Overview of Nidhi Company Registration
A Nidhi company refers to a type of entity in the non-banking finance sector, recognized under Section 406 of the Companies Act, 2013. Their primary business is borrowing as well as lending funds between their members. They are also regarded as Benefit funds, permanent funds, Mutual benefits and Mutual Benefit Funds companies. The Ministry of Corporate Affairs governs these entities in India and reserves the right to issue directions related to deposit acceptance activities. The core object of these entities is to foster the habit of thrift and reserve funds amongst its serving members. The concept of Nidhi Company is quite popular in the southern region of India.
Important Facts of Nidhi Companies
Conditions for Incorporating Nidhi Companies in India
The Governing Authority sets the following Conditions for Incorporating Nidhi Company in India:
Benefits of Incorporating Nidhi Companies in India
The followings are the major benefits of the Nidhi Company Registration in India:
- Easy Formation
The formation of a Nidhi Company is done through a very simple process. For the formation of Nidhi Company, there are certain requirements such as a minimum of seven members, out of which three will be appointed as directors and an easy and hassle-free documentation process.
- Non-Compliance with Reserve Bank of India
A Nidhi Company does not require to comply with any of the Reserve Bank of India guidelines. So, the Nidhi Company is free to inculcate its own rules.
- Less Risk
The lending, borrowing or depositing of transactions are done by the members only, decreasing the risk of any financial issues in the Nidhi Company.
- Economical Registration
The registration of a Nidhi Company is not heavy on the Director's pocket as it is very simple than other NBFCs registration process, so it does not affect the Director's finances. It also helps the Nidhi Company in getting business loans whenever required for the growth of the Company.
- Certainty of savings
The concept and objective of a Nidhi Company are to promote the saving among Indian people.
- Net-owned Funding system
A Nidhi Company follows the Net owned funding system, which means the transaction where an invest an amount in the business to raise funds for the same. This feature makes a Nidhi Company cost-effective for owners and helps in the growth of the business.
Documents for Nidhi Company registration
Following is the List of Documents required for registering a Nidhi Company in India:
The procedure of Nidhi Company Registration in India
The followings are the detailed steps for the procedure of Nidhi Company registration:
1: Obtain DSC and DIN from MCA certified agencies
The first step for all the directors is to obtain the DSC (Digital Signature Certificate) and DIN (Directors Identification Number) from the MCA certified agencies. The said agencies charge standard fees for rendering such services and seek basic documentation for the same. DSC is essentially used to authenticate the document electronically. It is by far the most secure and legit way of signing the e-form and others documents.
2: Name Approval
One needs to suggest the three best names for their Nidhi Company to the MCA, and one of these names will be accepted by the MCA. The name of Nidhi Company should be unique. Such approved name remains valid for 20days only
3: Application for Registration
Once the name is approved, the directors shall file an application for registration with the Articles of Association (AOA) and Memorandum of Association (MOA).
4: Certificate of Incorporation
It takes 15-20 days for the appropriate authority to grant a certificate for incorporation of a Nidhi Company. This certificate also contains the Company's Company Identification Number (CIN).
Restricted undertakings for Nidhi Company as Per the Nidhi Rules
Nidhi Companies Are Not Permitted to Engage with the Following Undertakings:
Changes made by Nidhi Company (Amendment) Rules of 2022
The followings are the said amendments related to the registration of Nidhi Company made under the Nidhi Company (Amendment) Rules, 2022:
However, not anything written under these rules shall apply to the Company incorporated on or after the commencement of these Nidhi Company New Rules.
(i) it has not less than 200 members;
(ii) it has Net owned Funds of Rs. 20 lacs or more
After examining the application, the central government conveys its decision within 45 days to the Company, and if it fails to do so within 45 days, it will be deemed to be approved.
However, the Company shall commence its business only if the central government approves its application.
The following criteria should be looked upon to determine that any promoter or Director is a fit and proper person:
(a) Integrity, honesty, ethical behaviour, fairness, reputation and character
(b) Not incurring any of the following disqualifications:
(i) Any complaint or information under section 154 of CrPC has been filed or is pending against him
(ii) Chargesheet filed against him in the matter of economic offences
(iii) Restraining, prohibition or department order has been passed against him in any matter related to company law, securities law or financial market in force
(iv) Conviction order passed against him involving moral turpitude
(v) Declared involvement and not been discharged
(vi) Unsound mind
(vii) Wilful defaulter
(viii) Fugitive economic offender
(ix) Director of five or more companies
(x) Such person is the Director in five or more than five; or promoter in three or more than three Nidi Companies