Nidhi Company Registration

DOCUMENTS REQUIRED TO REGISTER A NIDHI COMPANY

1. Digital Signature Certificate (DSC)

2. Directors Identification Number (DIN)

3. PAN card of the members.

4. Residential Proof of members

5. Passport Size Photos of all members

6. Document for Identity Proof (Pan Card/ Aadhar card)

7. Proof of registered place of business (rent agreement/ lease agreement or electricity bill if owned by the member).

8. No Objection Certificate (signed by the owner)

9. Memorandum of Association (MOA)

10. Article of Association (AOA)

HOW TO INCORPORATE A NIDHI COMPANY IN INDIA?

To incorporate a Nidhi Company in India, Minimum of seven members are mandatory, out of which three members should be the designated directors of the company.

For incorporating a Nidhi Company, it is necessary to have a minimum of Rs. 5 lakh equity share capital and it cannot issue preference shares.

The object mentioned in the Memorandum of Association should be “cultivating the habit of thrift and savings among its members, and also accepting deposits and lending funds to its members only for their mutual benefit.”

Members should apply for the Digital Signature Certificate first.

After acquiring the DSC, the applicant should apply for the Director Identification Number.

Next, the members have to make an application to ministry of corporate affair for name approval. The names applied should be unique and does not go against any provisions relating to intellectual property rights and should suffix the word “Nidhi Company” in its name.
Once the proposed name is approved, the applicant needs to file the related documents to the registrar of companies. The application must be filed through Form SPICe+ with attachment INC 9 (to be filed by all the subscribers to the Memorandum of Association (MOA), DIR 2 (to be filed by all the directors of the company, Declaration as per rule 5 & 6 of Nidhi rules 2014- to be signed by all the subscribers) and along with this, MOA and AOA should be submitted.

After verifying, the Registrar of Companies will issue the Incorporation Certificate if no objection was raised and the business can be commenced.

Next Nidhi Company is required to apply for PAN and TAN.

Once the incorporation process is done members can open a Bank account on behalf of the business for any transaction.

POST INCORPORATION THE NIDHI COMPANY SHOULD MEET THE FOLLOWING CONDITIONS:

Nidhi Company should fulfill the below given conditions within one year of its registration:

• It should have minimum two hundred members within one year of its commencement.

• The net owned funds should be 10 lakh rupees or more.

• It should have unencumbered term deposits of 10 percent or higher of the outstanding deposits.

• The ratio of net owned funds to deposit should not be more than 1:20.

  Net Owned Funds = Equity share capital + free reserves - accumulated losses - intangible assets.

• If at the end of one year from commencing, the Company was unable to meet the above requirement then the Company can apply to the Registrar in Form NDH-2 for an extension of time within thirty days before the end of the first financial year.

• If even after the second financial year the Nidhi Company was not able to fulfill the requirements, then the Company should not accept any further deposits until it complies with the Provisions for operating as Nidhi Company.

POST INCORPORATION COMPLIANCES FOR A NIDHI COMPANY

Nidhi Company should work on the following compliances after its incorporation:

• FORM NDH 1

  Nidhi Company should file Form NDH-1 along with prescribed fees within 90 days from the end of the first financial year after incorporation. Form NDH 1 contains the list of its members. The form should be duly certified by practicing professional (CA/ CS/ CWA.)

• FORM NDH 2

  In case of requirement of an extension to meet the target of 200 members, Nidhi Company needs to file the Form NDH 2 to the Regional Director within 30 days from the end of the first financial year.

• FORM NDH 3

  Nidhi companies needs to file its half yearly returns in form NDH 3.

• FORM AOC 4

  Nidhi companies needs to submit it profits and loss statement and Balance sheets as per the requirements of the Company on an annual basis in form AOC 4 to registrar of companies.

ADVANTAGES OF REGISTERING NIDHI COMPANY

• As nidhi companies work for the mutual benefits of its members there is no external interference in the company’s management.

• It is easy to lend money to or raise capital or borrowings from group of its members.

• There are less Compliance as compared to other forms of entities.

• There are many privileges and exemptions available for Nidhi Company under the provisions of the companies act, 2013.

• RBI has minimal involvement in nidhi company operations.

• Nidhi Company has the status of separate legal entity.

• Nidhi Company’s main objective is to fulfill the financial requirements of the lower and middle-income groups of its members.

• Under the Companies act, this form of entity would secure the status of limited liability.

• Compared to the credit societies that are regulated by the society’s registration Act, there are less Compliance for Nidhi Companies. Hence, when an individual wants to adhere to less compliance, he can opt for Nidhi Company.

RESTRICTIONS ON NIDHI COMPANY

Nidhi Companies have some limitations with it. As per rule 6 of the Nidhi Rules, 2014, a Nidhi Company shall not:

• Dealing with the business of Chit funds, hire purchase finance, leasing finance, insurance or acquisition of securities business,

• Issue preference shares, debentures, or any other debt instrument in any form whatsoever,

• Opening of current account with its members,

• Accepting deposits and lending funds to other than its members,

• Takeover another Company by the purchase of securities or control the constitution of the Board of Directors of any other Company in any manner whatsoever,

• Enter into any arrangement for the change of its management, unless it has passed a special resolution in the general meeting and also obtain the prior approval from the Regional Director which has the jurisdiction over such Nidhi Company.

• Pledge away any of the assets lodged by its members as security,

• Enter into any partnership arrangement in borrowing or lending activities,

• Advertise in any form for summon of any deposits,

• Pay any brokerage or incentive for call up deposits from members or for the distribution of funds or granting loans.