How To Start A Nidhi Company In India?

Start a Nidhi Company in India
Start a Nidhi Company in India

Nidhi Company is a financial establishment engaged in the business of acquisition of shares, debentures, and providing loans and advances. The company provides services only to individuals who are members of the company. If an individual wants to start a Nidhi Company, he must follow all required steps specified by the Government. Nidhi Company Registration is a significant requirement that must be undertaken by individuals.

 In this article, you will find information that will help you start a Nidhi Company.

What are the benefits of Nidhi Company?

Establishing a Nidhi company provides many advantages. Certain benefits of Nidhi companies will be highlighted in this section:

  • Limited liability
  • Fewer guidelines
  • Perpetual existence
  • Ease of management
  • Separate Legal Entity

How does a Nidhi Company work?

Understanding how a Nidhi company works is very important before an individual file for company registration, he must gain knowledge about the functions of the company, 

  • It provides various financial services but only to its members
  • It works through its members.
  • The main objective of Nidhi Companies is to promote savings, safeguard the financial conditions of its members.
  • It comes under the Non-Banking Financial Companies (NBFC) but does not require an RBI license.

Minimum requirements for Nidhi Company Incorporation

Below mentioned are certain requirements of a Nidhi Company:

  • A Nidhi company must include at least 7 shareholders and 3 directors.
  • The minimum capital requirement must be INR 5 lakhs.
  • Newly registered Nidhi Company must include “Nidhi Limited” along with the company name.
  • After the incorporation of Nidhi company, a minimum of 200 shareholders are required to be a part of the company within a year and the minimum owned fund must be at least INR 10 lakhs.

Nidhi Company Registration Process in India

The individuals who want to start a Nidhi company must follow the below-mentioned process. Nidhi companies work differently as compared to other companies. We will discuss the registration process individuals follow to register as a Nidhi Company.

Nidhi Company Registration Process

KYC of the shareholders and directors

KYC is a crucial part of the registration process. There must be at least 7 members along with 3 directors. These individuals must be appointed by the company owners. One individual can work as a director and a shareholder.

Acquiring Digital Signature Certificate and DIN application

DIN and DSC are two requirements that play an important role in the smooth functioning of a Nidhi Company. Thus both DSC and DIN must be attained while registering Nidhi Company. Application forms are required to be filled and submitted to obtain DSC as well as DIN.

Application of Name Reservation

Filling up an application to obtain a name for the company is important. Thus every company owner must file for an application to receive the name of the company. At least three names must be proposed to MCA for which SPICE + form must be used for reserving the company’s name.

Memorandum of Association and Articles of Association (Final Incorporation form)

As a part of the final incorporation, an incorporation form is required to be filled along with memorandum and articles of association. Both the documents must be submitted to the authority within the stipulated duration.

The MOA mentions details of the company such as:

  • Name of The Company
  • Registered Office of the Company
  • Overall capital of The Company
  • Liability distribution of members/directors/shareholders
  • The objective of the company

PAN and TAN attainment

The company must obtain PAN and TAN and fill important forms and submit documents as required by the authority.

Creation of bank account

The registration process ends with the creation of a bank account. After receiving PAN and TAN, the applicant must submit Memorandum of association, articles of association, certificate of incorporation, and PAN to the bank. After document verification, a bank account will be created in the company name.

Documents required for Nidhi Company Registration

Documents which are required to be submitted at the time of registering the company as a Nidhi are as follows:

  • Identity proof of directors, documents such as PAN card, passport copy, aadhar card serve as identity proof
  • Non-objection certificate (NOC) issued by the landowner
  • Address proof of the shareholders and the directors
  • Proof of registered office such as property tax receipt, rent agreement, etc.
  • Passport size photographs of the applicant
  • Incorporation documents with the digital signature application form

Compliances of Nidhi Companies

Understanding various compliances is crucial for the individual.

Nidhi Company Compliances are classified into three categories, which will be talked about in detail in this section:

Compliances of Nidhi Companies

Pre-Incorporation Compliances

Some compliances of Nidhi Company that must be followed before company incorporation are as follows:

  • A minimum of seven members must be a part of a Nidhi Company out of which three members must be directors of the company.
  • The minimum paid-up capital must be INR 5 lakhs to start a Nidhi Company.
  • Nidhi companies must not issue preference shares
  • Words “Nidhi limited” must be a part of the company name.
  • A Nidhi company cannot accept a deposit of more than 20% of net owned funds.
  • Unless a Nidhi company earns profits within three financial years, it cannot open any branches.
  • The rate of interest cannot exceed 7.5 percent offered on deposits.

Post-Incorporation Compliances

Post-Incorporation Compliances

The compliances of Nidhi Company which must be followed after incorporation are divided into two categories:

General Compliances

  • The total number of members must increase to at least 200 within one year of company incorporation.
  • The Net owned Funds of the company is required to reach an amount of INR 10 lakh or more.
  • The ratio of Net-owned Funds to deposits must not exceed 1:20.
  • The deposits of the company are required to maintain a certain percentage. It must not be less than 10% of the outstanding deposits.
  • The company must maintain Books of Accounts.
  • The company must maintain statutory registers of the company and record all important details.
  • The company board members must conduct meetings at regular intervals.

Annual compliances

Below mentioned are the annual compliances –

Form NDH -1 (Return of statutory compliance)       

Form NDH -2 (Application of extension of time)

Form NDH – 3 (High yearly returns)

Form AOC – 4 (Filing financial and other documents)

Form MGT – 7 (Annual Returns)

ITR – 6 (Income Tax Returns


Event-based Compliances

Below are the event-based compliances of a Nidhi Company:

  • Any amendments in the company name.
  • Changes in Registered office address.
  • Appointment or Resignation or Removal of Director.
  • Appointment or Resignation or Removal of Auditor.
  • Any changes in the company’s objective.
  • Transfer of shares.
  • Any rise in the authorized capital of the company.
  • Appointment of the Key Managerial Personnel.
  • Any other changes that are event-based.

Conclusion

Individuals can start a Nidhi Company if they follow all the guidelines in a proper manner. From submitting all documents to adhering to all compliances, it is important for individuals to understand every rule associated with online company incorporation. A successful company involves adherence to all rules and regulations to avoid penalties in the future.