How to form a Nidhi Company?

 A father and his son were talking when the latter landed up with a job:

Father: Son, you have begun to earn now and I think you should ponder over savings as well.

Son: Come on. I have only started to earn. Give me some breathing space. I will look into that in the future.

Father: However, savings are meant for your future only. (This triggers lengthy discussions on the futility of savings.)

There is nothing new about the above-mentioned conversation and we have heard such chit chats several times in the past as well. But the above interaction clarifies the worth of savings.

Savings plays a critical role in finance. It is as important to finance as Al Pacino is to Scarface or The Godfather. Jokes apart, it is a vital thing in many households as well .

With the tendency of saving any kind of monetary distress can be easily dealt with. These have prompted the Government to come out with several awareness initiatives among the people to emphasize the significance of Savings. Nidhi Company happens to be an effort in that direction.

What exactly do you mean by a Nidhi Company?

Companies Act, 2013 and Company Nidhi Rules, 2014 guides a kind of company which is known as Nidhi Company. “A company whose very existence depends upon making people realize the significance of savings” aptly sums up everything regarding Nidhi. This kind of company is controlled by the Ministry of Corporate Affairs (MCA) and the RBI has the power to instruct them from time to time in matters pertaining to their financial activities.

The company follows the principles of savings for the mutual benefits of members. These companies accept deposits from its members and give money to its members only. This does not allow the entry of any third-party into the company. The process of Nidhi Company registration is very convenient and simple one and in this write up we will be providing a heads up on Nidhi Company Registration.


Conditions to be met for a Nidhi Company Registration

These happen to be:

At least 7 Members are needed to register a Nidhi Company.

At least 3 Directors are also needed.

It has a least paid up share capital of INR 5 lakh and it cannot issue preference shares.

Nidhi Company will not have any aim in its Memorandum of Association apart from instilling the trait of thrift and savings amongst its members, accepting deposits from, and giving to, its members exclusively, for their mutual wellbeing.

Each Nidhi Company has, inside a period of 1 year from the date of its incorporation, assure that it has;

Minimum of two hundred members;

The least Net Owned Fund (Paid Up Share Capital + Free Reserves) for this kind of a company has to be INR 10 lakh or more and

The ratio of Net Owned Funds to Deposits has to be 1:20 i.e. if the net owned funds happens to be INR 10 Lakh then the total deposit limit would be INR 2 Crore.

Burden-free term deposits of minimum ten percent of the outstanding deposits as mentioned

A Nidhi Company must not have a Body Corporate, a Trust or a Minor as a member. Its basic objective should be to help individuals and satisfy their requirements.

Lastly, a company can only receive deposits and lend it to its members for their mutual welfare only.


Nidhi Company Registration Process

Process for Registration of a Nidhi Company is quite similar to that of any other type of company.

Name approval via ‘RUN’ facility

Similar to other companies, you have the liberty to select a name for your company. The applicant has to search for an eligible one on the MCA portal. It is essential for a Nidhi Company to conclude with “Nidhi Limited” as a part of its name.

For example, Maya Nidhi Limited.

Digital Signature Certificate (DSC)

A Class 2 DSC needs to be acquired by the Directors in question who could also be the Promoters or the Applicants of the Nidhi Company.

Filing SPICE32 Form

Post the name approval and the acquisition of the DSC, Form SPICE32 has to be filled up along with these attachments.

• Memorandum of Association

• Articles of Association

• PAN Card of the Subscribers

• ID Proof of First Directors

• Address Proof of First Directors

• Address Proof of Registered Office (Rent Agreement/Sale Deed)

• Latest Utility Bill of Registered Office (Electricity/Telephone/Gas)

• NOC pertaining to the Owner of Registered Office.

• Consent and Declaration from first Director in form DIR-2

• Self-Declaration from First Directors and Subscribers in form INC-9

Approval and Certificate of Incorporation

After going through these processes, it will take around 15-20 days to obtain the incorporation certificate of your Nidhi Company.

The Incorporation certification is an evidence substantiating that all the obligations regarding the incorporation of the Nidhi Company have been fully met.

Hence, in case you wish to save to meet certain objectives and also make people realize the utility of savings, then a Nidhi Company would be a perfect fit.