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How Online Nidhi Company Registration is Changing the Game in India?

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Last Updated on June 20, 2024 by Kanakkupillai

Nidhi Company is a financial company operating under the Companies Act 2013. Its primary purpose is to encourage savings among its members while operating on a principle of mutual gain.

Nidhi companies differ from NBFCs in not requiring preference shares to become registered. Instead, however, specific other requirements must first be fulfilled before becoming legal entities.

Benefits of Nidhi Company Registration

Nidhi Company is a mutual benefit society where members save and provide each other with financial aid. As an NBFC (non-banking finance company), it is regulated by the Ministry of Corporate Affairs and monitored by the Reserve Bank of India (RBI).

This type of company encourages thrift and savings among its members by encouraging investments into the company for future profit gains, lending money on loan for future investments in mutual profit gains, providing loans or advances to its members, acquiring government-issued stocks, bonds, debentures or securities but are not allowed to engage in microfinance or vehicle financing activities.

Nidhi companies can provide members with lower credit rates and minimal outside intervention, with deposits and loans only accepted or given out among its members, thus minimizing its risks compared to other finance-related businesses. Operating costs remain low while regular operations continue even in cases of death, insolvency or insanity of one of their members.

Establishing a Nidhi company is straightforward and requires only seven members as initial shareholders. Once completed, the process is quick and involves minimal paperwork. Once the MCA has approved your documents within 25 days, you should apply for your PAN and TAN numbers, which take seven working days; finally, your directors should submit copies of MOA, AoA, and Certificate of Incorporation with a bank to open an account in its name.

Registration of a Nidhi company in India is relatively straightforward and involves filling out several documents. Proof of address requirements include copies of sale deeds or property tax receipts and No Objection Certificates from landlords if renting premises; you’ll also need a list of directors with their DINs and passport-sized photos for submission online. Once all these are in order, submit them all online.

Requirements of Nidhi Company Registration

Nidhi Company is a non-banking financial company (NBFC) established under Section 406 of the Companies Act 2013. As a mutual benefit society, this form of NBFC offers members benefits such as encouraging saving practices and offering loans or advances. Furthermore, Nidhi can acquire government stocks, bonds, debentures or securities.

These entities are subject to MCA regulation, following guidelines established by the Reserve Bank of India. Like any entity, these firms must also promptly submit their financial statements and annual returns. Furthermore, their capital requirements are restricted, and only three branches can open within each district.

Beginning a Nidhi Company registration is relatively straightforward. First, directors must obtain their Director Identification Numbers and Digital Signature Certificates through the MCA portal. Then, they must create the MOA and AOA of their Nidhi company, which must be filed with ROC with subscription statements. MOA should detail why creating such an entity was done, while AOA lays down guidelines that need to be observed by them as soon as they register it with ROC.

Additionally, a company must possess at least Rs 5 lakhs of paid equity share capital with an ownership fund-deposit ratio of 1:20. In addition, non-member deposits should not be accepted, nor should any incentives given out for deposit acquisition, and activities deviating from its object should also be avoided.

Once submitted, the ROC will review these documents and approve your registration application. Afterward, the Registrar will issue a Certificate of Incorporation, which contains your company’s CIN and PAN, TAN, ESI, and EPF numbers; then, it can begin operating and opening bank accounts by providing these documents directly to each bank branch. This process may take 14-21 working days plus professional fees before your company must file its annual return by September 30 every year, just like any other entity.

Registration Fees

Nidhi companies form part of India’s non-banking financial sector and are registered under Section 406 of the Companies Act 2013. Also known as Benefit Funds, Permanent Funds, or Mutual Benefit Companies, these entities are overseen by the Ministry of Corporate Affairs and permitted to accept deposits from members and offer incentives that encourage savings habits.

Regarding fees, registration for a Nidhi company is quite affordable and significantly less than other types of business. Furthermore, additional costs associated with registration are minimal as well. For instance, DIN and DSC costs are already included in this process and must be acquired before registration can commence.

As part of their first step to forming a Nidhi company, all directors must obtain their DIN and DSC from MCA-accredited agencies. A DIN is a Director Identification Number, while DSC stands for Digital Signature Certification, after which the directors should propose three names for their company to MCA before filing the MOA (Memorandum of Association) and AOA (Articles of Association).

Next comes the task of drafting all necessary documents ROC requires for filing, such as subscription statements. This process should take a little time. Once complete, directors and shareholders must sign these off before being sent on for filing with ROC.

After this step is complete, an application for incorporation will be submitted to ROC for review and approval. After being approved by ROC, Directors will receive their Certificate of Incorporation, which contains their CIN and other key details about their company.

Nidhi companies must adhere to the net-owned funding system, which requires at least a 1:20 ratio between net-owned funding (NOF) and deposits. If this requirement isn’t fulfilled, penalties could apply, and penalties could include fines as outlined by law.

Nidhi Company Registration Process

Nidhi Companies are non-banking financial institutions regulated by the Ministry of Corporate Affairs (MCA). Like non-banks, their primary role is facilitating savings and lending among members; additionally, they can invest in government stocks, bonds, debentures and securities but cannot issue preference shares to new members or shareholders; deposit-taking is prohibited, and they are only permitted to accept deposits from existing shareholders or members as funding sources.

