In case you’re thinking about beginning a Nidhi Company in India then you definitely should understand the procedure and the requirements first. A Nidhi Company is an NBFC which encourages savings amongst members and also lends cash to them. Here are the eligibility criteria and steps to incorporate a Nidhi Company in India.
Meaning of a Nidhi Company
A Nidhi company is a Company limited by the Companies Act, 2013. It works to inspire saving and thrift in its members. A Nidhi Company’s business is to borrow and lend money amongst members.
Fundamental Eligibility Criteria for Nidhi Company in India
Given below is the eligibility criteria for Nidhi company registration in India:
- Public Company Status: A Nidhi company is a public Company. What this means is it requires 3 directors and 7 members to get going.
- Minimum Capital Requirement: The company must have a minimum Rs. 5 lakhs. This is the minimum amount that the shareholders ought to invest.
- Unique Name: The company name should include Nidhi Limited. For instance, in case you name your company Secure Savings, you name it Secure Savings Nidhi Limited.
- No Preference Shares: Nidhi Companies can not issue preference shares. Virtually any such shares issued before incorporation must be redeemed immediately.
Nidhi Company Registration Process
Given below is the table for the step-by-step incorporation process:
| Step Number | Process Description |
| 1 | Get Digital Signature Certificate: Step one is obtaining a DSC for all proposed directors. This is needed to sign electronic documents. |
| 2 | Director Identification Number: Then apply for the DIN for the proposed directors (in case none now exist). This number is necessary for the directors being recognized officially. |
| 3 | Approval of Name: You must apply for name approval at the ROC. The name should be unique and mustn’t resemble any current company or violate any law. |
| 4 | Prepare Documents: Prepare the AOA and MOA. These documents establish the company’s goals, rules, and regulations. |
| 5 | File Incorporation Forms: You must file the incorporation documents along with the AOA and MOA with the ROC. These forms consist of details regarding the company’s registered office, directors, and other details. |
| 6 | Get Certificate of Incorporation: If the ROC is pleased with your forms and documents, they issue a Certificate of Incorporation. This certificate is your initiation into your Nidhi Company. |
Post-Incorporation Requirements for Nidhi Company in India
Once you incorporate your Nidhi Company there are some obligations to keep the company in conformity with the laws.
- Minimum Membership: At least 200 members must be members within a year of incorporation.
- Net Owned Funds: Net own money of the company has to be more than Rs. Ten lakhs. Net owned funds are equal to paid up equity capital plus free reserves less built up intangible assets and losses.
- Unencumbered Term Deposit: A minimum of 10% of the complete deposits must be unencumbered term deposits. That means those deposits shouldn’t be collateral for any loan.
- Ratio Net Owned Funds to Deposits: Net owned funds/deposits ratio not below 1: 20. That means the firm can accept deposits of 20 times its net owned cash.
Compliance Requirements for Nidhi Companies
A Nidhi Company should follow these rules to remain in compliance:
- Annual Filing: File annual return and financial statements with the ROC.
- Form NDH-1: Within 90 days of the end of the financial year, submit Form NDH 1 with members and deposits.
- Form NDH-2: In case it doesn’t meet the minimum member requirement or the net had money to deposits ratio, the company has to apply for an extension on Form NDH 2 within thirty days of the conclusion of the fiscal 12 months.
- Form NDH-3: File Form NDH 3 (half-yearly return) with the ROC.
Nidhi Companies Restrictions
Nidhi Companies face certain limitations to operate legally:
- Business Activities: They may not operate chit funds, hire buy financing, leasing finance, or insurance.
- Securities issued: They are barred from distributing preference shares, bonds and other debt instruments.
- Partnerships: Nidhi Companies can make no partnership arrangement in lending or borrowing.
- Current Accounts: They can not open current accounts with their members.
- Advertising for Deposits: Nidhi Companies can’t advertise for soliciting deposits.
Rules for Accepting Deposits by Nidhi Companies
Only members of the Nidhi Company can make deposits. They accept the following money deposits:
- Fixed Deposits: The term of fixed deposits may be between six months and 60 months.
- Recurring Deposits: Recurring deposits range from twelve to 60 months.
These interest rates can’t exceed the RBI maximum rate that NBFCs accept public deposits.
Rules for Issuing Loans by Nidhi Companies
Nidhi Companies may only lend to their members under particular conditions:
1. Loan Limits: The maximum loan amount depends upon total deposits by members:
– Up to Rs. 2 lakhs for deposits less than Rs. 2 crore.
– Up to Rs. 7.5 lakh when deposits are somewhere between Rs. 2 crores & Rs. Twenty crore.
– Up to Rs. Twelve lakh when deposits are somewhere between Rs. Twenty crores & Rs. Fifty crore.
– Up to Rs. Fifteen lakh with regards to deposits over Rs. Fifty crore.
2. Collateral: The loans are typically backed by member property or other assets.
3. Interest Rates: The interest rate on loans ought to be reasonable and not go beyond recommended limits.
Conclusion
The procedure of incorporating a Nidhi Company in India requires following eligibility criteria and needs a structured procedure. Understanding the fundamental requirements and following the legal framework is enough to launch a Nidhi Company legally in the country. Such a company can be a great way to encourage saving habits and to encourage a financial community in the country.
FAQs
What are the requirements for Nidhi Company incorporation?
A Nidhi company should be a public Company with more than 3 directors and seven members to incorporate. The company should have minimum paid up equity share capital of Rs. 5 lakh and be named Nidhi Limited. Required documents & forms are to be sent to the ROC.
What conditions are needed for Nidhi?
A Nidhi Company must have at least 200 members in one year, net owned money of at least Rs. 10 lakh, along with a liquidity ratio of 20% minimum. Further, the net owned fund to deposit ratio should be at least 1: 20.
How much is the minimum authorised capital of Nidhi Company?
The authorised minimum capital of a Nidhi Company is Rs. 5 lakh. This amount must be paid up by the shareholders by the day of incorporation.
What are RBI regulations for Nidhi Company?
Nidhi companies are exempt from RBI core provisions but should stick to certain rules under Section 406 of the Companies Act, 2013. They must have 200 members and a capital of Rs. 5 lakh with 20% liquidity ratio and net owned money of Rs. Ten lakhs.
What are Nidhi Companies limitations?
Nidhi Companies can’t be involved in chit funds, hire buy, leasing financing or insurance. They may not issue preference shares, debentures or other debt instruments, form partnerships to lend and borrow, or advertise for deposits. They can’t also open current accounts with members.
