Nidhi Company Registration
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About Nidhi Company
A “Nidhi company” is a company that manages “deposits from and loans to” it’s members (shareholders) only, and works for their mutual benefits.
Accordingly, certain exemptions have been provided to a “Nidhi Company”, in respect of annual compliances and tax assessment.
Nidhi Companies in India are formed, administered, and controlled by Section 406 of the new, “Companies Act, 2013”, the Companies (Nidhi Companies) Rules of 2014, and the Chapter XXVI of the Companies Rules, 2014
The objective of incorporating a Nidhi Company is to encourage savings among its members. Nidhi companies are allowed to take a “deposit from and lend to” it’s members only. At the end of the day, the assets added to a Nidhi company come distinctly from its members and are to be utilized uniquely by the investors of the Nidhi Company.
The name “Nidhi” in Nidhi Company signifies “treasure” and it has its roots in the Hindi vocabulary.
Nidhi Company is a specific class of NBFC. Though not directly regulated by the RBI, still RBI has powers to issue directives for them related to their deposit acceptance activities. Moreover, because these “Nidhi companies” deal with their members (shareholders) only, they have been exempted from the core provisions of the RBI Act and other directions applicable to NBFCs. Accordingly, a Nidhi Company is a perfect lawful element to take a “deposit from and loan to” a particular gathering of members.
Nidhi Company Registration
Section 406 of the “Companies Act, 2013” and the Companies (Nidhi Companies) Rules of 2014, provide all the arrangements concerning the joining and administration of a Nidhi Company in India.
The rules and directives for the Nidhi Companies are likewise given by the RBI. These are chiefly identified with financial activities and investments by companies including the NBFCs.
The interest charged on loans under a Nidhi Company is very sensible. The advances are given against security as it were. The deposits under Nidhi do not earn much interest as compared to deposits in the sorted out banking sector.
All lending and borrowing of the Nidhi Companies are done by its members, exclusively. Consequently, such organizations additionally allude to Mutual Benefit Societies.
In the event when you are hoping to begin a business in financing or advances in India, a Nidhi Company is the best choice for it.
Documents Required
Passport Sized photographs of all the directors.
ID proof of all the designated directors and shareholders. (PAN card and Passport are valid).
Address proof of all the directors and members (Ration Card, Aadhaar Card, Passport, Voter ID, and Utility Bill – electricity/water/mobile).
Address Proof of the Company. Make sure that the address proof is not older than 2 months.
Copy of the Property papers (if the property is owned).
NOC (No-Objection-Certificate) from the owner (if the property is rented).
Benefits of Starting a Nidhi Company
The main objective behind building up a Nidhi Company is to urge its members to save so that they can easily meet their monetary requisites emerging from time to time. By being thrifty they become independent and would meet any future expense. And the advantage of getting a company enlisted as Nidhi doesn’t end here.
There are many favourable benefits of forming a Nidhi Company. Some are listed below:
- ✔ Liability is Limited: The liability of Directors and investors of a Nidhi Company is limited. The individual resources of any of the Directors or members are not in danger of being seized by banks, creditors, and government.
- ✔ Fewer Regulations: Nidhi organizations are administered under the Nidhi Rules, 2014. The Central Government is the directing power, and it only controls it’s exercising and working. Not many Rules are enforced by the RBI on a Nidhi company.
- ✔ Better Credibility: Nidhi companies offer better credibility instead of some other member-based associations like “Trusts, Cooperative Societies, or NGOs.”
- ✔ Better Option for Savings: The main purpose of a Nidhi Company’s incorporation is to encourage the habit of saving among the members (shareholders) of the Company. This is how it achieves the other goal of being mutually beneficial. The Nidhi Companies are allowed to lend and borrow money from it’s members (shareholders) only.
- ✔ Easy Access of Public Funds: The loans from the Nidhi Company comes at a less expensive rate than advances from banks and other NBFCs.
- ✔ Micro Banking: Nidhi companies give banking services to the remote and rural public of India, who are still located in far-off lands.
- ✔ Better Credit Co-operative Society: A Nidhi Company is a nearby substitute for a credit co-employable society. Furthermore, it is increasingly favored by the small financers. When a Nidhi organization has been enlisted, the members can profit from a considerable number of advantages of credit co-operative society.
- ✔ Simple Processing: Borrowing and lending to known people is substantially less confusing than managing banks, where the method is generic and fixed.
- ✔ Easy Registration Process: The procedure to enroll a Nidhi Company with LegalRaasta is very easy and transparent. You don’t have to take any permits from RBI. You simply need to incorporate your organization as an open constrained, with the MCA.
- ✔ Single Regulatory Body: After the Amendment in Companies act 2013, Nidhi Companies are supervised by the Nidhi Company Rules, 2014.
- ✔ Low Capital Requirement: Ministry of Corporate Affairs (MCA) orders that the base capital requisite is Rs.5 lakhs for a Nidhi company. And, within 1-year, the capital has to be raised to be at least Rs.10 lakhs. The “Fees, DIN, DSC & Other Expenses” are approximately Rs.25-30,000. These include Government fees that, differ from State to State.
- ✔ Fulfilling the needs of Lower & Middle-income groups: Nidhi Companies assume a significant job in addressing the needs of lower and middle-income groups by giving them money related assistance without complex formalities and documentation.
- ✔ Easier Eligible: People getting minimum wages and belonging to lower strata are usually unable to take loans from traditional banks because of their high eligibility criteria. For them, a Nidhi Company is a good option to obtain finance because of the fewer conditions.