To register a Nidhi Company, several documents must be filed: a Memorandum of Association (MOA) and Articles of Association (AOA), which must contain specific clauses related to Nidhi companies. Furthermore, you will require proof of address, such as a Sale Deed or Property Tax Receipt for your registered office; otherwise, submit a No Objection Certificate from the landlord if renting.

Once all necessary documents have been submitted, it should take approximately 15-25 days to receive your Certificate of Incorporation (COI), including your company’s CIN number. With your COI in hand, opening a bank account becomes possible by directly providing PAN, TAN and ESIC/EPF Certificates to a bank branch.

Nidhi Company registration online is straightforward, convenient and can be completed from any location – whether at home or work. Submit the necessary documents to the Ministry of Corporate Affairs (MCA), pay fees based on the authorized capital of your company, and complete a short process with them if any issues or delays arise during registration. The MCA will keep you up-to-date regarding any delays with the registration of your Nidhi company.

Once you submit the necessary documents, the directors of your company must obtain DIN and DSC for each director. A DSC is a digital signature proving who signed electronic filings with the MCA. Once these have been done, submit three names for consideration to the MCA; after just a few days, it should have approved one, and your business can begin operating!

Significance of Nidhi Company Registration in India

Nidhi Company is an entity established under the Companies Act that promotes thrift and savings among its members through benefit funds, permanent funds, or mutual benefit fund companies. Furthermore, these Nidhis facilitate borrowing/lending money between their members without outside interference.

1. Limited Capital Requirement

Nidhi Company registration can be an excellent solution for entrepreneurs as it does not require significant capital outlay. However, it must have at least 200 members and have a Net Owned Funds-Deposit Ratio of 1:20 or lower to register as one of these entities.

Additionally, the company must maintain Books of Accounts and Statutory Registers, convene Statutory Meetings, and follow annual compliance obligations.

Nidhi Companies are prohibited from engaging in activities that go beyond their objectives and can only accept deposits from non-members or lend them money with proper membership approval. Furthermore, Nidhi companies must file Form NDH-1 within 90 days after closing its first financial year, duly certified by a Certified Accounting/CS/CWA along with applicable fees; if this requirement cannot be fulfilled, it should submit Form NDH-2 with its Regional Director requesting an extension.

2. No Management Role

Nidhi companies cannot pay any inducements or commissions when mobilizing deposits, allocating funds or issuing loans. They cannot accept deposits from or loan money out to non-members.

To become a member of a Nidhi company, one must either be an Indian national or have registered his business within India. They also need a DIN number (Director Identification Number).

Once all requirements have been fulfilled, one may submit a digital signature certificate from a licensed certifying authority and complete Nidhi company registration online. Typically, it takes 15-25 days to receive their CIN (Company Identification Number), after which business operations can commence.

3. No Licensing Requirements

As mutual benefit societies, Nidhi companies do not require a license from the RBI to operate legally. Instead, this entity aims to instill thrifty savings habits amongst its members by collecting deposits and lending back out only for mutual benefits.

Nidhi companies differ from credit societies because their compliance requirements are less stringent. However, some restrictions remain, including not issuing debentures or preference shares and engaging in other business activities. Furthermore, they must submit COI forms within 90 days of closing out their first financial year following incorporation; additionally, they are prohibited from accepting money from non-members and lending it back out again.

4. No Liquidity Requirements

Nidhi companies belong to the non-banking Indian finance sector and are recognized under section 406 of the Companies Act 2013. Their primary business involves borrowing and lending amongst members.

Nidhi companies meet registration requirements similar to Pvt Ltd companies; this includes submitting a memorandum of association, address proof for directors and shareholders, a class 2 DSC certificate for individuals, and DIN numbers to SPICe+ for at least three members at incorporation time.

Once all necessary paperwork has been filed and stamped, a company can receive its Certificate of Incorporation from the Ministry of Corporate Affairs. After that, PAN/TAN must be obtained along with opening a bank account.

5. Net-Owned Funding System

Nidhi companies are registered under section 406 of the Companies Act 2013. Their primary purpose is to encourage savings among their members while also providing them with lending facilities.

Credit societies governed by the Societies Registration Act have more stringent compliance requirements to fulfill than these entities, which operate similarly to NBFCs but require less supervision from regulators.

These entities may accept deposits from its members as long as the deposits do not exceed 20 times the Net Owned Funds and offer fixed deposits; to secure permission, they should submit Form NDH-2 with their regional director of the Ministry of Corporate Affairs.

Supreena

Welcome to www.kanakkupillai.com! Hello there, I'm Supreena, a legal advisor deeply passionate about entrepreneurship and dedicated to helping business owners and startup enthusiasts navigate the complex landscape of business formation, growth, and success. My profound understanding of the intricate aspects of various industries, legal frameworks, and strategies for sustainable growth makes me your trusted partner in achieving your business goals. With a commitment to promoting diversity and inclusivity in the business world, I firmly believe that every entrepreneur, regardless of their background, should have access to the legal expertise and guidance needed to thrive in the competitive startup ecosystem. I am honored to be part of your journey toward entrepreneurial success through this blog, where I'll provide valuable legal insights and strategies tailored to your business needs. Thank you for entrusting me with the opportunity to contribute to your path to business prosperity. For more information and resources, please visit www.kanakkupillai.com.