In many societies, a group of people come forward and form a group to ensure mutual financial leverage. This helps them avert financial woes and elevate saving with time, a win-win proposition for everyone. However, the lack of legal stability can hinder the future of such groups. That’s where the Nidhi Company Registration Guide comes into play.
Apart from legalizing the group, it ensures better control and zero conflict among members, ensuring a long and sustainable lifecycle. To apply for such a registration, one needs to follow a long list of compliances, including paperwork arrangement and application filing with authority. In this Nidhi Company Registration Guide, we will take a walkthrough of such compliances.
Understanding What Nidhi Company is
Nidhi Company refers to an NBFC (non-banking finance company). It falls under the Section 406 of the Companies Act 2013. It enables mutual funding transactions, allowing members to get money as and when required. This encourages members to ensure long-term savings in the company.
The same money is used for credit facilitation, primarily in the form of loans and advances, available to active members. Further, the funds can be used to secure government securities/stocks/debentures/ bonds with the deposits.
What are to documents required for the Nidhi Company?
Documentation is a vital part of the Nidhi Company Registration Guide. The following list discusses the same.
- Photographs of passport-size
- AoA of the company
- NOC from the landlord/owner of the premises
- DIN of the directors
- DSC of the directors
- MoA of the company
- PAN card: It helps with financial transactions and taxation-related affairs of the company
- Proof of address: Address proof includes a bank statement, DL, residence card, etc.
- Proof of residence: You can provide a utility bill or bank statement reflecting the name and address
- Passport: It is mandatory only for foreign directors.
- Proof of registered office: Used for applying for government schemes and loans.
Nidhi Company Registration Guide: A 5 Steps Guide
The section below entails a detailed Nidhi Company Registration Guide. Pay attention to each step in the process to avoid unnecessary troubles.
Step 1: Obtaining DSC and DIN:
The first step involves securing a DSC (Digital Signature Certificate) and DIN (Directors Identification Number) for all the directors. DSC will help with signing the e-documents, including the online application, whereas DPIN shall reinforce a legal identity for the directors.
Step 2: Name Approval:
You can apply for a name reservation on the MCA portal with three proposed names. MCA will verify names against its database for legitimacy and originality. The approved name shall remain valid for 20 days as per the Company Act rule 8.
Step 3: Drafting Articles of Association and Memorandum of Association:
Submission of the charter documents, such as MoA and AoA, to RoC, is what this step requires. These documents go along with the Statement of subscription. MoA and AoA must reflect the company’s objective explicitly.
Step 4: Getting CIN (Certificate of Incorporation):
It takes around 2-3 weeks to secure the certification from the date of application. This certification ensures that your company is ready to serve its objective. Every registration certificate entails a unique identity number namely CIN.
Step 5: Apply for PAN, TAN, and open a bank account
Now that your company is certified, it is time to apply for a PAN, TAN, and open a Bank account. An online application can be filed with the respective authorities to secure the PAN and TAN with almost zero paperwork. Coming to the bank account opening, you must share common documents like MoA and AoA with the bank along with the application.
Understanding the Compliances of a Nidhi Company
Adhering to compliances is not uncommon for any entity seeking to operate legitimately. Nidhi companies also attract several legal requirements, be it a matter of registration or addressing events-based compliances. The Nidhi Company Registration Guide is incomplete without discussing the underlying norms.
Let’s take a closer look at the legal requirements applicable to Nidhi companies.
Pre-Incorporation compliances of Nidhi Company
Securing Nidhi Company Registration means complying with several legal requisites. Some notable compliances include:
- The presence of at least seven members is mandatory to form a Nidhi company. Among these three should serve a directorship position.
- The company must be a public company with the suffix “Nidhi Limited” in its name.
- Minor, Body Corporate and a Trust stand ineligible as a member.
- Rs. 5 lakh is the minimum paid-up share capital.
- Nidhi Company must stay profitable for three consecutive years if expansion via branch opening is on the card.
- The loan should not attract an interest rate higher than 7.5% above the highest interest rate applicable to deposits.
- The company stands ineligible to issue preference shares. If otherwise has happened before the commencement of the Act, the same shall be redeemed.
- The primary objective of the company should be promoting the thrift of saving among members.
Post-Incorporation Compliances of Nidhi Company
A registered Nidhi company must fulfill the following conditions within one year of incorporation:
- The member numbers should go as high as 200 within one year from registration.
- The net owned funds should be at least Rs 20 lakhs given the via Nidhi (Amendment) Rules, 2022
- The ratio for the net owned funds and the deposits should be maintained at 1: 20
- Unencumbered term deposits must be maintained around 10 percent of the outstanding deposits given the Rule 14 of Nidhi Rules 2014.
- Account records and statutory Registers should be maintained regularly.
- Convening Statutory Meetings at regular intervals is a vital compliance.
Conclusion
Running a Nidhi company seeks unwavering commitment to ensure the mutual betterment of onboard members while being compliant. There are a host of legal requirements that one must follow for opening such entities. We hope this Nidhi Company Registration Guide will address all your registration concerns.
