What is a Nidhi Company?
A nidhi company is a company that operates within the non-banking Indian finance sector recognized under section 406 of the Companies Act, 2013. The main business of a Nidhi Company is borrowing and lending money between their members. They are regulated by the Ministry of Corporate Affairs. The RBI has the power to direct Nidhi Companies about their deposit acceptances.
All financial dealings and the registration process of a Nidhi company fall under the Ministry of Corporate Affairs.
A Nidhi company is registered as a Public Limited Company. Hence, the requirements for incorporation of a Nidhi company covers a minimum of three Directors and Seven Shareholders.
The deposit acceptance activities conducted by the Nidhi Company also come under the scanner of Reserve Bank of India and the latter has the right to look into the financial dealings.
A Nidhi Company must accumulate 200 members within a year of its formation.If it fails to do so, it needs to apply for permission to extend the time limit to acquire more members. Three of its members will be appointed as directors and there must be seven stockholders on inception.
A Nidhi Company must have a paid up equity share capital of Rs. 5 lakh on inception. Moreover, 10% of the total deposit collected from members must be in a fixed deposit in a nationalised bank.
Why should I register a Nidhi Company
- No External Involvement in Management
- Helpful for Lower and Middle Classes
- Low Rates of Interest
- Secured Investments
- Minimum Documentation and Formalities
How to register a Nidhi Company?
- Step 1: Application of DSC & DPIN. First of all, the partners have to apply for Digital signature and DPIN for Nidhi company if they do not already have it.
- Step 2: Name approval. Three different name options for the Nidhi company have to be provided to MCA of which one will be selected. As the rules go for all kinds of companies, the name should not match any existing names and/or trademarks. This can be checked by checking the availability of the name on the MCA database.
- Step 3: Submitting the MOA & AOA. Post name approval, the Memorandum of association and Articles of Association need to be drafted. But the object of the Nidhi company must always be a charitable object. The MOA and AOA need to be filed along with the subscription statement to the MCA.
- Step 4. Getting the incorporation certificate.It generally takes 15- 25 days to form a Nidhi company, and receive the Certificate of Incorporation. It also includes your CIN number.
- Step 5. Apply for PAN, TAN and Bank account. PAN and TAN are given in 7 working days. Post this, the above documents can be submitted with the bank to open the bank account.
Proofs required for Nidhi Company registration
To be submitted by all directors –
- Self-attested copy of PAN Card
- Self-attested copy of Driver’s License/ Voter ID/ Aadhaar Card/Passport
- Self-attested copy of Bank Statement/ Telephone Bill/Mobile Bill/ Electricity Bill
- Passport-size Photograph
- Specimen Signature Certificate