Nidhi Company Registration

Introduction

Nidhi Companies are a type of Mutual benefit society which is included in the category of NBFC (Non-Banking Financial Companies). Since Nidhi companies comes under one class of NBFCs, therefore RBI is empowered to issue directions. However, since Nidhis deal with their shareholder-members only, therefore RBI has exempted the notified Nidhis from the core of provisions of RBI Act and other directions applicable to NBFCs.

Nidhi Companies are regulated by the Ministry of Corporate Affairs (MCA). Due to the fact that their operations are limited to their members therefore there are certain provisions of the Act, which are applicable on other companies but not Nidhi Companies.

As per Nidhi Rules 2014, Nidhi means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings  amongst its members, receiving deposits from and leading to its members only for their mutual benefit and which complies with such rules as may be prescribed by the CG for regulation of such class of companies.

 CHECKPOINTS TO REGISTER A NIDHI COMPANY

• It shall be a public company
• It shall have minimum 3 directors and 200 members
• Shall have minimum Net owned funds of Rs.10 Lakh
• Shall have last words “Nidhi Limited” After its name
• Unencumbered term deposits of not less than 10% of the outstanding deposits as specified in rule 14
• Ratio of Net owned funds to deposits of not more than 1:20
• It shall not issue any preference shares or debentures or any other debt instrument by the name by whatever name called.

 

DOCUMENTS REQUIRED FOR NIDHI COMPANY REGISTRATION

• For subscribers and Directors- 

• Self-attested copy of PAN card Mandatory
• Self-attested copy of Aadhaar card, Voter ID/Driving license/Passport
• Proof of Address- Rent agreement, sales deed, Latest bank statement/ telephone bill/ Mobile Bill/ Electricity bill (not older than 2 months) 

• For the registered office of the company-

• Rent agreement or sales deed or NOC from the owner (in case the owner is a subscriber or director)
• Telephone bill/ Mobile bill/ gas bill (not older than 2 months)

As a general expression in Hindi, 'Nidhi' means 'wealth'. As far as non-banking finance is concerned, the meaning isn't very different. Companies called Nidhi Companies are formed when a group of people pool their funds together in order to form one large corpus fund for the sole purpose of lending money to members of the company. A reasonable rate of interest is usually offered on these loans, which is lower than the market rate. In most cases, these loans are used for personal reasons. Collateral assets are usually used as security for these loans.

Permanent Funds, Benefit Funds, Quasi Banks, Mutual Benefit Funds, and Mutual Benefit Companies are also commonly known as Nidhi Companies. Compared to organised banks, Nidhi companies raise much less deposits since most of their funds come from the members. The RBI has the authority to give directions to Nidhis on matters related to their deposit acceptance activities since Nidhis are classified as NBFCs. In view of the fact that Nidhis deal exclusively with their shareholders, RBI has exempted them from the core provisions of the RBI Act and other directions applicable to NBFCs.

 NIDHI COMPANY REGISTRATION APPLICABILITY

A set of Nidhi Rules, 2014, was made by the Central Government for the purpose of making Nidhi companies able to achieve their objectives. Application of these rules shall be limited to:

• In accordance with Section 620A(1) of the 1956 Companies Act, a Nidhi or Mutual Benefits Trust is established.
• Companies that function as Nidhi companies or Mutual Benefit Societies but have not applied for or have applied and are awaiting notification to become Nidhi companies or Mutual Benefit Societies as defined in Section 620A(1) of the Companies Act, 1956.
• Companies incorporated as Nidhis in terms of Section 406 of the Companies Act, 2013 are considered Nidhi entities.

 NIDHI COMPANY: THINGS TO KEEP IN MIND

In order to start a Nidhi Company, there are some important basics you should know. The benefits that you can enjoy if you start a Nidhi company can encourage business owners to start one. A Nidhi company is subject to certain restrictions and deposit requirements. When you're new to Nidhi company, you need an understanding of the company.

 WHY YOU SHOULD REGISTER A NIDHI COMPANY IN INDIA?

Nidhi companies have a number of advantages when registered in India:

• In accordance with the Nidhi Rules, 2014, Nidhi Companies can lend and receive deposits only from members. This makes them less risky than similar businesses in that loan defaults are less likely to occur.
• Additionally, since all financial activities are limited to members, external factors are less likely to adversely affect the functioning of such companies.
• By registering them as members, you can invite deposits from the general public the safest and easiest way possible.

 

THE NIDHI COMPANY NEEDS TO MEET THE FOLLOWING REQUIREMENTS

• A Nidhi company that is required to be incorporated under this Act must be a public company.
• A minimum paid-up equity share capital of Rs. 5,00,000/- is required.
• Preference shares will not be issued. Prior to the commencement of this Act, such preference shares were already issued by Nidhi Companies. They must be redeemed as per their terms.
• As a result of such a firm, members would be imbued with a habit of thrift and saving, and the services would only be available to them.
• Nidhi Limited must be included in the name.
• Each Nidhi shall have at least 200 members within one year of the commencement of Nidhi Rules, 2014.
• Moreover, it must ensure that its net owned funds are equal to or greater than Rs. 10,00,000/- (net owned funds refers to the aggregate of paid up equity shares and free reserves, as reduced by accumulated and intangible assets appearing on the last audited balance sheet.
• A ratio of 1:20 must also be maintained between net owned funds and deposits.
• There should be at least 10% of unencumbered term deposits among outstanding deposits, according to Rule 14.

Nidhis that adhere to all these rules may rent locker facilities to their members if they follow all of their provisions. During a financial year, the Nidhi must not spend more than 20% of its gross income on rent.