number of shareholders, etc., share capital and net owned funds requirements, etc. The same has been mentioned in detail below:
• The company should be registered under the Companies Act as a Public Limited Company.
• Number of shareholders- At least 7 shareholders are required
• Number of Directors- At least three directors are required in the company.
• Equity Share Capital- A minimum of ₹5 Lakh of equity share capital is required
• There must be at least 200 people working for the company.
• Net Owned Funds- At least ₹10 lakh in Net Owned Funds.
• The company's name should finish with 'Nidhi Limited.'
• The company's goal must be to lend and borrow monies only among persons who have registered as members.
• The corporation should have 10% or more of its outstanding deposits in unencumbered term deposits.
• The company's Net Owned Funds to Deposits ratio must be less than 1:20.
• All directors must supply their Director Identification Numbers (DINs).
Documents Required for Registration as a Nidhi Company
To register a firm as a Nidhi Company, the following files/documents must be submitted:
• NOC from the landlord of the area in which the business is registered
• ID proofs
• Address proofs for members
• Photos of the members of the company
• DSC (Digital Signature Certificate) of the company
• Member’s PAN cards copies
Forms to be Filed for Nidhi Limited Registration
Certain forms are required to be filed by the Company which wishes to get itself registered as a Nidhi Company. These forms are given below-
• INC 9: All subscribers to the Memorandum of Association must file the INC 9 form (MoA)
• DIR 2: The DIR 2 form must be completed by all of the company's directors.
All subscribers must sign a declaration by Nidhi regulations 2014 rules 5 and 6.
Conditions to be Fulfilled for Obtaining the Nidhi Company Status
Within 1 year of registration as a NIDHI company, the following requirements need to be ensured by the Nidhi Company.
- They must have at least 200 members.
- Its net owned funds must be at least ₹10,00,000.
- Unencumbered term deposits should account for at least 10% or more of total deposits.
- The net owned funds to deposits ratio cannot be more than 1:20.
Note- Meaning of Net owned funds – these comprise Equity share capital free reserves (-) accumulated losses (-) intangible assets.
If the Company meets the above mentioned requirements, it must file form NDH-1 together with the required charges within 90 days of its incorporation. A practising CA, CS, or CWA must correctly certify the form.
By submitting NDH-2 to the Regional Director within 30 days after the first financial year's end, a second financial year can be requested.
Note - If the Nidhi Company fails to satisfy the requirements after the second financial year, it will be unable to accept deposits until it achieves the requirements, and a penalty will be imposed.
Procedure for Incorporation as a Nidhi Company
- RUN facility for name approval: The applicants must use the MCA portal's RUN facility to submit their name availability. Every company that wishes to be incorporated as a "Nidhi" must include the words "Nidhi Limited" in its name. For name availability, the applicant's digital signature is no longer required.
- Mandatory DSC requirement: The prospective Directors, who may also be Nidhi Company Promoters/Applicants, should get a Class 2 DSC.
- New form SPICe32: After the name has been approved, file form SPICe 32 with the accompanying attachments for Nidhi Company incorporation:
- MOA (Memorandum of Association)
- AOA (Articles of Association)
- Subscriber’s PAN card
- Id Proof & Address Proof of First Directors
- Proof of Address of Registered Office, i.e., rent deed of the sale deed
- Latest Utility Bill of Registered Office (Electricity/Telephone/Gas)
- NOC of Owner of Registered Office
- Declaration on and Consent from the first Director in form DIR-2
- Self-Declaration from First Directors and Subscribers in form INC-9
- COI (Certificate of Incorporation) after approval After all of the paperwork has been filed, and the registration money and stamp duty have been paid, the incorporation certificate of Nidhi Company will take 15-20 days to arrive. Incorporation certification is proof that all of the legal requirements for incorporation have been met.
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The Advantages of Forming a Nidhi Company
By registering as a Nidhi Company, you can take advantage of several advantages.
These benefits can be summarised as follows:
- Legal Status - The registration of a corporation as a Nidhi Company establishes its legal existence. Such a company can purchase or dispose of assets in its name because it is a separate entity from its members.
- Members have limited liability - The company's members' obligations will be limited based on the amount they invest or contribute. The members will only be liable for their proportionate part of the firm. Members' liabilities cannot be utilised to cover the company's obligations.
- Funds Availability: Members can borrow at cheaper interest rates from funds donated by themselves.
Branches of Nidhi Company
Yes, a Nidhi Corporation may have branches. Nevertheless, to be qualified to open a branch, the business must adhere to the following guidelines:
- The Nidhi Corporation will be authorised to open offices only if it has consistently produced net profits after taxes for the previous 3 financial years.
- Nidhi Company can have only three branches. All of these locations must be located in the same area.
- If a Nidhi Company wants to open more than three branches, it must first request and receive approval from the Regional Director. These branches can be in the same area or a different one. Every branch must notify the registrar within 30 days of its opening.
A Nidhi Company is a non-banking financing firm supervised by the central government. A Nidhi Limited Company Registration’s primary function is to facilitate the easy loan of money amongst the numerous key members of the concerned company. The process of obtaining Nidhi Company Registration is simple and requires the fulfilment of certain conditions. It can be done through an online process.
We hope that this article has explained to you in detail about the Nidhi Company, its requirements, documents to be filed, and the registration process.