Nidhi Company Incorporation Procedure in India
A company incorporated to cultivate the habit of saving amidst its members or shareholders falls under Nidhi Company. The dictionary meaning of the term Nidhi is ‘treasure’. However, in the Indian financial sector, it a mutual benefit society which gets notified by the Central Government. Nidhi companies can solely take a deposit from their members and lend to their members only.
RBI regulates the matters of a Nidhi Company in regards to its deposit acceptance activities. Despite being an NBFC, a Nidhi company has exempted from the core provisions of the RBI Act, 2013 because it works for the welfare of its members. The incorporation of Nidhi Company is a lengthy procedure for which one needs to meet the eligibility criteria. So let’s perceive the whole concept of Nidhi Company Registration Process.
Conditions before Nidhi Company Registration Process
To set up a Nidhi company one has to comply with the requirements mentioned below:
- A company must be a “public company” first, before incorporating as a Nidhi Company.
- To run a Nidhi Company, one should have a minimum paid-up equity share capital of INR 5 Lakhs.
- At the time of incorporation, a company shall not issue any preference shares. In case a company has issued preference shares before the incorporation process. Then those shares must get redeemed as per the terms of the issue.
- The objective of a Nidhi should be crystal clear. Primarily the object must be to foster the habit of thrift and savings among its members. Secondly, the company must receive and lend deposits to its members for mutual benefits.
- Every company that embraces the activities of a Nidhi shall have the last words as ‘Nidhi Limited  ’ at the end of its name.
- The minimum number of members and directors at the time of Nidhi Company’s incorporation shall be 7 or more and 3 or more respectively.
Post Registration Requirements for a Nidhi Company
Here are the requirements that one has to fulfill after registration of a Nidhi Company:
- Within a year of its incorporation, a Nidhi Company shall have at least 200 Members. Along with that, the company must have the Net Owned Funds of Rupees 10 Lakhs or more.
- It shall have Unencumbered Term Deposit of not exceeding to 10% of its Outstanding Deposits.
- The Net owned fund to deposits ratio should be more than 2:1.
- If the company does not meet the above requirements within one year of its incorporation, then it shall seek an extension from RD in Form NDH-2 within 30 days of First Financial Year’s closure.
- RD shall permit such orders as may consider appropriate within 30 days of receipt of Application for the extension.
Documents Required for Nidhi Company Registration
The Nidhi Company Registration is an online process for which the applicant should have self-certified documents:
- A copy of the PAN Card
- Passport size photographs
- A copy of Aadhaar Card
- Bank Statement/Telephone Bill/ Electricity Bill
- A proof of the registered office
- If the office set is on a rental property, then provide a copy of Rent agreement of office premises that executes on the name of the company.
- A copy of the latest Water/Gas/Utility bill of the registered office
- NOC (No Objection Certificate) from the landlord stating he has no objection for utilizing his premises as a registered office of Nidhi Company.
Procedure for Nidhi Company Registration
It is utmost essential to incorporate a limited company under the Companies Act, 2013 before establishing a Nidhi Company in India. The applicant has to ensure the presence of a minimum of 7 members and 3 directors to start with the registration process. Usually, it takes around 45 days for the completion of this process. Follow these easy steps for registration:
- The first and foremost thing that an applicant has to do is to apply for (DIN) Director Identification Number and (DSC) Digital Signature Certificate. Mostly it takes 2 days for the Procurement of DSC.
- Further, it requires the directors and shareholders to draft MOA and AOA.
- Note that the Ministry of Corporate Affairs will issue DIN to the directors of your company.
- Since the entire registration process of the Nidhi Company is online, you have to submit all the documents online. Besides, don’t forget to verify the authenticity of your documents.
- As soon as you obtain DIN and DSC, file an application in INC-1 to the Ministry of Corporate Affairs for reservation of name of your Nidhi Company.
- Ensure that the name of your company is unique and doesn’t resemble other companies. Also, it should not be undesirable in consideration of the Central Government.
- It is mandatory to add ‘Nidhi Limited‘ to the name of a Nidhi Company.
- Once you get an approval for the company’s name by MOCA, it’s time to prepare for Memorandum of Association (MOA) and Articles of Association (AOA).
- Keep in mind the objective of your company while preparing MOA and AOA.
- Now apply for incorporation of Nidhi Company.
- After the Incorporation Certificate has issued to you; it’s suitable for you to apply for the PAN and TAN of the company.
- Lastly, open a current bank account.
Note: A Nidhi applicant must get GST registration. All the business entities in India who exceed the threshold limit of turnover or profits have to oblige GST rules. If one fails to do that for tax evasion, then it gets considered as a criminal offence which is subject to prosecution, jail term, and penalties.