Nidhi Company in India - Checklist and Rules

Nidhi company in India is based on the object of cultivating the habit of thrift and savings amongst its members by way of receiving deposits from and lending to its members only for their mutual benefit. In simple terms, a person who is willing to start a company with aim of collecting money from its members and giving away that money as loans with security can start a Nidhi company. Activities of Nidhi company include borrowing and lending money among their members for their mutual benefit.

In this article, we will be discussing the meaning of Nidhi company, the Incorporation process along with the rules and registration fees. The list of documents required for incorporating a Nidhi company with its example.

What is the Incorporation Process of Nidhi Company in India?

Here is the detailed Nidhi company incorporation procedure. Before the formation of a Nidhi company, it must have at least seven members and three directors. The objects of Nidhi company shall specify the receiving and lending of deposits from its members for their mutual benefit. The steps for incorporation are given below:

Step 1: Apply for DSC

The requirement of DSC is a mandatory criterion as the Nidhi company registration process is completely digital. Directors and subscribers need to apply for a DSC from certified agencies. The process to obtain DSC has three verifications that are document verification, video verification and phone verification.

Step 2: Prepare MOA and AOA of Nidhi company in India

Step 3: Fill SPICe+ form for Nidhi Company registration

• Part A comprises Name reservation. Make sure to enter a minimum of three names as per your choice.
• Part B includes
• Details of the company,
• Details of registered or correspondence address,
• Subscribers' and directors’ details,
• Information about share capital
• Declaration by directors and subscribers
• Declaration and Certificate by professional
• source of Income with range code for application of PAN and TAN.

Step 4: Issuance of DIN, PAN, TAN and Certificate of Incorporation

Nidhi Company Rules

The Nidhi company is not governed by the RBI but by the central government and hence the central government has introduced the Nidhi company in India rules 2014 in order to better govern the company transparently.

• Nidhi company must be registered as a public company
• The minimum paid-up capital must be at least 5 lakhs.
• The name must have the word ‘Nidhi Limited’ at the end.
• A Nidhi company needs to have at least three directors and seven shareholders to obtain registration as a Nidhi company
• From Incorporation within the one-year time limit, Nidhi company must accumulate 200 members.
• The deposits must not be more than 20 times net-owned funds.
• The rules specify the unencumbered term deposits needed to be equal to or more than 10% of the outstanding deposits.

Amendment to Nidhi Company Rules

As per the amendment announced by the Central government to Nidhi rules, 2014 for Nidhi company in India to safeguard the interest of the public. The rules provide that public companies who desire to function as Nidhi’s must obtain a prior declaration from the Central government before accepting deposits.

1. A public company incorporated as a Nidhi company in India with a share capital of Rs. 10 lakhs; needs to receive a declaration as a Nidhi company from the central government by applying in form NDH-1 with a minimum membership of 200 Net owned funds of Rs. 20 lakhs within 20 days of its incorporation.

2. The promoters and directors of the company have to meet the criteria o fit and proper person as laid down in the rules

3. If the central government doesn’t convey any decision within 45 days of the receipt of the application filed in Form NDH-4, approval would be deemed as granted.

Checklist for Incorporation of Nidhi Company

Nidhi company in India is one of the most famous business structures for the public and by the public. The following points are given below for providing a checklist for incorporating a Nidhi company:

1. Nidhi company is made to cultivate the habit of savings amongst the member, receiving deposits from and lending to its members only for their mutual benefit.

2. Nidhi company falls under one class of Non-Banking Financial Companies. Thus, RBI is empowered to issue commands in a subject related to deposit acceptance activities.

3. Nidhi company is one of the categories of Non-Banking Financial Company (NBFC) that does not require any reserve bank license to start its operations.

4. Within one year of incorporation, a Nidhi company in India must increase its members to at least 200.

5. The ratio of net owned funds to the deposits must not exceed 1:20

6. The net owned funds of the Nidhi company must be Rs. 10 lahks or more.

7. Deposits should not be less than 10% of the outstanding deposits as per Rule 14 of the Nidhi company rules, 2014.

8. It shall maintain its statutory registers and books of accounts

9. It must convene statutory meetings from time to time.

10. There are two categories of compliances post-incorporation process i.e., general and annual compliances.

What are the various documents required for Nidhi Company registration?

The mandatory registration documents required for Nidhi company in India are given as follows:

1. Copy of ID proof of all the shareholders and directors

2. Registered office proof

3. Directors and shareholder’s residential proof

4. Copy of the Aadhar card of the proposed members

5. Passport-size photo of all the shareholders as well as directors.

6. Bank statement (not older than two months)

7. No objection certificate signed by the owner of the premises

8. Digital Signature Certificate of directors and shareholder’s

9. Memorandum of association of Nidhi company (MOA)

10. The Articles of association of Nidhi company (AOA)

The MOA must contain only one object of the company i.e., cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.

What is the Business Plan of Nidhi Company?

A Nidhi company in India is a type of non-banking financial organization that carries out the activities of lending and borrowing money amongst its members. The word Nidhi means treasure. There is an increase in the complexity of the investment sector, therefore borrowing and investing money is tough for small households. The idea of Nidhi company was introduced to help these households. You can also download the Nidhi company business plan pdf from google.

Conclusion

Nidhi companies in India are easy to form in comparison to other loan-providing entities because of less involvement on the part of RBI. There is no scope for outsiders and less capital requirement. It also stimulates saving habits among its members.

As we have discussed above, the compliances of Nidhi company in India provided by the Companies Act, 2013 and Nidhi rules, 2014 must be followed. The Ministry of Corporate Affairs regulates and governs Nidhi company rules and regulations. Otherwise, you could be subjected to heavy penalties. In this article, we have noted the incorporation process, documents required and checklist of incorporation of Nidhi company.