What is a Nidhi Company?
The term “Nidhi” means treasure in the traditional Indian context. However, a Nidhi Company, in the Indian financial domain, refers to a type of company recognized u/s 406 of the Companies Act, 2013. They are also known by other names such as Permanent Funds, Mutual Benefit Companies, Benefit Funds, and Mutual Benefit Funds. They are regulated by the Ministry of Corporate Affairs (MCA) and the RBI is empowered to direct them in matters related to their financial activities. Nidhi Companies are immensely popular in South India and almost 80% of such companies are concentrated in Tamil Nadu itself.
What is the eligibility to do a Nidhi company registration online?
Nidhi Company registration is less complex when compared to other types of financial companies such as NBFCs. However, a Nidhi Company must meet the following pre-registration criteria within 1 year of its incorporation, to be able to register itself.
- No corporate, minor or body shall be a member of the Nidhi Company
- It should have a minimum Net Owned Fund (NOF) of Rs 10 Lakhs. Also, at least 10% of its outstanding deposits should come from un-encumbered term deposits.
- The maximum ratio of NOF to deposits should be 1:20.
What is the documentation criteria for Nidhi company registration online?
To complete the registration formalities, the Nidhi Company should furnish the below-mentioned documents-
- Identity proof of its directors and shareholders– Self-attested Copies of PAN cards for Indian nationals and passport for foreign nationals( if any)
- Residential proof of its directors and shareholders- Self-attested copies of passport/ Aadhar card/ electricity bill/ bank statement/ driving license.
- Incorporation documents- The signed document of digital signature application and soft copies of other incorporation documents (signed).
- Passport-sized photographs of shareholders and directors.
- Proof of registered office- Copies of sale deed/rental agreement, property tax receipt, electricity bill, or an NoC from landlord to utilize his premises as an office.
What is the procedure of the Nidhi Company registration?
The step-by-step procedure of the Nidhi company registration online is mentioned below-
Step 1: Application for name approval
You need to suggest at least three names while applying for name approval with the MCA. Please ensure that the proposed names are unique. Also, the name should conform to Company Incorporation Rule 8.
STEP 2: Application for Digital Signatures (DSC)
This is one of the major steps of the registration process. DSC is a pen drive-based signature that is used to sign on digital documents. All the directors/shareholders of the company must have their own DSCs.
STEP 3: Document preparation
Once MCA approves the name of your company, you need to sign and prepare the necessary documents (please refer to the previous section to know about the documentation criteria). At this step, you need to prepare the Forms INC 9, INC 10, DIR 2, Memorandum of Association (MoA) and Article of Association (AoA). You should also share these forms and documents with the promoters for signature.
STEP 4: Filing for registration
Once the documents are duly signed, the next step is to file for incorporation with SPICE Form INC 32.
STEP 5: Verification & Approval
After your credentials are verified successfully, the Government will issue you a registration certificate.
Advantages of registering a Nidhi Company in India
There are several advantages of Nidhi company registration online in India. Here are some of these-
Limited RBI regulatory compliance
Nidhi Companies are incorporated as Public Limited Companies with the MCA. They don’t need to get an RBI license to operate. They need to comply with the less stringent Nidhi Rules, 2014, and the Companies Act 2013 for their financial activities.
Limited capital requirement
As mentioned in the Nidhi Rules, 2014, the minimum capital requirement to register a Nidhi Company is just Rs 10 Lakhs.
Less Risky proposition
Nidhi Rules, 2014 says a Nidhi Company can provide loans to and accept deposits from its members only. Hence, the risk of loan default is less as compared to other businesses of similar nature. Also, there is less risk of negative impact from external factors as all financial activities are restricted to the members only. It’s one of the safest ways of inviting deposits from the public.
The normal operations of a Nidhi Company are not interrupted even at the insanity, insolvency, death or retirement of any member, thanks to the practice of perpetual succession.
A simple procedure of formation
The process of forming a Nidhi Company is fairly simple. You just need 7 members to start with and a few simple documents. You can then do Nidhi company registration online with the MCA through a simple registration process.