Nidhi Company

Advantages

  • Limited Liability Protection
    to Director's personal assets
  • Accept Deposits and grant loans
  • Easy Access to Public Funds
  • Good option for savings
  • Less Complex Structure than NBFC

Minimum Requirements

  • Minimum Three Directors
  • Minimum Seven Shareholders
  • Minimum Capital : 5,00,000/-
  • Maximum Fifteen Directors
  • One Director shall be
    Indian resident

Introduction

‘Nidhi’ means a company that aims to increase the sustainability and saving habitsof its members, to take deposits, and to lend only to its members for their mutualbenefit. Only an individual can be a member of a Nidhi company. A corporation orlimited partnership cannot become a member of a Nidhi Company. Hence it cannot take deposits from or lend money to any corporate body. A Nidhi Company alsoprovides loans to its members at a lesser rate comparatively than Banks. Thecompany independently still must adhere with the rules and regulations set by theCentral Government for regulation of such companies.

Basic Conditions For Incorporation Of A Nidhi Company

  • 1. Can only act as a Public Company
    The Nidhi Co. that has been incorporated should only act as a PublicCompany.
  • 2. Cannot issue Preference Shares
    Preference shares cannot be issued by any Nidhi company to its members at anycondition.
  • 3. Paid-up Share Capital
    Every Nidhi company need to have a paid-up equity share capital for thecompany, of the amount of Rs. 500000 (five lakhs only).
  • 4. Inclusions in MOA
    Every Nidhi company should include objects in its MOA other that theseobjects of receiving deposits from and lending money to its members only formutual benefit.
  • 5. Company Name
    All Nidhi companies should end its company name with Nidhi Ltd. Only.

Requirements For Incorporation Of A Nidhi Company

1. Requirements For Minimum Number Of Members and Net Owned Funds

Every Nidhi company must have the following criteria fulfilled after oneyear of commencement of its rules:

  • Number of Members
    There should not be less than two hundred members in the company.
  • Net Owned Funds
    The company should have a net owned fund of at least ten lakh rupees or more.
  • Term Deposit
    The companies unencumbered term deposit should not be less than 10% of thetotal outstanding deposit, (likewise specified in rule 14).
  • Ratio of Net Owned Fund to Company Deposits
    The ratio of the company’s net owned fund to the companydeposit should be maximim1:20.

2. Requirements of Minimum Number of Member/Subscribers and Directors

The minimum number of members/subscribers required to register for a Nidhicompany are seven members and the minimum number of directors required areonly 3 to register for a Nidhi company.Therefore, a member of a Nidhi company is a person who buys and owns shares ina company with share capital. They become members when their name is enteredin the register of members. And a director of a Nidhi company is a person who leads or supervises a particulartype of business for the company.

3. Required Documents

  • Self-attestedID proof of all members/subscribers and directors, which could be a valid passport,voter id, Aadhar card or valid driving license.
  • Self-attested address proof of all members/subscribers and directors (It shouldnot be older than 2 months), which includes bank statements, electricity bill,telephone bill, mobile bill.
  • Self-attested PAN Card of all members/subscribers and directors.
  • 2-2 Passport Size Colored Photos of Members/Subscribers and Directors
  • The documents and information of the registered office is also required.
    • If the registered office is taken on lease, then a NOC from the landlord,lease agreement, utility bill (either electricity bill or mobile bill or telephone bill which is not older than 2 months) is to be submitted.
    • If the registered office is not taken on lease, then a NOC from the owner ofthe property, property papers, utility bill (either electricity bill or mobile billor telephone bill which is not older than 2 months) is to be submitted.

4. Required Documents

  • The total amount of authorized and paid-up share capital of the proposed company and number of shares subscribed by members.
  • The place of birth and duration of stay of members and directors at their present residential address.
  • Occupation of all members and director.
  • The proposed object/business of the proposed company
  • Educational qualification of all members and directors.
  • Email IDs and contact number of all members and directors.

Process of Registration

The ministry of Corporate Affairs vides its notification dated 18th February 2020effective from 23rd February 2020 has further amended the companies(incorporation) rules, 2014 thereby substituting the old form INC-32 (SPICe) withweb service SPICe+ along with certain other amendments.

  • 1

    An Application of Name Registration

    The first step is to make an application for reservation of name which shall be reserved by using the web services (SPICe+) available at www.mca.gov.in along with the specified fees. Before Applying for the name, kindly check that the name is available on MCA as well as no trademark. Is there no such name under the Class of work you are going to apply.
    The same can be checked by clicking on the link below: Trademark Registration
    The new integrated form consists of two parts i.e. PART A and Part B. The Name(s) of a company can be reserved in Part A of SPICe+. In case the applicant wants to apply for name, incorporation, and other integrated services together, he can do so together by filling necessary information in Part A and Part B.

  • 2

    Fill Part B of SPICe+, MOA, AOA and AGILe Form

    The second step is to fill the Part B of SPICe+ for registering the Company. Thesaid form contains various sections that allow you to save and modify the requiredinformation if required. Also you need to fill the MOA and AOA of the company along with AGILe form.

  • 3

    Convert SPICe+ Form into PDF

    The third step is to convert the SPICe+ form into a pdf format to affix the DSC.


  • 4

    Upload the Form on Ministry of Corporate Affairs

    After affixing the DSC the form is required to be upload on the Ministry ofCorporate Affairs in accordance with the existing process.

