Nidhi company


Nidhi means a company which is established with the motive of receiving deposits and enhancing habit of reserve funds among the members of the company.

It is also incorporated with the purpose of lending money to the members for their benefits. Thus Nidhi Company is a type of Indian Non-Banking Financial Company (NBFC) who is mainly involved in borrowing and lending money to its Members but does not require license from RBI to operate its business . Hence , Starting a Nidhi Company will be best option for those entrepreneurs who wants to commence finance business with low capital investment.

It is recognized under section 406 of the Companies Act, 2013. This company is also known as Benefit Funds, Permanent Fund, Mutual Benefit Company and Mutual Benefit Funds.

Nidhi Company is based on the principle of “mutuality” and it is in existence even before the Companies act 2013. 80% of these companies are located in Tamil Nadu and this shows that it is more popular in the south of India.

It is governed under the laws of “Nidhi Rules, 2014”. As this company is incorporated as public limited company hence it is based on two sets of norms including Companies Act, 2013 and Nidhi Rules, 2014.

It is governed under the laws of “Nidhi Rules, 2014”. As this company is incorporated as public limited company hence it is based on two sets of norms including Companies Act, 2013 and Nidhi Rules, 2014.


BENEFITS OF NIDHI COMPANY

There are numerous advantages of commencing a Nidhi company which makes it better than other types of companies. Some of them are:

No Approval from RBI: Nidhi Company can be incorporated as public limited companies but it is not compulsory to register it under RBI as NBFC in India is exempted to get a license to operate.

Fewer risks: As Nidhi Company always accept and lend money to its members only thus it reduces the risks of individuals being a fraud.

Limited initial capital: the initial capital or minimum capital requirements for a Nidhi company is only Rs 5 lakh as per Nidhi Rules 2014.

Simple procedure: it requires a few documents and a minimum of 7 members to incorporate a Nidhi company which makes it easy to commence and operate.

Unaffected actions: death, retirement or insolvency has no effect on a Nidhi company due to the feature of perpetual succession and thus all operations of this company remain uninterrupted all the time.

KNOW ABOUT NIDHI COMPANY BEFORE STARTING

Every entrepreneurs must understand about few key features of Nidhi Company before deciding to commence it :

Regulated by Companies Act, 2013 and Nidhi Rules, 2014 , exempted from taking license from RBI.

Nidhi company is not allow to perform vehicle finance business & microfinance business in India.

Nidhi Company may open upto three branches within district. For setting up of more than three branch within district or outside district approval of Regional Director required.

Nidhi Company shall not declare dividend exceeding 25% or such higher as approved by Regional Director.

POST REGISTRATION COMPLIANCES

Every Nidhi company shall within a period of one year after registration ensure that it has-

(a) not less than two hundred members;

(b) Net Owned Funds of ten lakh rupees or more;

(c) unencumbered term deposits of not less than 10% of the outstanding deposits; and

(d) ratio of Net Owned Funds to deposits of not more than 1:20.

REGISTRATION PREQUISITES

It is a very simple and easy process of registering a Nidhi company as compared to any other type of financel company. Here are some key points which focus on basic requirements to get your company registered as Nidhi Company:

Initial capital must not be less than Rs 5 lakh

There must be atleast 7 members to start the company

There must be atleast 200 members within one year of the commencement of the company

There must be atleast 3 directors at the starting

DOCUMENTS REQUIRED

Before registering for a Nidhi company, there are some documents required by each director and shareholder. These documents include:

Copy of PAN card of directors and shareholders

Identity proof of directors and shareholders

Address proof of directors and shareholders

Passport size photos of Directors

Proof of registered office (Electricity bill/any utility bill – Not older than two months)

Copy of rent Agreement (if rented)

NOC from the owner of the Property

RESTRICTIONS

Nidhi Company is restricted from undertaking various activities such as:

To issue preference shares and debentures.

To undertake the business of chit fund, insurance, hire purchase, leasing finance or acquisition of securities issued by any body corporate.

To open the current account with its members.

Acquisition of another company’s control subject to approval from shareholders and Regional Director.

To lend or accept money from any individual (not a member of the company).

Carry on any other business other than borrowing and lending in its own name.

To issue any advertisement.

Lend or take deposit from corporate.

pledge any of the assets lodged by its members as security.

Enter into any partnership arrangement in its activities.

Pay any brokerage or incentives for mobilising deposits and providing loans to its Members.

Mandatory Compliance for Nidhi Company

Form NDH-1

Filing of Form NDH-1 within 90 days from the close of financial year.

Form NDH-2

Filing of Form NDH-2 within 30 days from the close of first financial year for extension of period in case number of members are less than 200.

Form NDH-3

In every year, a half yearly return is also required to be filed in Form NDH 3.

Financial Statements

In every financial year , financial statements and other related documents are required to be submitted in Form AOC-4.

Annual Returns

Every financial year , Annual Return is required to be filed through Form MGT-7.

Income tax Returns

Filing of Income Tax return by 30th September of the following financial year.

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