Nidhi Company registration Procedure in India – A Complete Guide as per rules

Introduction

Nidhi company registration is one of the kinds of NBFC which do not require the Reserve Bank of India (RBI) approval. Further, it is described as the cheapest form of NBFC which can be formed by any person in India. Nidhi Company does not require RBI license to start the business activity, rather it can directly start the business after registration.

Before, we should start understanding the Nidhi company registration procedure; let us first understand the five important points about the Nidhi Company:

• Nidhi Company is the only finance company in India which can accept deposits and extend loans without getting any approval from the Reserve Bank of India (RBI).

• Nidhi Company can accept deposits up to 20 times the net owned funds. E.g. if you have invested Re.1, then you can accept the deposits of Rs.20.

• The maximum interest rate that a Nidhi company can provide on deposits is 12.5%.

• Nidhi Company cannot open branches for three years. It can only open collection centers.

• Nidhi Company cannot advertise to accept deposits. Further, it can only deal with its members.

 

After discussing the five important points about the Nidhi company registration, let us proceed to understand the Nidhi Company registration procedure.

 

Nidhi Company Registration Procedure

Nidhi company registration procedure is explained as below:

 

1. Basic requirements for Nidhi company registration

The first step of registration is to fulfill all the basic requirement of the Nidhi Company registration. The requirements have been listed in the Nidhi rules and Companies act, 2013. The basic requirements for Nidhi Company are as follows:

• Minimum 7 members are required out of which 3 are also appointed as directors of the company.
• The minimum capital to start the company is Rs.5 lakh and in a span of one year, it must be raised to Rs.10 lakh.

 

2. Gather all necessary documents for Nidhi Company

The second step is to collect all the necessary documents required for Nidhi Company registration. Here is the list of the documents required to start the Nidhi Company in India:

For Directors/Members

• PAN Card
• ID Proof – Anyone (Aadhar card, Driving License, Voter ID card, Passport).
• Address Proof – Anyone (Electricity bill, mobile bill, telephone bill, bank statement)

For Registered Office

• Ownership proof (If the property is owned)
• Rent Agreement (If the property is on rent)
• Electricity bill
• No Objection Certificate (NOC)

 

3. Prepare Digital Signature for all members

The next step is to get the digital signatures for all the members in Nidhi Company. Earlier, there are only three digital signatures were required. However, with the introduction of the new procedure, the digital signature is required by every member of the company.

 

4. File for DIN and get the Name approval

The next step is to get the DIN for all the directors. DIN is an identification number required by every director. It is like a Pan number which is mandatory for all income tax assessee. Here DIN is mandatory for all the directors in the company.

Further, once the DIN and DSC are done, the next step is to file for Company Name approval. Company Name is the most important task because it is the name which becomes the identity of the company. Hence, make sure you use the first words of the company name as your brand name like TATA, Birla etc.

Here are four key factors which drive the Company name approval:

• The Company name must be unique and should not be similar to an existing company.
• The company name should not match with any registered trademark of the same class.
• The company name should not contain any prohibited words like Gandhi, Ashok chakra etc.
• 5 names in order of priority should be submitted to the government for approval.

 

5. Prepare all necessary documents for Nidhi Company

Once the name of the company is approved, the next step is to prepare all the important documents. The lists of all the important documents to be prepared are as follows:

• Memorandum of Association (MOA)
• Articles of Association (AOA)
• Affidavits for company registration
• CA declaration
• All KYC documents of directors
• Additional undertakings

 

6. File for Nidhi Company incorporation

Once all the documents are prepared, the application for Company registration is filed. The company incorporation is filed through new electronic form SPICE. This form is the single integrated form for all the company registration.

Once, the form is filed, the regular follow-up is necessary for the incorporation purposes.

 

7. Registration Certificate and PAN, TAN numbers

Once the Nidhi Company registration is done, the incorporation certificate is generated online along with PAN and TAN. Under new rules, PAN and TAN are not to be applied separately. They are allotted at the same time of registration. However, the hard copy is received within 15 to 20 days.

 

Nidhi Company Compliances after registration

Once the Nidhi Company registration is over, the next step is to start the Nidhi operations in the district from where the registration is granted. To start the Nidhi company compliance, the following things should be drafted as per law:

• Membership form for Nidhi Company: As per the Nidhi rules, a Nidhi Company can only deal with its members and it cannot deal with the general public directly. Hence, drafting the membership form is the foremost requirement.

• Deposit form for Nidhi Company: To draft this form, the members of the Nidhi Company should include all the details like interest rate, a period of maturity, details about the directors etc.

• Encumbered deposit: For every Nidhi company, it is important to keep the 10% of the all the deposits to be in the bank account.

• Minimum 200 members: For every Nidhi Company, it is important that they should reach the minimum of 200 members within the span of one year.

• The ratio of 1:20: The ratio of one is to twenty must be maintained between the net owned funds to all deposits. E.g. if you have invested 10 lakh as a capital, then you can accept deposits up to Rs.2 crores.

• NDH – 3: NDH – 3 is the half-yearly return filed by the Nidhi Company.

• NDH – 1: NDH – 1 is filed after the closure of first financial year. It should be filed within 90 days from the closure of the financial year.

 

Conclusion

We have tried to explain the Nidhi Company Registration Procedure and brief compliances. In case you have any issues, please email us at info@hubco.in.