  • 5

    Declaration of the Companies Directors and Subscribers

    Declaration of all subscribers and first directors of the company which is currentlybeing filed in Form INC-9 will be automatically generated in pdf format and shall be submitted only through Electronic form in all cases, except in case:
    a) The no. of subscribers and/or directors is more than 20.
    b) Any of the subscribers and/or directors do not have DIN and PAN

Changes As Per The Amendments Introduced Recently

1. No need to mention SRN

There is no need to mention SRN for names reserved in Part A of SPICE+ as the same will be automatically displayed while filing Part B after filing of Part A.

2. Mandatory Registration for ESIC and EPFO

Registration for ESIC and EPFO has been made mandatory for all new companies that are incorporated w.e.f 23rd February 2020.

3. Professional Registration for Maharashtra

Registration for Profession Tax is made mandatory for all new companiesincorporated in Maharashtra state, with effect from 23rd February 2020.

4. Mandatory Application for opening a bank account

Application for opening of bank account is made mandatory for all newcompanies incorporated with effect from 23rd February 2020 the sameapplication shall be filed through the form AGILE-PRO linked web form.

5. Declaration of Company’s Subscribers and First Directors in PDF form & e-submission

Declaration of all Subscribers and First Directors of the Company which is currently being filed in Form INC-9 will be automatically generated in pdf format and shall be submitted only through Electronic form in all cases, except in case:
• The no. of subscribers and/or directors is more than 20.
• Any of the subscribers and/or directors don’t have DIN and PAN.

6. Mandatory use of e-MoA (INC-33) and e-AoA (INC-34) (in some cases)

It is mandatory to use e-MoA (INC-33) and e-AoA (INC-34) in case the number of subscribers is up to 7 and in the following scenarios:
• Individual subscribers are Indian nationals
• Individual subscribers who are foreign nationals in case they valid DIN and DSC and also submit proof of a valid business visa
• Non-individual subscribers based in India.

7. Signed Physical Copies of the MoA / AoA (in some cases)

Physical copies of the MoA / AoA must be signed and attached if the individuals' first subscribers are located outside India or if the individual outsourcers do not have a valid business practice or any of the following scenarios: -

S. No. Cases Forms to be filed
1. Non-Individual first subscriber based outside India SPICe+ (INC-32) with apostille MOA and AOA as attachments
2. Non-Individual first subscriber based in India SPICe+ (INC-32) with linked filing of e-MOA (INC-33) and e-AOA (INC-34)
3. Indian National being Subscriber other than Director SPICe+ (INC-32) with linked filing of e-MOA (INC-33) and e-AOA (INC-34)
4. Indian National being Subscriber-cum-Director SPICe+ (INC-32) with linked filing of e-MOA (INC-33) and e-AOA (INC-34)
5. Foreign National being Subscriber other than director having valid DIN SPICe+ (INC-32) with linked filing of e-MOA (INC-33) and e-AOA (INC-34) along with Valid Business Visa to be submitted. In case Business Visa is not available, apostille MOA and AOA shall be attached and in such cases, e-MOA (INC33) and eAOA (INC-34) are NOT acceptable.
6. Foreign National being Subscriber-cum-Director having valid DIN SPICe+ (INC-32) with linked filing of e-MOA (INC-33) and e-AOA (INC-34) along with valid Business Visa to be submitted. In case Business Visa is not available, apostille MOA and AOA shall be attached and in such cases, e-MOA (INC33) and e-AOA (INC-34) are NOT acceptable.
7. Foreign National being Subscriber-cum-Director not having valid DIN SPICe+ (INC-32) with apostille MOA and apostille AOA as attachments.

Note: In all the above-mentioned cases, the maximum number of subscribers allowed shall be 7 for filing of SPICe+ form. Wherever the number of subscribers exceeds 7, SPICe+ form shall be filed with MoA and AoA as attachments.

8. Mandatory Filing of Statutory Return

Companies newly incorporated through SPICE+ and who have obtained EPFO/ESI number will have to file Statutory Return only if the prescribed threshold limit has been exceeded.
To read more about nidhi company compliances, click on Nidhi Company

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FAQs on Nidhi Company

The Public Limited Company is best suited for the large business operating entities as helps them in availing the loans easily and making them able to reach people at large also It provides them the credibility and a image of their business in the eye of financial institution, suppliers & potential clients.

In case of Nidhi Company there lies a principle of mutual benefit to pool the savings from members and can lend only to the members & never have dealing with Non members.

Members who are only individuals. Bodies Corporate or the Trust can never be admitted as Members.

The Nidhi Companies are not expected to engage themselves in the business like Chit Fund, hire purchase, insurance or in any other business which includes investments in shares or debentures.

A Nidhi Company incorporated under the Companies Act, 2013 shall be regarded as a Public Limited Company.

One Member of Nidhi Company shall not have the maximum balance of more than Rs. 1 lakh in a savings account & the maximum rate of interest which is to be paid on any deposits shall not be more than 2% above the rate of interest payable by the nationalized banks, on such deposits.

Net Owned Fund is equal to Paid up share capital + Free Reserves – Accumulated losses, deferred revenue expenditure, and other intangible assets.

No, there is no such requirement to obtain any licence or permission from the RBI as the Reserve Bank of India has exempted Nidhi Companies from the applicability of its core provisions.

Yes a Nidhi Company may declare dividends which shall not exceed 25% or higher as may be approved by Regional Director subject to the fulfillment of certain conditions.

No, a Nidhi Company cannot issue Preferential Shares as prescribed by the Companies Act, 2013.

Once the Nidhi Company is registered, it must fulfill the following mentioned requirements:

  • Have at least 200 members/shareholders.
  • Minimum Net Owned Fund should be Rs. 10 Lakhs.
  • Unencumbered term deposit must be at least 10% of the term deposit.
  • The ratio of Net Owned Fund to term deposit should not be less than 1:20.