Incorporation Procedure of Nidhi Company

WHAT IS NIDHI COMPANY

Nidhi means a company which has been incorporated as a Nidhi  with the object of :

-Cultivating the habit of thrift and savings amongst its members,

– receiving deposits from, and lending to, its members only, for their mutual benefit, and Which complies with rules of Chapter XXVI of Companies Rules, 2014.

Section 406 of Companies Act 2013 and Companies (Nidhi Companies) Rules, 2014 governs The Law and Procedure for Nidhi Company.

ACTIVITIES PROHIBITED IN A NIDHI COMPANY

No Nidhi shall:

(a) carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;

(b) issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;

(c) open any current account with its members;

(d) accept deposits from or lend to any person, other than its members;

(e) pledge any of the assets lodged by its members as security;

(f) take deposits from or lend money to any body corporate;

(g) pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.

MEMBERSHIP

(1) A Nidhi shall not admit a body corporate or trust as a member.

(2) Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced

to less than two hundred members at any time.

(3) A minor shall not be admitted as a member of Nidhi:

Provided that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

NUMBER OF MEMBERS

Minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.

SHARE CAPITAL

A minimum of 5 lakh rupees, is required as the equity share capital to start a Nidhi Company. Nidhi Company can’t issue preference shares.

REQUIRED DOCUMENTS FOR NIDHI COMPANY REGISTRATION

  • Copy of PAN of Directors and Shareholders.
  • Copy of ID Proof of Directors and Shareholders. (Voter ID, AADHAR, Driving License, Passport)
  • Copy of Address Proof of Directors and Shareholders (Bank Statement/ Electricity bill/ Mobile bill/ Telephone Bill)
  • Passport size Photographs.
  • Property Ownership Documents of Registered office premises:
  • If property is owned: Electricity bill, Ownership Documents and NOC (if required)
  • If property is rented: Electricity bill , Rent Agreement  and NOC

A NIDHI IS INCORPORATE SIMILAR TO A PUBLIC LIMITED COMPANY THEREFORE FOLLOWING CRITERIA SHALL MET BEFORE IN-CORPORATION: –

  • Minimum number of proposed members at the time of incorporation shall be 7 or more.
  • Minimum number of proposed directors at the time of incorporation shall be 3 or more.
  • It must have a minimum paid up equity share capital of Rs. 5,00,000/-;
  • Name of the Company shall end with “Nidhi Limited”. Reserve Name of the Company through “RUN” service having name ending with “Nidhi Limited”.
  • After name approval file form SPICe for incorporation of Nidhi Company.

A NIDHI IS SHALL MEET WITH FOLLOWING REQUIREMENTS AFTER ITS INCORPORATION: –

  • Within One year of its incorporation Nidhi Company shall have not less than 200 Members, Net Owned Funds of not less than Rupees 10 Lakhs & shall have Unencumbered Term Deposit of not less than 10% of its Outstanding Deposits.
  • Nidhi Company shall file Form NDH-1(Return of Statutory Compliances), certified by CA/CS/CMA within 90 days of closure of First Financial Year.
  • If not meeting with the above requirements within one year of its incorporation then Nidhi Company shall seek extension from RD in Form NDH-2within 30 days of closure of First Financial Year. RD shall grant such orders as may deem fit within 30 says of receipt of Application for extension.
  • If non-compliance of Point No. 1 extends beyond second Financial Year, Nidhi shall not accept any further deposits from the commencement of second Financial Year till it complies with the provisions.
  • Nidhi Company shall file Form NDH-3(Half Yearly Return), certified by CA/CS/CMA within 30 days of conclusion of each half year.
  • Every Director of the Nidhi shall be its member also.

RESTRICTIONS ON NIDHI COMPANY

A Nidhi shall not: –

  • Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issue by any body-corporate.
  • Issue preference shares, debentures or any other debt instrument or in any form.
  • Open any current account with its members.
  • Acquire other company by way of control, share purchase, composition of the Board of Directors etc.
  • Carry on any business other than borrowing or lending in its own name.
  • Accept deposit or lend to any person other than its members.
  • Pledge any of the assets lodged by its members as security.
  • Issue or cause to be issued any advertisement in any form for soliciting deposits.
  • Enter into any partnership arrangement in its borrowing or lending activities.
  • Accept deposits more than 20 times of its Net Owned Funds as per the last audited balance Sheet.
  • Declare dividend more than 25%, if wants to declare more than 25% than seek prior approval from Regional Director & transfer amount equal to such higher amount in General Reserves.
  • Appoint Auditor for more than 1 term of consecutive 5 years & Audit Firm for more than 2 terms of Consecutive 5 Years. However, Such Auditor/Auditor Firm may be reappointed after completion of 2 years from completion his/its term.
  • Appoint Director for a term of more than 10 consecutive years but eligible for re-appointment after completion of 2 years from ceasing to be director.

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