SPECIAL ENTITIES - Nidhi Company
Focus on the Future
Nidhi Company is a type of Non-Banking Financial Company (NBFC) called Nidhi. It is formed to borrow and lend money to its members. It cultivates the habit of saving among its members and works on the principle of mutual benefit. Basic examples of Nidhi Company include options such as Mutual Benefit Funds, Permanent Funds, Benefit Funds and Mutual Benefit Company. It is registered with Ministry of Corporate Affairs and regulated by Companies Act, 2013 and Nidhi Rules, 2014. Nidhi Company is incorporated in the nature of Public Limited company and should have “Nidhi Limited” as the last words of its name. It has to comply with two set of norms, one of Public limited company as per Companies Act, 2013 and another is for Nidhi rules, 2014. Nidhi Company is not required to get license from Reserve Bank of India (RBI), hence it is easy to form. These companies are more popular in South India.
Nidhi Company cannot deal in chit funds, hire-purchase finance, leasing finance, insurance or securities business. It is strictly prohibited from accepting deposits from or lending funds to, any other person except members. Also, it cannot advertise itself to ask for any deposits.
Registration
Nidhi company registration is simple and less complex as compared to other types of finance companies like NBFC which require RBI license to start. It can be started with an initial capital of Rs.5 lakh and requires minimum 7 members to start with. Nidhi company registration also requires 3 Directors initially. Every promoter or director needs a copy of PAN card, ID proof and address proof to apply for a Nidhi company in India.
Conditions to be fulfilled
for getting ‘Nidhi’ status
- Nidhi company must ensure that it has minimum of 200 members within a period of 1 year from its commencement.
- The net owned funds should be 10 lakh rupees or more within 1 year of its registration. Net owned funds = Equity share capital + free reserves (-) accumulated losses (-) intangible assets
- Unencumbered term deposits must be 10% or higher of the outstanding deposits within 1 year of its registration.
- The ratio of net owned funds to deposits shouldn’t be more than 1:20 within 1 year of its registration.
If Nidhi Company satisfies all the above conditions, it should file NDH-1 along with prescribed fees within 90 days from the end of the first financial year after incorporation. The form must be duly certified by practicing CA/ CS/ CWA.
It can avail extension of another financial year upon submission of NDH-2 to the Regional Director within 30 days from the end of the first financial year.
If even after the second financial year, it doesn’t fulfil the requirements, it cannot accept deposits till it complies with the provisions, and also penalty will be imposed.
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