Incorporation process of Nidhi company in India

Dhaval Gusani  on 05 January 2019


What is Nidhi Company?

Nidhi Company is governed by Section 406 of the Companies Act, 2013 and Company Nidhi Rules, 2014 which has a sole objective of cultivating the habit of thrift and savings amongst its members. Nidhi companies are allowed to take deposit from its members and lend to its members only. Therefore, the funds contributed for a Nidhi company are only from its members (shareholders) and used only among the shareholders of the Nidhi Company.

Nidhi Company is a class of NBFCs and RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhis deal with their shareholder-members only, RBI has exempted the notified Nidhis from the core provisions of the RBI Act and other directions applicable to NBFCs. Therefore, Nidhi Company is an ideal entity to take deposit from and lend to a specific group of people.

Pre-Registration Requirements

• Minimum 7 Members;
• Minimum 3 Directors;
• No Minimum Capital Requirement;
• No Preference Shares allowed to issue;
• The object of the company shall be receiving deposits from and lending to its members only for their mutual benefits.

Post-Registration Requirements

• Minimum 200 Members within 12 months of registration

A Nidhi company must add at least 200 members to comply with this requirement of law. Further, it has to maintain this during the course of time. If the total members falls less than 200 at anytime thereafter, it will leave the company at default. However, if you are not able to reach the limit of 200 members, then you must apply for time within 30 days of closure of financial year in Form NDH-2 with Regional Director, Ministry of Corporate Affairs.

• Minimum Net Owned Fund (Paid Up Share Capital + Free Reserves) of 10 lakh or more

• Unencumbered term deposits of not less than 10% of the outstanding deposits.

• A Nidhi Company shall not admit a body corporate, trust or minor as a member.

• Net owned funds to Deposits should be 1:20 i.e if you have net owned funds of 10 lakh, then your total deposit limit would be INR 2 Crore.

Process of Registration

1. Name Approval in ‘RUN' facility

The Applicants are required to file name availability in RUN facility of MCA portal. Every Company proposed to be incorporated as a 'Nidhi' shall have the last words ‘Nidhi Limited' as part of its name. Now, one doesn't require digital signature of applicant for name availability.

2. Obtaining Digital Signature Certificate (DSC)

The proposed Directors who may also be the Promoters/Applicants of Nidhi Company have to obtain Class 2 DSC.

3. File form SPICe32

After the name approval, File form SPICe 32 with following attachments for incorporation of Nidhi Company.

• Memorandum of Association
• Articles of Association
• PAN Card of subscribers
• Id Proof of First Directors
• Address Proof of First Directors
• Address Proof of Registered Office (Rent Agreement/Sale Deed)
• Latest Utility Bill of Registered Office (Electricity/Telephone/Gas)
• NOC of Owner of Registered Office
• Consent and Declaration from first Director in form DIR-2
• Self Declaration from First Directors and Subscribers in form INC-9

4. Approval and Certificate of incorporation

It will take 15-20 days to get the incorporation certificate of Nidhi Company once all the documents have been filed and registration fee and stamp duty paid. Incorporation certification is a proof that all the formalities regarding the incorporation have been complied with.

Documents Checklist for Incorporation of Nidhi Company

Following Documents require from Members/Directors

• Copy of PAN Card
• Passport size photograph
• Copy of Aadhaar Card
• Bank Statement/Electricity Bill/Telephone Bill

Proof of Registered office

• Copy of Rent agreement of office premises executed on the name of Company.(If rented property)
• Copy of latest Electricity/Water/Gas/Telephone bill of registered office
• NOC from Landlord that he has no objection for using his premises as the registered office of Company.

Other Declarations and Affidavits from proposed 1st Directors of Nidhi Company in the prescribed Format.

Prohibitions

Nidhi Company can't enter into following transactions:

• Continuing business of chit fund, leasing finance, insurance, hire purchase or acquisition of securities issued by any corporate body;
• Business other than borrowing and lending in its own name. Nidhi Company offers lockers on rent to its members subjected to rental income from such facilities not exceeding 20% of the gross income of the Nidhi at any time during the ongoing financial year;
• Accept deposits from any other members, other than its own members;
• Pledge any of assets lodged by its own members as security;
• Lend or deposit money to any corporate body;
• Enter into partnership in its activities of lending and borrowing;
• Pay any brokerage or incentives for mobilizing deposits from members;

Annual Compliance

NDH-1: Return of Statutory Compliances

Nidhi shall file a return of statutory compliances in Form NDH-1 within 90 days from the closure of the financial year with the Registrar duly certified by a Company Secretary in practice or a Chartered Accountant in practice or a Cost Accountant in practice.

NDH-2: Apply to the Regional Director for extension of time

If the company is not complying with the minimum member criteria, it shall within 90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 for extension of time and the Regional Director may consider the application and pass orders within 30 days of the receipt of the application.

NDH-3: Half yearly return with the Registrar

Nidhi has to file form NDH-3 within 30 days from the conclusion of each half year, duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.

Whether Nidhi has to take RBI License or RBI Act applicable on it?

No. Nidhi's are not required to take RBI license for incorporation. RBI has exempted the Nidhi's from the core provisions of the RBI Act and other directions applicable to NBFCs. As on date, RBI does not have any specified regulatory framework for Nidhi's. The provisions of Section 45-IA (Compulsory Registration with RBI), Section 45-IB (Maintenance of Liquid Assets), Section 45-IC (Creation of Reserve fund) have been exempted for Nidhi Companies. However, R.B.I can issue direction to Nidhi's.

Benefits of Nidhi Company

• It's easy for Nidhi Company to get funding or borrow capital from or lend money to group members.
• No Minimum Share Capital Requirement
• Easy to Manage
• No External Involvement in Management
• Relaxation in Compliances
• Easy Transfer of Ownership
• Low Rates of Interest
• Secured Investments
• Clear Objectives for easy donations and loans
• Exemptions and Privileges under Companies Act, 2013
• Least intervention of R.B.I


Recommended Read




Published in Corporate Law
Other Articles by - Dhaval Gusani

  Report Abuse







Popular Articles



CCI Articles

submit article

Stay updated with latest Articles!




Grant Thornton

CA Final FR

Corporate and Allied Laws



close
CA Learning