Introduction Of Nidhi Company
The formation of Nidhi Company is basically for borrowing and lending money to its members. It promotes the habit of saving among its members and deals with the principle of mutual benefits. For Nidhi Company it is not required to get a permit from the Reserve Bank of India (RBI), thus it is not difficult to form. Registration of Nidhi company is done as a public company. So, the last word should have a limited on its name.
As per the Indian language, Nidhi implies “treasure”. It is additionally known by the name Mutual Benefit Company.
Exercises Prohibited in a Nidhi Company
In addition, Nidhi Company does not deal in chit funds, hire-purchase finance, leasing finance, insurance or securities. Other than its members, it is strictly prohibited to accept deposits from or lend funds to anyone else.
“Nidhi Company is also not allowed to advertise itself for any kind of deposits”.
Members
A minimum of 7 members are expected to begin a Nidhi Company in which the 3 members must be a director.
Share Capital and Owners’ Funds
A minimum of 5 lakh rupees, is expected as the value share capital to begin a Nidhi Company. Preference shares are not issued by the Nidhi company.
Benefits of the registration of Nidhi Company
1. Simple Process of formation
The process of forming the Nidhi company is easy because of a few requirements. A portion of the essential things to be remembered for the formation:
- At least 7 members are required of which 3 are appointed as a director.
- Basic documentation process.
- Simple registration to do so.
- Indeed, even after being an alternate kind of NBFC, the registration process is relatively basic for Nidhi companies.
2. No Compliance with RBI
Nidhi does not need to comply with RBI guidelines, as we recommended above. This allows the organization to do better and different standards for its function.
3. Less or No Risk
The fact that all lending and depositing transactions are handled by members of the company lowers the company’s financial risk.
4. Economical Registration
Registration of a Nidhi company is not costly for the directors. Cost is less for Nidhi companies as compared to NBFCs.
5. Reliability of Savings
The fundamental goal is to promote a culture of savings among individuals in India. This goal makes the idea of Nidhi companies certain and reliable.
6. Net-owned Funding System
All Nidhi companies are funded through net-owned funds. Net-owned funding is when the owner invests in a business to raise funds for it.
Documents Required for Nidhi Company Registration:
- Proof of the registered place of business (Ownership documents/ rent or lease agreement)
- No Objection Certificate (signed by the owner/ landlord)
- Identity proofs
- Address proofs of the members
- Photos of the members
- PAN card copies of the members
- Digital Signature (DSC)
- Director Identification Number (DIN) of the directors
- Memorandum of Association of the company (MoA)
- Articles of Association of the company (AoA)
Forms to be filled –
INC 9 – To be filed by all the subscribers to MoA
DIR 2 – To be filed by all the directors of the company, deceleration as per rules 5 & 6 of Nidhi rules 2014 also to be signed by all the subscriber.