Overview

The Nidhi company is a blessing in disguise for those who are interested in starting a loan / finance business in India as it also ensures ease and affordability factor.

Nidhi Company registration is a process through which the incorporation of types of NBFCs called funds is possible. Another name of this NBFC is Mutual Benefit Finance Company. Further, this incorporation takes place under the provisions of the Companies Act, 2013.

The business of the fund company is related to acceptance of deposits and money lending. Compared to the registration procedures of other NBFCs, this registration process is an easy one. In relation to taxation and annual compliance, fund companies take advantage of specific exemptions. The fund company incorporation will increase the sense of savings as well as smart spending in the minds of its members.

Widely known as a fund bank, fund companies try to cultivate the values of savings among their members. The rules relating to the fund company state that it can proceed for transactions within limited limits of work and only with its registered members.

Further, it is not wrong to say that these companies acquire from their members and provide to their members. The activities of the fund company are under the purview of RBI. In this category of NBFCs, directors are at least free from the shackles of eligibility criteria. At the end of the name of all fund companies, Nidhi Limited should be at any cost.

Benefits

Many people in our country want to deal with financial services, but due to lack of capital they are unable to take further steps. The main objective of forming a Nidhi company is to nurture belt-tightening habits among its members so that by prioritizing savings, they do not face any difficulty in meeting their financial needs arising from time to time. In addition, there exist many unexplained benefits of establishing a Nidhi company.

Reasons, why people prefer Nidhi Companies, are listed down as

• Easy construction without any complexity is included

  The registration process of the fund company provides freedom from all kinds of complications. Since the fund company registration has a low documentation process from beginning to end, starting a fund company is an easy task. Additionally, the registration process is completed in a week or two.

• Limited Liability

  As per the Companies Act, 2013, directors and shareholders have limited liability. In the game of business, either the profit will be made or the company will incur a loss. While performing business activities, if the company suffers from any loss or even goes through any financial trauma, creditors, banks, and the government have the personal property of any of the shareholders or even directors There is no power to seize.

• High Certainty Value

  In a developing nation like India, adults ranging from India children up to age 40 are interested in saving their money. Here, the habit of saving is going in the same line with the central goal of the fund company. Adapting savings among its members is one of the primary objectives of fund companies. As it is a worrying establishment and full of certainty, members will stick to the good habit of saving.

• Few Guidelines

  As governed under the Nidhi Rules, 2014, Nidhi companies will have to follow lower guidelines imposed by RBI. The monitoring and regulation of the cap remains in the hands of the central government. This empowers them to control the operating portion along with all their activities. Though the fund company falls under the category of NBFCs, it rarely follows RBI rules. Your Nidhi company form in India is not going to cause any trouble in your way as RBI. Proceed without putting yourself in any crowd-n-hash.

• Separate Legal Entity

  Being a separate legal entity from its shareholders, directors and promoters, the fund company can own property and debt in its own name. It has got the power to sue anyone or prosecute others. If funds will be required in the company, the company cannot ask for any contribution from its members.

• Easy Availability of Funds

  Nidhi company is the most secure and accessible way of accepting deposits from the end of the general public. The only requirement is that they be registered members.

• Perpetual Existence

  The death or departure of any member is not going to affect a fund company as it always exists. The Permanent Succession Fund allows the company to continue until it is legally dissolved.

• Meeting the Requirements of Lower and Middle Class

  Nidhi companies play an important role in meeting the demands of the lower and middle income groups, including providing financial support through them without any lengthy documentation.

• Ease of Management

  In Nidhi Company, bringing changes is not a matter of worry and concern, unlike other NBFCs.

Registration Process

Even though the Nidhi company registration process is quite simple to follow, things can be further complicated with the help of professionals. Become comfortable with the help and advice of professionals in completing and filing complex forms. In addition, it will be a time-saving exercise with their support. Sometimes, government portals and slightly harder language make things challenging. Having specialized in Nidhi company registration, we have successfully started several Nidhi companies under our roof. The Nidhi company incorporation process involves presenting several items such as

• Directors and Members - Begin with KYC Part

  All shareholders and directors must go through the KYC process. There should be three directors with at least seven members. A person can be a director, as well as a member. Both can be the same.

• The Need for Digital Signature

  The Nidhi company registration process gains momentum on fulfillment of the primary requirement i.e. digital signature. In addition, it is mandatory to self-verify all submitted forms.

• Consent on Name

  Now, the first requirement is to select and suggest at least three names to proceed in the fund company registration process. The MCA is fully prepared to reject two names and will only indicate its name. Another factor that needs to be considered is the specificity of the proposed names. Also, they should not match the names of companies registered in the past. SPICE + will help in submitting the web based form name.

