REGISTRATION OF NIDHI COMPANY IN INDIA

One of the simple and easy option to start a borrowing and lending business in India without obtaining RBI approval is Formation of Nidhi Company, Such Companies accepts deposits and provide loans only to their members, it is prohibited from dealing with non-members.

Definition: –

Nidhi means a Company which has been incorporated as a Nidhi:

Features: –

• Nidhi Companies are mutual benefit societies, because their dealings are restricted only to the members;
• Membership is limited only to individuals; Body Corporate cannot become its members;
• The principal source of funding is contribution from the members and loans are given to the members at relatively reasonable rates;
• Suitable for fulfilling the Financial Requirements of lower and middle income groups;
• Deposits mobilized by Nidhis are not much when compared to organized banking sector;
• As Nidhi Companies deal with Shareholder- members only, RBI has exempted the notified Nidhi’s from the core provisions of RBI Act.

Visit:- REGISTRATION OF NIDHI COMPANY IN INDIA

GOVERNING LAWS: –

Chapter XXVI of Companies Act 2013: –

• Section 406;
• Nidhis Rules, 2014;
• Nidhi Amendment Rules, 2022 w.e.f. 19^th April, 2022.

CHECKPOINTS: –

Pre-requisites for Incorporation as a Nidhi Company: –

• Shall be a public Company;
• Shall have Minimum 3 Directors and 7 Shareholders for formation;
• Shall have minimum paid up capital of Rupees Ten Lakhs (Rs. 10,00,000/-) (*as per Nidhi Amendment, Rules 2022, prior to amendment it was Rupees Five Lakhs [Rs. 5,00,000/-] 😉
• Shall have the last words “Nidhi Limited” as a part of its name;
• Such Company shall not issue preference shares.

PROCEDURAL ASPECTS FOR INCORPORATION OF NIDHI COMPANY: –

• Application for Reservation of Name: – (Spice+ Part-A):-
• Two names can be proposed in order of preference;
• The name shall end with the word “Nidhi Limited”;

• Application for Digital Signature Certificate (DSC): –

The proposed First Directors and Subscribers have to obtain Digital Signature Certificate (DSC);

• Application for Incorporation of Company: –

Forms: – Spice+ Part B (INC-32) linked with Spice+ MOA (INC-33); Spice+ AOA (INC-34); Agile Pro-S (INC-35) and Form INC-9;

• Checkpoints for Spice+ Part B: –
• Purpose of Form: –
• Application for: – Incorporation of Company; Allotment of DIN upto three applicants; PAN; TAN.

Details: –

• Company Details: –
• Authorised Share Capital;
• Subscribed Share Capital;
• Registered Office Address;
• Contact Details of proposed Company;
• Jurisdiction of Registrar of Companies based on the location of registered office of the Company.

• Subscribers and Directors Details: –
• Number of Subscribers and First Directors having valid DIN and not having DIN;
• Personal details of First Directors and Subscribers;
• Number and amount of Shares subscribed by the Subscribers;
• Designation and Category of Proposed Directors.

• PAN TAN Information: –
• Area Code, Range Code, AO Type depending upon the location of registered office of the Company;
• Source of Income;

• Documents (Attachments): –
• Proof of Registered Office Address: – Copy of Utility bill not older than 2 months along with NOC and Proof of Office Address: Conveyance Deed/ Lease Deed/ Rent Agreement etc. along with rent receipts;
• Proof of First Directors and Subscribers not having DIN: – Proof of Identity (Voters Identity Card/ Driving License/ Passport); Proof of Address (Latest Bank Statement/ Telephone Bill/ Mobile Bill/ Electricity Bill); PAN Card;
• DIR-2 (Consent to Act as Director of the Company) & Interest of such Directors in other entities;
• Other Declarations required as per Applicable Rules.

