What is a Nidhi Company? A Nidhi company is a type of non-banking financial institution that primarily deals with lending and borrowing money between its members. These companies are formed as public limited companies and must be registered with the Ministry of Corporate Affairs. Nidhi companies are also known as mutual benefit societies.
Features of a Nidhi Company
- Limited Liability: Members of a Nidhi company enjoy limited liability for the company’s debts and obligations.
- No External Funding: Nidhi companies cannot accept deposits or investments from anyone other than their members.
- Minimum Capital Requirement: A Nidhi company must have a minimum paid-up equity share capital of Rs. 5 lakhs.
- Mutual Benefit: The main objective of a Nidhi company is to promote the savings habits of its members and provide them with easy access to credit at reasonable rates.
- Prohibition on Certain Activities: Nidhi companies are prohibited from engaging in activities such as chit funds, leasing, insurance, and hire purchase financing.
Benefits of a Nidhi Company
- Easy Access to Credit: Members of a Nidhi company can easily access credit at reasonable rates.
- Safe and Secure: Nidhi companies are regulated by the Ministry of Corporate Affairs, making them safe and secure for members.
- Limited Liability: Members of a Nidhi company enjoy limited liability for the company’s debts and obligations.
- Easy to Form: Setting up a Nidhi company is relatively easy.
Limitations of a Nidhi Company
- Limited Activities: Nidhi companies are prohibited from engaging in certain activities, which can limit their growth potential.
- Limited Membership: Nidhi companies can only have a maximum of 200 members, which can limit their ability to raise funds.
- Limited Branches: Nidhi companies are not allowed to open branches beyond their home state, which can restrict their reach.
How to Set Up a Nidhi Company in India
Setting up a Nidhi company in India involves several steps, which are as follows:
- Incorporation: The first step in setting up a Nidhi company is to incorporate it as a public limited company. The company must have at least three directors and seven shareholders.
- Capital Requirement: The company must have a minimum paid-up equity share capital of Rs. 5 lakhs.
- Name Approval: Once the company is incorporated, it must apply for name approval from the Registrar of Companies (ROC).
- Memorandum of Association (MOA) and Articles of Association (AOA): The MOA and AOA of the company must be prepared and filed with the ROC.
- Obtaining PAN and TAN: The company must obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department.
- Registration with the ROC: The company must register with the ROC within 60 days of incorporation.
- Compliance: The company must comply with the provisions of the Companies Act of 2013 and the Nidhi Rules of 2014.
How to Apply for Nidhi Company Registration in India
To apply for Nidhi company registration in India, the following documents must be submitted to the ROC:
- Application for name approval
- Memorandum of Association (MOA)
- Articles of Association (AOA)
- Proof of registered office address
- Identity proof and address proof of directors
- PAN card and TAN card
- Certificate of incorporation
- Board resolution approving the registration of the company as a Nidhi company
Once the documents are submitted, the ROC will verify them and issue a certificate of incorporation. The company can then apply for registration as a Nidhi company.
Final Conclusion
In conclusion, Nidhi companies are an important source of credit for their members in India. They offer several benefits, including easy access to credit, limited liability, and regulation by the Ministry of Corporate Affairs. However, they are also limited in terms of the activities they can engage in and the number of members they can have. If you are interested in setting up a Nidhi company, it is important to understand its features, benefits, and limitations before proceeding.
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Frequently Asked Questions (FAQs) about Nidhi Companies in India
Q.What is a Nidhi company?
A Nidhi company is a type of non-banking financial institution that primarily deals with lending and borrowing money between its members. It is registered as a public limited company and is governed by the Companies Act of 2013 and the Nidhi Rules of 2014.
Q.What is the minimum capital requirement for a Nidhi company?
A Nidhi company must have a minimum paid-up equity share capital of Rs. 5 lakhs.
Q.Who can become a member of a Nidhi company?
Any individual or legal entity can become a member of a Nidhi company, provided they meet the eligibility criteria specified in the Nidhi Rules of 2014.
Q.What are the activities that a Nidhi company can engage in?
A Nidhi company can engage in the activities of borrowing and lending money to its members. It can also accept deposits and provide other financial services such as locker facilities, but only from its members.
Q.What are the activities that a Nidhi company cannot engage in?
A Nidhi company is prohibited from engaging in activities such as chit funds, leasing, insurance, and hire purchase financing.
Q.What is the maximum number of members that a Nidhi company can have?
A Nidhi company can have a maximum of 200 members.
Q.Can a Nidhi company open branches in other states?
No, a Nidhi company is not allowed to open branches beyond its home state.
Q.How is a Nidhi company regulated?
A Nidhi company is regulated by the Ministry of Corporate Affairs, and it must comply with the provisions of the Companies Act of 2013 and the Nidhi Rules of 2014.
Q.What are the benefits of a Nidhi company?
The benefits of a Nidhi company include easy access to credit, limited liability, and regulation by the Ministry of Corporate Affairs.
Q.How can I set up a Nidhi company?
To set up a Nidhi company, you must incorporate it as a public limited company, meet the minimum capital requirement, obtain name approval from the Registrar of Companies, prepare and file the MOA and AOA, and register with the ROC within 60 days of incorporation. It is advisable to consult with a professional to ensure compliance with all legal requirements.