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

  After finishing the name approval process, the Nidhi company registration application is submitted with the articles of association and memorandum of association of respectively Nidhi's Company. Before issuing a COI, the application is inspected in an ordered manner. And finally, the COI is released.

• PAN and TAN & Opening of Your Bank Account

  You are likely to get your pan and tan within a week. And thereafter, submits the Memorandum of Association, Articles of Association, Certificate of Incorporation, and PAN to the bank, and finally, you have to open your bank account.

Requisites

• Minimum Directors- 3
• Minimum members- 7
• Minimum capital requirement- Rs 5 Lakh
• Not empowered to issue preference shares
• The goal of the company should be fostering the saving habit by receiving deposits from and lending to its members
• DIN for Directors

Nidhi Companies not entitled to do.

Nidhi Companies are not entitled to perform the following transactions

• Invite and accept deposits from their own members rather than other members.
• Engage in Chit funds business and leasing finance
• Lotteries
• Going on for any business other than borrowing and lending to its members
• Opening the current account with its members
• Getting into a partnership arrangement to carry lending as well as borrowing activities
• Insurance
• Issuing debentures, preference shares, or some other debt instruments
• Accepting and lending of deposits from corporate
• For mobilization of deposits, pay fee, incentive, and commission
• Pay brokerage amount for granting loans to the members
• Hire-purchase finances

Key Points

• All provisions relating to the governance and establishment of fund companies in the geographical boundaries of India are also included in section 406 of the Companies Act 2013 and the Fund Companies Rules of 2014.
• Since Nidhi companies do not accept money lending and deposits by anyone else, only RBI has given them many discounts by their members.li>
• RBI is responsible for issuing instructions and guidelines for fund companies. Primarily, these are related to investments and most financial activities by companies. (This includes NBFCs)
• In the case of funds, deposits earn a shallower interest than deposits in the systematic field of banking.
• As Nidhi companies are helping all members for their welfare as well as mutual benefit, these companies have earned the tag of Mutual Benefit Societies. All members of the fund company participate in all lending and lending activities.

Mandatory Compliances

• NDH 1

  In this form, A Nidhi company has to submit the list of members of Nidhi company at the end of the financial year within a time limit of 90 days.

• NDH 2

  In this form, a Nidhi company can request MCA for an extension if it has been unable to add 200 members in its fiscal year.

• NDH 3

  Apart from the above forms, A Nidhi Company is also required to file half-yearly returns in NDH 3 form.

• Annual Returns with ROC

  It is mandatory that the Nidhi company should file an annual return with the Ministry of Corporate Affairs through Form MGT-7

• Profit, Loss and Balance Sheet

  In Form AOC-4, A Nidhi Company has to submit financial statements and other related documents.

• Income Tax Returns

  Nidhi Company must file annual returns in the following financial year by September 30, like the rest of the companies.

Required Documents

The key Documents are

• Copy of Directors Pan card
• Identity proof of every shareholder and the director
• Passport size photos of all the directors
• Electricity bill or other utility bills for the address proof
• Aadhaar Card of Directors as well as of Shareholders
• Address proof of the directors and shareholders
• Rent agreement copy (In case if rented)
• No-Objection-Certificate (NOC) from the Landlord
• Property papers copy

Requisites

• To comply with the statutory requirements, A Nidhi Company needs to have 200 members by the 1st year-end.
• The minimum New Owned Fund should be Rs 10 Lakh or more than 10 Lakh Rupees.
• The prescribed ratio of the Net Owned Fund to Deposits should not exceed more than 1:20.
• A Nidhi Company is not entitled to admit a minor, trust, or a body corporate as a member.
• There is a rule that unencumbered term deposits shall be more than 10% of outstanding deposits.

Factors

you need to consider these points

• Must Display Uniqueness

  The name should be only one of its kinds. It must carry a distinctive identity when compared to existing companies.

• Simple and Crisp

  It should be easy to keep in mind for a long time, and also it should be easily understandable by one and all.

• Must Meet its Purpose

  It must meet its purpose of conveying the brand objective and information about the brand to the people through its name.

• The Suffix Portion is Crucial

  Mutual benefit Nidhi Limited or Nidhi Limited' should come as the suffix.

• Must Follow the Laws

  There are some provisions related to name in Emblems and Names (Prevention of Improper use) Act, 1950. Without violating laws, it should follow these guidelines.

• Shouldn't be Offending Anyone

  It should not be offending any community of people, shouldn't be hurting the sentiments of any religion, and also shouldn't be undesirable to any culture.