How to make members In Nidhi Company –step by step procedure

Introduction

Nidhi company is an NBFC [does not require RBI approval] which can work for its members by accepting deposits and lending funds. One of the main criteria of Nidhi Company is that it can only work with its members. In other words, it cannot accept deposits, nor it can lend funds to any person other than the members.

To make any person a member of Nidhi Company, one share must be given to him. However, in case if the member wants to have a recurring or fixed deposit, the number of shares shall be 10.

Don’t look for new shares

This is one of the most committed mistakes done by the person opting for Nidhi Company.  Under Nidhi Company, if the company wants to issue new shares, then it shall be done by Private Placement Procedure.

Further, under the private placement, the minimum shares to be issued must not be less than two thousand shares [2000] to a single person. Hence, this is the main reason why private placement procedure cannot be opted to issue shares under Nidhi Company.

Let us discuss the procedure on to how to make member under Nidhi Company.

Procedure to make member under Nidhi Company

• Choose and divide shares:
  Choose any one person shares and divide them into small share certificates equivalent to either one share or ten shares depending upon the need.

Example: Suppose the new company A Nidhi Ltd has been formed, in which there are seven shareholders and each having equal shares, 10,000 shares each.
Then anyone shareholder may divide his share part into 1,000 share certificates of 10 shares each.

• Attach the share certificate with FORM SH – 4:
  Form SH – 4 is being used to give effect to the share transfer. Attach the FORM SH – 4 with share certificates.
   
• Attach along with Membership Form:
  The Form SH 4 and Share certificates are now to be attached with the membership form. Now suppose any person visit the office to deposit 10,000 Rupees. Then he must be given the membership form to fill, and after that, the transfer procedure should be conducted by filling necessary details on share certificates and form SH – 4.
   
• Hand over the share certificate to him:
  Once proper due diligence has been done in respect to share transfer, the proper set of documents should be handed over to the applicant. The company must retain a copy of those documents.
   
• Pass board resolution for each entry:
  The board resolution must be passed at the end of the month validating the share transfer happened during the month.
   
• Enter details in Share Transfer Register:
  Once share transfer has taken place, the required details must be entered in share transfer register. 

Conclusion and Queries
In case you have any query on Nidhi Company, you may post it in our CONTACT FORM.