What is Nidhi Company?

What is Nidhi Company?

Most of us would’ve heard about the Nidhi Company, but we are not wholly educated about the company. The process and cycle of deposits and loans are quite common. The Nidhi Company is one such. Let us know what exactly is the Nidhi Company, what are all the strategies, and the processes involved, and the pros and cons of it.

What exactly is the Nidhi Company?

An Indian non-banking finance sector that permits people to borrow and lend money between their shareholder members is called the Nidhi company. Being registered under the Companies Act, the company aims at working with the principle of mutual benefits that are controlled by the Ministry of Corporate Affairs.

The Central Government amended few provisions relevant to the Nidhi companies under the Companies Act, 2013. The following are the rules:

The amendments were put in action to make the regulatory regime for Nidhi Companies more effective.
Thus, the purpose of transparency and investor friendliness in the corporate environment.

Minimum Requirements for Incorporation of Nidhi Company:

There must be a minimum of 200 shareholders in number
Minimum number of Directors must be 3
The capital amount must be a minimum of Rs. 10 lakhs
DIN for all directors
Minimum number of 200 Shareholders
At Least Rs. 10 lakhs must be the Net owned Fund and not less than that
Unencumbered deposits of not less than 10% of the outstanding deposits
A ratio of 1:20 and more must be the Net owned funds to deposits

The process involved in the Nidhi company:

Step 1: To obtain (DSC) Digital Signature Certificate of the proposed directors

Step 2. Application for Name Reservation using ‘RUN’ facility

Step 3. Memorandum of Association & Article Of Association submission

Step 4. Get the incorporation certificate

Step 5: RBI Guidelines on Nidhi Companies

Step 6: Make an Application for PAN, TAN, and Bank account

Step7: File Form SPICe32 (Simplified Proforma for Incorporating Company Electronically)

Online Filing of Nidhi Company Registration:

Another easier process to file for the Nidhi Company is the online process. This process can be done by filing the simplified Proforma for Incorporating Company Electronically or through SPICe form in the Form INC-32 using the Digital Signature Certificate of the Director along with eMoA in Form INC-33 and eAoA in Form INC-34.

Requirements:

Any company to be incorporated under this act can be a public company.
‘Nidhi Limited’ will be included as a part of the name.
A minimum paid-up equity share capital of 5 lakhs
No preference shares shall be issued.
No preference share by the company will be given. Before commencement of this Act, if any such shares are already issued by a Nidhi Company, such preference shares following the terms of issue are to be redeemed for such shares.

Documents required for registration:

PAN card copy
Passport size photos
Address proof of the director as well as the company’s address
NOC
Digital Signature Certificate (DSC)
Director Identification Number (DIN) of directors
Company’s Memorandum of Association (MoA)
Company’s Articles of Association (AOA)
Address Proof
Passports
Registered Office Proof
Forms to be filled:

The following compliance is mandatory for Nidhi company registration. They are:

INC 9
DIR 2

Filing of requisite annual forms with ROC by the Nidhi companies:

Form NDH-1
Form NDH-3
Form AOC-4
Form MGT-7

What are all allowed in Nidhi company?

Gold loan
Loan against immovable properties
Loan against FDR and deposits
Loan against NSC/Government Bonds
Unsecured loan by Nidhi Company
Vehicle Finance by Nidhi Company

Restrictions of Nidhi company:

Nidhi does not encourage any chit fund activities or hire purchase and lease financial activities. Nidhi company does not motivate to lend or borrow money from any other members other than their members.
A minimum of Rs. 10 lakhs must be given as paid-up capital requirement
The Nidhi company produces only secured loans that can be given i.e. insecurity of any gold, silver, or any other valuable jewel.
Nidhi companies are not really allowed to issue any preference shares, debentures, or any debt instruments.
Repayment duration should not exceed one year.

Compliances:

There are three types of compliances. They are:

Pre-Incorporation Compliances
Post –Incorporation Compliances
Event-based Compliances.

Advantages of the Nidhi Company:

Cheaper to Borrow
Limited liability
Better credibility
The interest rate is quite less
Cheers savings
Complications are minimum
Formation is easy
Easy access to public funds
Ease of fund
Micro banking
The registration process is easy
Separate entity
Registration is cost-efficient
More certainty
No RBI regulations
Low level of risks
Permanent succession

FAQs:

Can loans be provided to non-members?

No, the company provides loans to its members only since the aim of the company is to pool the savings from members and lend them only to their members only.

Who can become members of Nidhi Companies?

Members are only individuals. Bodies Corporate or Trusts are not allowed to become members.

Does the Nidhi company issue preference shares?

No, the Nidhi company does not issue preference shares.

What are the requirements of minimum shareholding for deposit holders?

The Nidhi company allots to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees.

What is the minimum paid-up share capital to incorporate Nidhi Company?

Nidhi company shall have a minimum paid-up equity share capital of five lakh rupees

What is the link between GST and Nidhi Company?

Once the Nidhi Company gets incorporated, GST registration is a must. This process is almost the same as done for other public companies.

Know more: https://vakilsearch.com/nidhi-company

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