CA Paras Mehra

In the age of Internet, where everything is going online, where we can meet without being there personally, we must understand how this has impacted the starting of business in India especially the Nidhi Company.

Nidhi is the safest and the cheapest way of raising funds from the General public. The most important thing is that you don’t require Reserve Bank of India (RBI) approval for this Company. The alternatives of Nidhi (like Non Banking Financial Companies (NBFC’s) will need a capital of at least two crores) are very costly. Through, very business friendly, Nidhi is yet to be common between the business communities. Nidhi is another way to gathering funds and then utilizing the same for the more beneficial purpose. The main disadvantage of this form is that it can only work through its members. In positive words, you can do business with anybody just by making him the member of your Nidhi; we shall discuss its features, merits, and demerits later on, but now let us explain how to register the Nidhi Company online.

Basics of Nidhi Company

Before we explain the process of registration, you must understand the basic of Nidhi Company:

  1. Nidhi Company is also called a Mutual Benefit company. It promotes the art of saving and utilization of funds within its member community.
  2. Anybody can register a Nidhi Company; there is no background check, nor there did any prescribe qualification for its owners.
  3. Nidhi Company cannot deal with anybody other than its members. You will have to understand the process of making a making in a Nidhi.
  4. The minimum capital requirement for Nidhi Company is five lacs with at least seven members needed to incorporate a company.

Process of Registering the Nidhi Company online

Let us first understand the process diagrammatically:

Nidhi Company

Let us understand the process in more detail:

1. The Minimum Requirements: This is one of the most important points of discussion. You require a minimum of 7 People, with five lacs capital to start the company. Also, before you initiate the company, you must read and understand the company post compliance procedure. Like, you must get up to 200 members within one year of incorporation, because, if these compliances are not followed up, then your Nidhi Company registration can be canceled. We will discuss the post-compliance in our next article, but right now, we will only concentrate on incorporation part.

2. Decide Directors and Shareholders: This is also a next big question because directors are the one who runs the company. Also, there is a myth in the industry that directors should be only out of the seven people. However, you can choose directors separately and not out of the seven persons. The following permutation is possible:

DIRECTORSSHAREHOLDERSTOTALREMARKS
377Directors from 7 shareholders
Three only director710Shareholders and directors are different

 The combination may be different from what is written above. You can choose directors of your choice and shareholders of your choice. But choose them wisely, because once done, they are difficult to remove.

3. Prescribed Documents: There is a set of documents that are mandatory for the directors and shareholders to get into the company. Here is the list of documents required for getting the Nidhi Company registered:

a) Documents for Director and Shareholders:

  • Copy of PAN Card
  • Copy of ID Proof (Anyone – DL, Voter ID, Passport, Aadhar)
  • Copy of Address Proof (Anyone – Bank Statement/Passbook, Electricity Bill, Mobile Bill, Telephone Bill)
  • Passport Size Photograph

b) Registered Office Docs:

  • If property is owned: Electricity bill + Ownership Documents + NOC
  • If property is rented: Electricity bill + Rent Agreement + NOC

Apart from these documents, there are other sets of documents that will be prepared by your Chartered Accountant and which are to be submitted to the Registrar of Companies (ROC). Also, only the scan copies of the documents are required. Originals are not needed.

4. Apply for Digital Signatures (DSC) and Director Identification Number (DIN): After collecting the required documents, now is the time to apply for the Digital Signatures and DIN. Digital Signatures are the certificates which are made personally for every director. These signatures are used throughout the incorporation procedure.

 After DSC, Director Identification Number (DIN) is applied to the directors. As per Indian law, every director must request a DIN number. Director Identification Number (DIN) is like PAN card, which has lifetime validity and has to be applied only once. It will remain valid irrespective you remain the director or not.

5. Choose a Name and get it approved: Now is the time for selecting a name and get it registered with the Registrar of Companies (ROC). Nidhi Company name has a structure, and the name can be registered accordingly. The structure is as follow:

FIRST NAME     +   NIDHI      +  LIMITED E.G. If you choose the first name like ABC, then the full company name will be “ABC NIDHI LIMITED”.

However, before finalizing the name, the same should be verified with Ministry of Corporate Affairs and trademark department, whether the same is available or not? You can check from the following link:

For MCA- http://www.mca.gov.in/mcafoportal/showCheckCompanyName.do

For Trademark – http://ipindiaonline.gov.in/tmrpublicsearch/frmmain.aspx

After selecting the name, the same should be applied via form INC – 1. The Registrar of Companies (ROC), after verifying the name will issue an approval letter to you.

6. Applying for Incorporation: This is the most important step of Nidhi Company formation. The incorporation must be applied correctly to avoid any chance of rejection of the forms. We cannot explain you here, the full process because of the size of this article. You can read the same from the following link:

7. Nidhi Limited Incorporated: Once ROC approves your company incorporation, you can start the business instantly. You can apply for PAN and TAN, and you can also launch the membership procedure. Also, the Government of India has dispensed the procedure of filing business commencement certificate.

8. Opening a Bank Account: The first step people do after incorporating the company is to open a bank account in India. Also, there is a myth in the market that you cannot open a bank account with the PAN card of your Company. This is You can open the bank accounting with PAN card application ( proof that you have applied for PAN card). You can open the bank account with the following documents:

a. Certificate of Incorporation (COI)

b. Memorandum of Association (MOA)

c. Articles of Association (AOA)

d. PAN card Acknowledgement

e. PAN and ID of directors

f. Other documents as per bank Requirement like Board Resolution etc.

9. Post Compliance Procedure: After getting the company incorporated, the first thing you should do is to appoint a Chartered Accountant for your company. There is much-sophisticated compliance for the Nidhi Company. Hence, to avoid being in default, a person should always comply with the law and do the business properly.

About the Author

CA Paras Mehra is a practicing Chartered Accountant, a specialist in dealing with Nidhi Companies Registration and Practice. He is also a founder of https://www.hubco.in/ a leading website for providing accounting solutions to the Industry. In case there is any feedback or queries, you may reach the author at paras.mehra18@gmail.com or +91 9654622792.

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