Checkpoints for Spice+ MOA: –

• Details: –
• Main Objects and Incidental or Ancillary Objects;
• The Main Object should be cultivating the habit of thrift and saving amongst its members & receiving deposits from, and lending to, its members only, for their mutual benefit;
• Authorised Share Capital of the Company;
• Details w.r.t Subscribers and Number of Shares Subscribed by them;
• Details w.r.t Professional witnessing the E-Form.

Checkpoints for Spice+ AOA: –

• Details: –
• E-AOA has option of adding, modifying, and deleting Articles; Table F, Schedule-1 of Companies Act, 2013 is applicable in case of Company Limited by shares;
• Details w.r.t Subscribers;
• Details w.r.t Professional witnessing the E-Form.

(*In case number of Subscribers are more than Seven then physical copies of MOA & AOA needs to be attached)

• Checkpoints for Agile Pro-S (INC-35): –

Purpose of Form: –

Application for GSTIN (Optional); EPFO, ESIC, Professional Tax (Mandatory for Companies registered in Maharashtra, West Bengal and Karnataka); Opening of Bank Account; Shop and Establishment Registration Number (only for Delhi location);

• Documents: –
• Specimen Signature of Authorised Persons for registration with EPFO;
• Proof of Identity and Address of Authorised Director for opening of Bank Account;
• Passport size photograph of First Directors;

Checkpoints for Form INC-9: –

• Purpose: –

Form for Declaration by First Subscribers & Directors as per applicable Rules;

• Type:-

It is Web Based Auto Generated Form (In case if total number of subscribers and/ or directors exceeds twenty (20) and / or any such subscriber/ director has neither DIN/ PAN then it is required to be attached to Spice+ Part B)

• Spice+ is the Web based Form which is required to be filled online, once all the details are filled, the E-Forms can be downloaded by clicking on download icon for affixing DSC’s and then such Forms can be uploaded like Normal other E-Forms after making payment of requisite fees.
• FAQ’S:-

Q.1.  Which activities are not allowed by the Nidhi Company to carry on?

• Restrictions/ Prohibitions: – No Nidhi Shall:-
• Carry Business as: –
• Chit Fund;
• Hire Purchase Finance;
• Leasing Finance;
• Insurance; or
• Acquisition of Securities issued by any body corporate.;
• Issue: –
• Preference Shares;
• Debentures; or
• Any debt instrument.;
• Open any Current Account with its members;
• Acquire another company by
• purchase of securities,
• or control the composition of the Board of Directors;
• Carry on any business in its own name other than the business of borrowing or lending;

*Nidhi may provide locker facilities on rent to its members, provided rental income from such facilities shall not exceed 20% of the gross income of the Nidhi at any point of time during a financial year;

• Accept deposits from or lend to any person/ body corporate, other than its members;
• Pledge any assets kept as security by its members;
• Enter into any partnership arrangement in its borrowing/ lending activities;
• Issue/ Cause to issue any advertisement in any form for soliciting deposits;
• Pay brokerage/ incentive for mobilizing deposits from members/ for deployment of funds/ for granting loans;

Q.2. What are provisions relating to Membership of Nidhi?

• As per Rule 8 of Nidhis Rules, 2014
• Only an individual who is major can become its member; Minor shall not be admitted as its member.

(*Deposits may be accepted in the name of minor, if they are made by natural or legal guardian who is member of Nidhi)

• Body Corporate or trust shall not be admitted as a member of Nidhi;
• For Formation of Nidhi – There must be minimum seven members out of which three members shall be Directors, Post Formation it must ensure that the number of members are increased to two hundred (200) and Nidhi shall ensure that its membership is not reduced below two hundred (200) at any point of time;

Q.3. Is it necessary that Director of Nidhi shall also be a member of Nidhi?

• Rule 17 of Nidhis Rules, 2014

As per the said rule, the Director shall be member of Nidhi;

Q.4. What are the Post Incorporation Compliances of Nidhi Company?

• Every Nidhi shall within a period of 120 days ((*as per Nidhi Amendment, Rules 2022, prior to amendment it was 1 year 😉 from the date of incorporation ensure that: –