What is the process for Nidhi Company Registration Process?

Nidhi company is a category of NBFC(Non-Banking Financial Company), that is formed to lend and borrow money from its members. It works on the belief of mutual benefit. Nidhi company is easy to assemble as it does not require to receive a license from Reserve Bank of India.

Nidhi Company Registration Process is a lengthy process and requires specific eligibility criteria.

What is Nidhi Company?

The incorporation of a Nidhi Company is done based on the rules of the Companies Act 2013. Nidhi company requires a minimum of three directors and seven shareholders. The objectives, as well as functions of a Nidhi Company, are to encourage the habit of saving among its members. It receives deposits from the members and lends the money only to its members. All these have to be mentioned in the Memorandum of Association at the time of incorporation.

What are the features of the Nidhi Company Registration Process?

The features of Nidhi company are-

• Minimum documentation and formalities;
• Secured investment;
• Not governed by any committee or trust;
• Easy and flexible loans as compared to traditional banks;
• Provides financial growth of the middle and lower-middle-income group of people.

What are the advantages of the Nidhi Company Registration Process?

The advantages of Nidhi Company Registration Process are-

• Fulfill the needs of middle and Low-Income Groups

The investments made in the Nidhi company fulfills the needs of the middle and low-income groups by providing them with financial help.

• Loans with minimum eligibility criteria

Nidhi company helps small wagers to obtain loans with minimum eligibility criteria.

• No External Involvement

The Company takes its funds from its members and further provides the credit to its members, which states that there is no external involvement in the working process.

• Limited Liability

The directors are benefitted as they have limited liability, and their assets are safe from any debt.

• Perpetual Succession

It has never-ending existence because it cannot be dissolved by the death or insolvency.

• Better Credibility

It is synchronized by the Ministry of Corporate Affairs, so it is considered more trustworthy.

• Separate Entity

It can acquire property and incurs debts on its name.

What are the minimum requirements for Nidhi Company Registration Process?

The minimum requirement for registration of Nidhi Company is-

Pre-registration requirements	Post-registration requirements
Minimum 7 shareholders	Minimum 200 shareholders
Minimum 3 directors	Net owned fund limit 10 lakhs
Minimum capital income 10 lakhs	Minimum net owned fund ratio 1:20
	Deposit should not be less than 10% of outstanding profit

What are the documents required for Nidhi Company Registration Process?

• Pan or aadhaar card of directors
• Passport-sized photograph of directors
• ID Proof of all directors and shareholders
• Address proof of directors
• Address proof of the Company
• NOC from the owner of the property rented

What is the procedure for registration of Nidhi Company?

• Apply For DSC

The first step is to obtain a Digital Signature Certificate by filing the SPICe+ form

• Name approval

Select an appropriate name for the Company and get is approved by the Ministry of Corporate Affairs. The name has to be unique, and it should not resemble any other registered company.

• Submission of MOA & AOA

After the name has been selected, MOA & AOA has to be submitted with all the objectives clearly stated to the Ministry of Corporate Affairs.

• Incorporation certificate

After verifying all the documents, the incorporation certificate will be issued by the MCA. It usually takes 10-15 days to get the incorporation certificate.

Describe the Compliances of a Nidhi Company?

Nidhi Company compliances are divided into three parts:
•    Pre-Incorporation Compliances,
•    Post-Incorporation Compliances, 
•    Event-based Compliance.
 

What are the Pre-Incorporation compliances for Nidhi Company?

Nidhi Company has to follow some compulsory compliance to get Nidhi Company Registration Process.

The essential agreements are mentioned below:-

• Minimum seven members are required, out of which three members must be the Directors of the Company.
• The Minimum paid-up equity share capital of INR 5 lakh is essential to incorporate a Nidhi Company.
• Preference shares should not be issued, and if it is released, the same is to be redeemed as per the terms.
• "Nidhi Limited" must be part of the given name.
• Minor should not be a member of a Nidhi Company.
• A trust cannot be a member of Nidhi Company.
• Net owned funds cannot be more than 20%.
• Nidhi Company cannot open branches.
• The rate of interest on the loan should not be more than 7.5%.

What are the post-registration compliances?

The post-registration compliances you need to follow are-

• Apply for companies PAN to carry out financial activities
• After PAN, you are required to open a bank account in your Company's name for all the future transaction

What are the Event-Based Compliances of a Nidhi Company?

Usually, event-based compliances are essential to file only once through the company registration process. Also, the agreements must be followed when there is any change in the Company's structure, which is non-periodical.

Below is the list of event-based compliances:

• Any change in the Company's name.
• Change in Registered office address.
• Appointment or Resignation or Removal of Director.
• Appointment or Resignation or Removal of Auditor.
• Any amendment to the Company's objective.
• Transfer of shares.
• Rise in the authorized capital of the Company.
• Appointment of the Key Managerial Personnel.
• Any other changes that are event-based

Which activities are prohibited by Nidhi Company?

The activities that are not permitted by the Nidhi Company are-

• Advertisement for funds
• Lottery
• Chit funds
• Insurance
• Leasing
• Accepting deposits or lending funds to outsiders
• Entering into partnership
• Sell assets of its member for providing loans

What are the kinds of Deposits for Nidhi Company Registration Process?

According to Rule 13, there are three types of deposits under Nidhi Company-

• Fixed Deposit   
• Recurring Deposit 
• Saving Deposit Account

What is the Maximum Deposit Limit in Nidhi Company Registration Process?

Nidhi Company will not accept deposits that are beyond 20 times its NET OWNED FUNDS (NOF) as per the last audited financial statement of the Company.

What is the Duration of Deposit in the Nidhi Company Registration Process?

The deposits shall be accepted for a minimum period of 6 months and a maximum period of 5 years.

The Company can accept deposits like Banks/NBFCs, of which the maximum period of deposit is five years. Still, a company can renew the same for the next five years based on the choice of the investor.

Recurring Deposits will be accepted for a minimum period of 12 months and a maximum period of of5 years.

Recurring deposit is a perfect tool that is mostly used by the Nidhi Companies to increase the deposit amount and funds, and hence the same as fixed deposits, and its maturity time is five years. When the Recurring deposit is mature or closed, the money of that deposit is automatically moved to the regular savings account. The Company can again offer the recurring account facility to the same member, and the amount collected of recurring deposits will be capitalized in fixed deposit as bulk money on the customer's choice. Therefore, it is a sales promotion idea for the Nidhi company.

What is the Rate of Interest on Fixed Deposits and Recurring Deposit?

The Rate of Interest that can be offered on Fixed and Recurring Deposit should not surpass the maximum rate of interest arranged by RBI, which the NBFC offer on the deposits.

 The Maximum interest rate offered on Fixed Deposits and the Recurring deposit will continuously be fluctuating, and it is at all times essential to look at the RBI policies for the Interest rate.

Whatsoever RBI decides for NBFC about the rate of interest. The same will be applied directly to Nidhi companies.

Conclusion

Nidhi Company works on the concept of mutual benefit. It is easy to form Nidhi Company as it does not require to receive a license from the Reserve Bank of India. It accepts deposits from the members and lends the money only to its members. For any assistance regarding  Nidhi Company Registration Process, feel free to reach us at Corpbiz.