Nidhi Company

What is Nidhi Company?

A Nidhi company is a Indian non-banking finance sector company, recognized under section 406 of the Companies Act, 2013. Their core business is borrowing and lending money between their members. They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. They are regulated by Ministry of Corporate Affairs. These companies deal with their shareholder-members only and provide benefits to its members who are registered and working with the company. Nidhi means a company which has been incorporated with the object of developing the habit of thrift and reserve funds amongst its members and also receiving deposits and lending to its members only for their mutual benefit. Nidhi companies existed even prior to the existence of companies Act 2013. The basic concept of Nidhi is "Principle of Mutuality". These companies are more popular in South India, and 80% of Nidhi companies are located in Tamil Nadu.

Advantages of Nidhi Company

• Simple Formation: -It requires only 7 members out of which 3 members would be the directors. Also no. of the documents required for the registration are very less.
• Capital Required: -The minimum capital requirement for the registration of Nidhi company is 5,00,000 Rs. only
• Limited RBI Regulations: -Though Nidhi Company is a finance company and falls under the category of NBFC, it does not require approval / license of RBI.
• No outsider intervention: -The Nidhi Companies are formed, managed and provides benefits only to their members. There would be no external intervention in the management as well.
• Benefits to the members: -Nidhi Company works with the objective of increasing savings of its members. It is very easy to make donations and get loans from the company for its members at a lower rate compared to the market rate. Also the investments in the Nidhi Company are secured ones. The risk of non-payment of loans is less as compared to other finance businesses.
• Exemptions and privileges under the Companies Act,2013: -certain provisions of the Companies Act,2013 shall not apply to the Nidhi Company and Nidhi would be exempted from the same. A Nidhi Company is free to make a private placement to any number of persons and it shall not be deemed to be an offer to the public.
• Separate Legal Entity: -A Nidhi company is a legal entity separate from that of its members and known as artificial person. Therefore, it can sue or be sued in its name.

• Perpetual Succession: - A Nidhi company has a perpetual succession until it is legally dissolved. It is unaffected by the death of members or change in constitution.

Procedure for the Incorporation of Nidhi Company

1) The first step is to obtain a Digital Signature Certificate (DSC) by all the Directors and Members. Documents required to obtain DSC are:

• PAN Card of the Director
• Aadhar card of the Director
• Photo
• Email ID
• Contact Number

2) After obtaining DSC, the next step is to obtain the Director Identification Number (DIN) by filing form DIR-3 along with a self-attested identity proof, address proof and a photo. (If directors are more than three as DIN for up to three directors can be obtained through Spice+ Inc-32).

3) File form Spice+ Part Afor reservation of name. Two names can be proposed in application. CRC on being satisfied may reserve the name for a period of 20 days from the date of approval.

4) The next step is to file application for certificate of Incorporation through Spice+ Part B for incorporation of company along with e-MOA and e-AOA.

5) Spice+ also gives facility to obtain EPFO, ESI and GSTIN registration of the proposed company.

6) After satisfying with all the details provided in application for certificate for incorporation, registrar of companies shall issue Certificate of Incorporation (COI) of the company and allot CIN Number (Corporate Identity Number).

Documents required for Incorporation of Nidhi Company

1) Passport size photograph of all directors and members

2) Self-attested copy of PAN of all directors and members

3) Self-Attested Address proof of all directors (Any One of Voter ID, Passport, Driving License, Aadhar Card)

4) Proof of office address (Any One of Electricity Bill, Telephone Bill, Property, Gas Bill, Tax Bill).

5) If Rented Business (Rent Agreement Copy) or if own (sell deed)

6) Company Name (1 to 2 Names)

7) Company object or product Name