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Setting up of Nidhi Company
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Setting Up Of Nidhi Company

Registration of Nidhi Company under the Companies Act, 2013
Assistance in obtaining RBI License and registration
Creating a robust business plan and getting approval from RBI
Advisory on meeting all compliance norms under RBI Act and Companies Act
Getting companies easy access to public financing

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    The word “Nidhi” in Nidhi Company advances from a root word which traditionally means “treasure”. Recently, in the Indian financial sector, a Nidhi Company refers to any mutual benefit society notified under the Central / Union Government as a Nidhi Company. They are created basically for the motive of encouraging the custom of frugality as well as savings amongst its members. The various organisations that are a part of Nidhi business, and are known under various names such as Benefit Funds, Mutual Benefit Funds, Nidhi, Permanent Fund, and Mutual Benefit Company.

    Nidhi companies are more well known in South India and are highly sectorized single office organisations. They are usually mutual benefit societies, as their affairs/concerns are limited only to the members; and membership is restricted to individuals. The leading source of assets is the benefit from the members.

    The grants are provided to the members at approximately reasonable rates for purposes such as manufacturing houses or restoration/fixation and are generally secured. The deposits organised by Nidhis are not great in comparison to the organized banking sector.
    Regulatory framework Nidhi’s are Companies that are registered under the Companies Act.

    Although the Nidhis are regulated by the provisions of the Companies Act, 1956, they are discharged from certain provisions of the Act, as relevant to other companies, due to curbing their operations within members. The Central Government notification comprising a Committee to analyse the various features of the working of the Nidhi Companies. There was previously no Government bulletin defining the word ‘Nidhi’. Talking about the approach adopted by Nidhi companies for their operation and the guidance of Shri P.Sabanayagam Committee in its report in order to curb immoral persons utilising the word ‘Nidhi’ in their name without being integrated with Department of Company Affairs (DCA).

    The word Nidhi shall not be a part of the name of any organisation, firm, or individual involved in appropriating and accommodating money without embodiment by DCA. Also, such breach will ultimately lead to penal action.” A part of this definition is reflected in the new Companies Bill 2012 under Section 406.

    Rules Regarding Setting up of a Nidhi Company in India

    Legal Structure Requirement:

    Nidhi Company Setup shall contribute to make money and persist to keep providing, in not encumbered term deposits along with a Scheduled commercial bank (other than a co-operative bank or a regional rural bank), or even a post office deposit in its own name.

    It is registered under Companies Act, 2013.
    Administered by the Nidhi Rules, 2014.
    Belonging to the NBFC sector
    The essence of their business is borrowing as well as lending money amidst its members that abides with rules of the Companies Laws, 2014.
    It is also known as Mutual benefit companies, permanent funds, or even benefit funds.
    They are chiefly coordinated and managed by MCA.
    Nevertheless, the RBI is authorised to issue directions to them for matters describing their deposit acceptance activities.
    Integrated in the nature of a public limited company, hence it has a two-faces
    No RBI approval is needed for this type of NBFC Registration in our country.
    Their membership is limited to a ceiling & also it is only individuals who can participate.
    These kind of Companies are generally in highlight in South India.

    How does it Work?

    Here, the main source of funds is beneficence from its members. The credit is given to the members at relatively moderate rates for things like house construction or repairs and is mostly guaranteed against some property or encumbrance.

    The deposits or funds assembled by Nidhi’s are limited in comparison to the organized banking sector because it operates in a limited area with a specified fund base. They can carry on the following business:

    To provide loans to its members
    To accumulate deposits from its members
    Loans should be subject to some limits.

    What is the Process of Registration of a Nidhi Company?

    A Nidhi company is integrated as a public limited company with a minimum paid-up capital surmounted at Rs. 5 lakhs. It can’t circulate preference shares, debentures, or even a debt instrument. The objective must be quoted in the MOA as developing the habit of thrift as well as savings amidst its members, getting deposits from or lending to its members only, for their mutual benefit.

    Also, one must have the title of a NIDHI LIMITED at the end of its name after incorporation as well as all its dealings.

    Following are the detailed steps of Nidhi Companies Registration Process:

    1. The promoters/directors of the company must apply for DIN through E-Form post getting their digital signature certificate (DSC).

    2. After getting the DIN for directors, the promoters should get an appropriate name registered for their Nidhi company. The name should be as per the norms suggested by the MCA and should have the word “Nidhi” in it. It should be noted that the company directors need not to have DSC to apply for name approval as per changes made by MCA from 26th January 2018.

    3. Post name approval, the company needs to furnish all the documents with the E-Form for verification by the authority.
    4. After verification of all the documents and E-Form, the authority grants the registration certificate to the Nidhi Company. The certification process usually takes 15-25 days to complete. The registration certificate has the Corporate Identity No. inscribed in it.

    Nidhi Company Registration Fees

    The fee for Nidhi company registration has various segments and can be paid online. The main fee of registration depends on the authorised capital of the applicant firm. More fees is charged for higher authorised capital. Additionally, the firm needs Rs. 500 per director for their DIN registration and Rs. 1000 for its name approval. The amount for stamp duty paid with the document varies as per the state where the firm is located.

    Document Required

    A Nidhi Company Has The Following Restrictions

    Cannot be involved in any work of Chit Funds
    Cannot hire a Purchase Financer
    Cannot be involved in Leasing Finance
    On the issuance of preference shares and debentures or any other debt instrument.
    Cannot open a current account with its members.
    Acquire another company and control the composition of a board of directors of the company.
    Cannot enter into any arrangement for the change in management, but it can be done if the special resolution has passed in general meeting and prior approval of the regional director has been obtained.
    They cannot accept deposits or lend money to any person other than members.
    Cannot carry any business other than the borrowing or lending.
    Cannot pledge assets which have been lodged by the members as security.
    They cannot accept deposits or lend money to body corporate.
    They cannot enter into a partnership agreement for its borrowing or lending activities.
    They cannot issue advertisement for deposits.
    They cannot pay any brokerage for granting a loan to its members.

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      Frequently Asked Questions on Setting up of Nidhi Company

      The various advantages offered by Nidhi Companies are as follows:

      • It is a single office institution regulated exclusively by its members with no third party intervention.
      • It provides loans and advances at minimal interest rates as well as minimum documentation.
      • Secured contributions are guaranteed by such organisations.

      All the Deposits with Nidhi companies are very much safe as well as secure as the Ministry of Corporate Affairs and the Reserve Bank of India has framed rules and regulations to ensure the safety and security of Deposits. And the Nidhi Company compulsorily abide by the rules of Central Government.

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      NIDHI COMPANY NBFC
      On the other hand, a Nidhi Company cannot continue with the trade connected to leasing finance, insurance, chit fund, hire purchase finance, or acquisition of securities issued by any body corporate. A NBFC is a kind of financial institution that is employed in the business of loans/ advances as well as obtaining of shares/stocks or other securities issued by Government or hire-purchase, insurance business, local authority, leasing and chit business.
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