Key overview before the Nidhi Company Incorporation
Nidhi Companies in India are created for cultivating the habit of thrift and savings amongst its members. Nidhi companies are allowed to borrow from their members and lend to their members. Therefore, the funds contributed to a Nidhi company are only from its members (shareholders). Nidhi companies are minute when compared to the banking sector and are mainly used to cultivate a saving amongst a group of people.
Nidhi Company Overview
Nidhi Companies are registered Limited Companies involved in taking deposits and lending to their members. The activities of a Nidhi Company do fall under the purview of Reserve Bank of India, as it is similar to an NBFC. However, as Nidhi Companies ONLY deal with shareholder-members money, RBI has exempted Nidhi Companies from the core provisions of the RBI and other regulations applicable to an NBFC.
Registration Process for a Nidhi Company Registration:
The first step in the process of registering a Nidhi Company is to file an application in the RUN facility of the Ministry of Corporate Affairs (MCA) Portal in order to check for availability of name, followed by obtaining the Class 2 Digital Signature Certificate (DSC) of all the proposed Directors.
After successfully completing both the above-mentioned steps, the applicant has to duly fill and submit, in the prescribed form and manner. Such form has to be annexed with the Memorandum of Association (MOA), Articles of Association (AOA), PAN Card, ID Proof and Address Proof of the First Directors, Consent of the proposed Directors to act as Directors and Self Declaration in form DIR-2 and INC-9 respectively, Address Proof of the Company’s Registered Office along with the NOC from the Owner of the Premises as applicable, latest Utility Bills of the Registered Office.
Upon filing the specified Form in the prescribed form and manner, with the prescribed registration fees and stamp duty, the MCA issues the Incorporation Certificate within 15-20 days and such Incorporation Certification shall be conclusive evidence that all formalities have been duly complied with.
Post-registration, a Nidhi Company ought to secure a minimum membership of 200 members within the first year of its operation in order to avoid the “default” status. However, in the event a Nidhi Company is unable to secure membership of 200 members, the Company shall apply to the Regional Director, MCA, for additional time within 30 days of closure of the financial year in the prescribed NDH-2 Form.
Further, upon registration, every Nidhi Company ought to maintain a Minimum Net Owned Fund of Rs. 10 lakhs or more and shall maintain the net owned fund to deposit ratio at 1:20. By net owned fund to deposit ratio is meant if the Nidhi Company has Rs. 20 lakhs as its net owned funds, then the deposit limit for such Nidhi Company shall be Rs. 4 crores.
Documents required for Nidhi Company Registration
Following is the List of Documents required for registering a Nidhi Company in India:
- Directors Identification Number, i.e., DIN
- PAN number of the proposed directors and members
- Residential proof and address proof of the proposed directors and members
- Photographs of the proposed directors and members
- Identification Documents like Aadhar card
- Registered business place proof such as lease or rent agreement
- Ownership proof of the business place in case the premises are owned
- NOC if required
- MOA i.e., Memorandum of Association
- AOA, i.e., Article of Association
The procedure of Nidhi Company Registration in India
The followings are the detailed steps for the procedure of Nidhi Company registration:
1: Obtain DSC and DIN from MCA certified agencies
The first step for all the directors is to obtain the DSC (Digital Signature Certificate) and DIN (Directors Identification Number) from the MCA certified agencies. The said agencies charge standard fees for rendering such services and seek basic documentation for the same. DSC is essentially used to authenticate the document electronically. It is by far the most secure and legit way of signing the e-form and others documents.
2: Name Approval
One needs to suggest the three best names for their Nidhi Company to the MCA, and one of these names will be accepted by the MCA. The name of Nidhi Company should be unique. Such approved name remains valid for 20 days only
3: Application for Registration
Once the name is approved, the directors shall file an application for registration with the Articles of Association (AOA) and Memorandum of Association (MOA).
4: Certificate of Incorporation
It takes 15-20 days for the appropriate authority to grant a certificate for incorporation of a Nidhi Company. This certificate also contains the Company’s Company Identification Number (CIN).
FAQ On Nidhi Company Incorporation
Q 1 How much time will it take to register a Nidhi Company?
Ans It takes only 7-10 days to complete the whole process for registration of Nidhi Company.
Q 2 Do we require any Approval from RBI for the formation of a Nidhi Company?
Ans No, RBI approval is not required for the incorporation of Nidhi Company.
Q 3 Can a Nidhi Company Lend or Borrow Money from any person?
Ans Nidhi Company can Lend or Borrow Money only from its members.
Q 4 Is there any minimum capital requirement for the Registration of Nidhi Company?
Ans Yes, there is a minimum capital requirement of INR 5 lac for the incorporation of Nidhi Company.
Q5. What are the Nidhi Companies not allowed to do?
Ans: Nidhi Companies are not allowed to carry out the following transactions
· Obtaining into a joint venture for lending as well as lending activities
· Hire-purchase business
· Invite and accept deposits out of their own members instead of from other members.
· Acceptance and lending of corporate deposits
· Starting forward for any company other than having to borrow and loaning to its members
· Going to open your current account with your members
· Insurance business
· Lotteries business Activity
· Going to issue debts, preference shares, or some other debt instruments
· Mobilization of deposits, payment rates, benefits, and commissions