Nidhi - Easystax

Nidhi Company Incorporation

Set up Your own Nidhi Company to start thrift and saving among members
Starting At ₹ 5999/- (Onwards) + GST

It just Takes 10 to 15 business days (subject to Government processing time). No Hidden Cost

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What is a Nidhi company?

Nidhi Company is a company registered under Companies Act and notified as a Nidhi company by Central Government under Section 406 of Companies Act, 2013. It is a type of non-banking finance company a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members. It functions by receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.

Nidhi Company is a type of Non-Banking Financial company (NBFC) registered under Companies Act and notified as a Nidhi company by Central Government under Section 406 of Companies Act, 2013. This form of Company is opted for the sole purpose of receiving deposits and lending between their members only, for their mutual benefit.

Although Nidhi Company is a NBFC however Reserve Bank of India vide Exemption Notification No. DNBS.(PD).CC.No. 12 /02.01/99-2000 has exempted Nidhi Companies to comply with the regulations of NBFC. The notification can be read in detail on: https://rbi.org.in/Scripts/NotificationUser.aspx?Id=2712&Mode=0#:~:text=12%2F02.01.%2F99%2D,control%2Fmanagement%20of%20the%20company )

Therefore, one who wants to enter into Microfinance Banking business without complying the provisions of NBFC as specified by RBI one can incorporate Nidhi Company. However, there are other provisions which are applicable on Nidhi Company as provided in The Companies Act, 213 and Nidhi Rules, 2014.

Process of Nidhi Limited Company Incorporation

Step 1

Consent of Directors and Members

Step 2

Check the Name Availability

Step 3

Apply for DSC

Step 4

Completion of Documentation

Step 5

Filing of Forms

Step 6

Final Approval

Step 7

Open Bank Account & Deposit Paid-up Capital

Step 8

Post-Incorporation Compliance (Nidhi Specific)

Documents Required

Digital Signatures

DIN of Directors

Identity Proof

Address Proof

Photograph

Registered Office Address Proof

Rent Deed / NOC (If Premises is Rented)

Statutory & Professional Documents

Ownership Proof (If Premises is Owned)

Advantages of Nidhi Company

Easy Incorporation in comparison to other forms of NBFC’s.
No RBI Compliance only Nidhi Rules, 2014 and other provisions of The Companies Act, 2013 is required to be complied
Low capital requirement in comparison of other NBFC’s the capital requirement is just 500000.
Closed Management No External Involvement in the Company’s Management;
Easy lending and borrowing between the members
Substitute of a Co-operative Society and Micro Finance Business with additional benefits
Registration under Ministry of Corporate Affairs hence many privileges and exemptions are provided under the provisions of the Companies Act, 2013 and they also enjoy status of a separate legal entity.
Access to public funds only requirement is that any lending or borrowing should be done with members only.
Secured investment with lower Rate of Interest hence Lower level of risk Financial help to Common group people by Fulfilling the financial requirements of the lower and middle-income groups though their easy lending and borrowing mechanism.

Characteristics of Nidhi Company

Some of the important points to be kept in mind regarding Nidhi Company:

A Nidhi Company can only be incorporated under the Act as a public company and shall have a minimum paid up equity share capital of five lakh rupees.
Minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.
Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.
A Nidhi cannot admit a body corporate or trust as a member.
A minor cannot be admitted as a member of Nidhi Company
All the Director shall be a member of Nidhi Company
Nidhi Company can’t deal with chit funds, hire-purchase finance, leasing finance, insurance or securities business.
It is strictly prohibited from accepting deposits from or lending funds to, any other person except members.
An approval is required from MCA for formation of a Nidhi company

Post Incorporation Requirement:

Once incorporated, a Nidhi company is required to fulfill the following requirements within 1 year of its registrations:

Nidhi Company should have minimum 200 members within one year from commencement
The net owned funds should be 10 lakh rupees or more. Net owned funds = Equity share capital + free reserves (-) accumulated losses (-) intangible assets
Unencumbered term deposits must be 10% or higher of the outstanding deposits
The ratio of net owned funds to deposits shouldn’t be more than 1:20

Extension of another financial year can be availed upon submission of NDH-2 to the Regional Director within 30 days from the end of the first financial year.

If even after the second financial year, it doesn’t fulfill the requirements, it can’t accept deposits till it complies with the provisions, and also penalty will be imposed.

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