About Nidhi Company
In this article, we will be discussing the procedure of the Incorporation of Nidhi Company. Nidhi Company is a non-banking financial business.
Nidhi Company performs lending and borrowing of money job with its members themselves do all the work. This is done for the mutual benefits of all the members of the Nidhicompany. It promotes saving and utilization of its funds within its members.
Nidhi Companies governed with the provisions of Section 406 of the Companies Act, 2013 (“CA, 2013”) and ruled by the Ministry of Corporative Affairs (hereinafter “MCA”). It is solely formed to create a habit of saving and benefits for each and every members of the Nidhi Company.
Functioning of Nidhi Company:
Applicability of Nidhi Rules, 2014
Ministry of Corporate affairs notified Nidhi Rules, 2014, in order to carry out the purposes of Nidhi Companies.
The Rules as aforesaid provides that it is applicable on:
Pre-requisites For Incorporating a Nidhi Company
What to do after Registration of Nidhi Company
Raise minimum members to 200 within 12 months of registration of Nidhi company. If any time during the business of Nidhi company the aggregate of total members falls below 200 then it will be considered as a default. However in that case the Nidhi Company can request for more time to get the total number. The request shall be raise in form NDH 2 and shall be filed to Regional Director, MCA.
Raise net owned fund to minimum 10 lakhs ie., (Paid Up Share Capital + Free Reserves).
This will be the first step of registration of Nidhicompany, the proposed directors are required to obtain the DSC. It is optional to have DIN prior to registration of Nidhi Company.
After having DSC application for name availability in RUN facility of MCA portal is to be filed. It is to be noted that the word Nidhi Limited must be there at the end of the name of the proposed Company.
Every Company desirous to be registered as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Now, one doesn’t require digital signature of applicant for name availability.
After the name approval, Form SPICe 32 shall be prepared and filed with the ministry with following attachments.
Since a Nidhi company falls under one class of Non-Banking Financial Companies, the RBI is authorized to issue directions in relation to deposit acceptance activities. However, since the Nidhi Company deals with its shareholder-members only, exemption has been provided by RBI from the core provisions of the RBI Act and other directions as are applicable to NBFCs.
After being satisfying with the submission of documents and information the Registrar of Company will issue a Certificate of Incorporation.
In order to make regulatory regime for Nidhi Companies more effective and also to accomplish the objectives of transparency & investor friendliness in corporate environment of the country, the Central Government has amended the provisions related to NIDHI under the Companies Act and the Rules (effective from 15.08.2019).
As per Amendment, the Nidhi companies have to apply to the Central government for updation of their status/ declaration as Nidhi Company in Form NDH-4.
The time-frame for applying to Central Government in form NDH-4 is as under:-
Please note that in case a company does not comply with the above requirements, it shall not be allowed to file Form No. SH–7(Notice to Registrar for any alteration of share capital) and Form PAS–3 (Return of Allotment).
About Author: Praveen Singh is a Founder and Managing Partner of TRIJURIS (Legal & Taxation Service Provider in Delhi). The head office of the firm is based in Delhi. The firm inter-alia engaged in providing services related to Corporate and Commercial laws advisory, Indirect taxation, Setting up industries in India as well as outside India, Legal recovery services and other regulatory matters. The firm has actively participated in assisting MSMEs in India and small businesses to scale there business and closing working with them in respect of recovery of their legitimate dues.