- ✔ No External Involvement: Nidhi Companies take assets from their members and further gives credit to it’s members. In this way, no outer variables are influencing the work of these organizations. The financial members themselves direct the tasks of the organization.
- ✔ Separate Entity: A Nidhi Company is a separate legal entity that can acquire assets and incur debts in it’s own name.
What is included in Our Nidhi Company Registration Package
DIN for 3 Directors
Digital Signature For 3 Directors
Name search & approval
MOA/AOA
Registration Fees
Company Pan Card
Key Features
Few points about the working of Nidhi Companies in India, as cited in Rule-6 of the Nidhi Rules of 2014, are critical to note:
- ✔ It can’t convey any of the following types of exchanges, such as “chit fund, leasing finance, insurance, or acquisition of securities” issued by any corporation.
- ✔ It can’t acknowledge deposits or offer advances to someone outside the company.
- ✔ A Nidhi Company isn’t engaged to give ‘inclination offers, debentures, or some other obligation instruments” in any structure.
- ✔ Companies Act, 2013 and Nidhi Rules, 2014 are the administering bodies and they only control the activities of a Nidhi Company in India.
- ✔ A Nidhi Company doesn’t go under the purview of the RBI.
- ✔ It isn’t designated for performing vehicle fund business or microfinance business in India.
- ✔ Within a year of enrollment, the number of members must be at a rate of 200.
- ✔ A maximum interest rate of 20% p.a. (calculated by the reducing balance method) can be charged.
- ✔ The maximum rate of interest that can be offered on a savings deposit account shall not exceed 2% above the rate offered by the Nationalised Banks.
- ✔ A Nidhi Company can acknowledge FD, RD, and reserve funds. It can also earn an interest of 12.5% as of now.
- ✔ The rate of interest that can be offered on Fixed and Recurring Deposits must not surpass the maximum rate of interest, prescribed by RBI for the NBFCs to be offered on deposits. The maximum limit of interest for NBFCs are also applicable to the Nidhi companies.
- ✔ Activities are restricted to a regional level for the initial 3 Years. After fulfillment of 3 years, 3 workplaces can be set up inside a similar area. For development out of the region, an earlier endorsement from the Regulator Director is required.
- ✔ It can only give loan against securities. These securities may be “Gold, Property, Fixed Deposits, Government Securities, or Life Insurance Certificates.”
- ✔ Unencumbered deposits (Deposits that aren’t offered as securities for any purpose) should not be less than 10 % of outstanding deposits.
- ✔ Filing of “Audit, Tax Returns, and Annual Accounts” in the best possible configuration is necessary.
Procedure for Nidhi Company Registration
Though the process of enrolling a Nidhi Company is easy to handle. Still, help from an expert is encouraged to finish different forms and to file them within time.
Furthermore, LegalRaasta is a specialist in Nidhi Company Incorporations, with more than 7 years of involvement in the field and effectively enlisting more than 500 Nidhi Companies. Our operations are spread all over India.
Step 1: Applying for DIN and DSC
To begin with, the Directors of the Nidhi Company have to apply for DIN (Director’s Identification Number) and DSC (Digital Signature Certificate).
DIN is given by the MCA and DSC is a digital signature used for an all e-filing process. This progression can be skipped for the Directors who have both DIN and DSC.
Step 2: Name Approval
Presently, you have to pick and propose 3 distinct names to MCA for your Nidhi Company. Out of these 3 names, just one will be acknowledged for your Company by MCA. The proposed names must be special and not similar/identical to the names of previously enlisted organizations. According to Rule 8 of the Companies Act, The affirmed name will stay legitimate for 20 days.
Step 3: MoA & AoA
These must specify the main motive of incorporating a Nidhi company. The “MoA and AoA” are to be filed with the ROC (Registrar of Companies) along with a subscription statement.
Step 4: Certificate of Incorporation (CIN)
It takes between 15-25 days to frame a Nidhi company, and to get the incorporation certificate. This certificate proclaims that an organization has been made and it specifies the company identification number (CIN) too.
Step 5: PAN, TAN and Bank Account
Lastly, you need to apply for both “PAN and TAN”. The PAN and TAN are usually received within 7 working days. Later, you have to get a bank account opened by submitting the “Certificate of Incorporation, MoA, AoA, and PAN” to the bank.
Important Points
Minimum Requirement
- A Section 8 Company gets incorporated by the MCA.
- All necessities of the Companies Act 2013, for example, the minimum number of Directors and Shareholders, and so on must be met with.
Charitable Object
- Section 8 Companies can be built up for non-benefit goals only. Any benefit earned or income received by this Company is not to be dispersed among its individuals.
- This infers the pay will either be reinvested in the business or used for the advancement of its fundamental items, for example, charitable reason.
Companies Act, 2013
must follow the arrangements recommended under the Companies Act, 2013. Maintaining Book of Accounts, Return Filing, Audits, Board Meetings, and so on.
MoA & AoA
A Section 8 Company will not roll out any improvements to the arrangements of its MoA and AoA without looking for an endorsement from the Central Government first.
Voting Rights
The voting rights of the investors of a Section 8 Company depend on the number of shares held by them. Like that of some other organization.
Income tax
The Company needs to follow the arrangements of the Income Tax Act.
GST Registration
On the off chance that Section 8 Company goes under the domain of the GST Act, it must get registered with GST.
Conversion
It may not change over itself to some other sort of organization structure without conforming to conditions, as material.