Nidhi Company Incorporation

WHY SHOULD YOU FORM A NIDHI COMPANY?

Nidhi Company is one of the EASIEST WAYS TO JUMP INTO CORPORATE FINANCE WORLD.

Nidhi Company form of business is an easy and simple way to get into the corporate finance world and it is an easy way for a good start-up.  As compare to Sole Proprietorship, it is a better option for the start-up as in this form of business liability of members is limited. It is a good platform for incorporating a company form of business having ownership.

BENEFITS OF NIDHI COMPANY:

a. No RBI Regulation

By its nature of the activity, Nidhi Company falls under the NBFC category but does not require approval from RBI. These companies obey Nidhi Laws, released in 2014 with respect to the company's operation and function. RBI has exempted Nidhi Company from observing strict compliances, so you don't have to be in a rush-n-hush as RBI won't bother if you start a Nidhi Company in India.

b.Can easily lend and borrow funds fund from its member

The main objective of Nidhi company is to promote the habit of saving amongst its member which means it is certain and going concern business as the members will not stop savings anytime.

c. Low rate of interest

One can borrow money as a member at a minimum rate, compared to the rate at which banks lend money. This can be a big advantage in times of need, as different individuals in the mutual benefit society would probably need funds at different times.

d. Encourage Saving

It encourages all its members to save money and encourages a sparing lifestyle. After all, a Nidhi Company is a mutual benefit society in which members can lend or borrow money, and accept financial assistance among themselves.

e No external involvement of management

f. Easy transfer of ownership

Essentials for incorporation of Nidhi Company

Pre- incorporation requirement:

âž² At least 7 members at the time of incorporation

âž² Minimum 3 directors should be there

âž² Preference shares are not allowed at the time of incorporation

âž² Objects must specify the receiving and lending of deposits from its member for their mutual benefits.

Post- incorporation requirement:

âž² Within 12 months from the date of registration member size must increase to more than 200 and further member size has to be maintained during the course of time. 

âž² There should be minimum net owned fund (Paid-up share + Free reserve) of INR 10 lakh or more

âž² Unencumbered term deposits of not less than 10% of the outstanding deposits

âž² A body corporate or a minor cant act as a member of a Nidhi Company.

âž² Ratio between net owned fund to deposit must be in 1:2

Documents required for Incorporation of Nidhi Company

1. ID proof of proposed Directors and members:

âž² PAN card (Mandatory)

âž² Aadhar card (Mandatory)

âž² Passport  or Voter’s ID or Driving License

2. Address proof of proposed members and directors (any one):

âž² Telephone bill

âž² Mobile Bill

âž² Bank statement

âž² Electricity bill

3. Address proof for principal place of business of proposed company (any one)

âž² Utility bill like telephone bill, electricity bill, gas bill, water bill

âž² Rent agreement with rent slip

âž² Proof of ownership

Process of Incorporating a Nidhi Company

STEP 1: APPLY FOR THE DESIRED NAME

The first step in incorporating a company is for reserving the name of the proposed company in part-A of SPICe Plus (SPICe+) form. In this form choose your business activity and file for two proposed names, if CRC will reject the proposed name then file again with two new names within a certain time limit from the date of rejection (15 days).

STEP 2: APPLY FOR A DIGITAL SIGNATURE CERTIFICATE (DSC)

The process of incorporation of a Company is 100 percent online in India. Hence, we need to apply for a DSC (Digital Signature Certificate), which will be used for electronically signing the forms by proposed directors and proposed members respectively. DSC has to be mandatorily applied for each and every single member/shareholder and director of the Company.

STEP 3: FILL THE APPLICATION FOR INCORPORATION (SPICe plus Form - SPICe+)

Once, your name gets reserved under it will be valid for 20 days from the date of approval, within 20 days you have to fill-up the respective application form for incorporation along with all the requisite attachments and documents and upload it online. SPICe+ is an advanced form combination of 8 forms in one. Through this proposed company can apply for at once:

• Name reservation
• Incorporation
• Apply for DIN
• TAN
• PAN
• EPFO
• ESIC
• GSTIN

Next step is to fill the part-B of SPICe + which will contain all the detail related to incorporating company like number total number of directors and members, Authorized share capital, paid-up capital, number of share hold by members, company registered address detail, directors and member detail and will required attachments for proof. Then draft the MOA (memorandum of association) and AOA (Article of Association) of the proposed company, then fill form required for EPFO and ESIC registration with detail, then Fill the AGILE form for procuring GSTIN. After filling all these attach the signature and then upload it on the MCA website.

STEP 1: APPLY FOR THE DESIRED NAME

The first step in incorporating a company is for reserving the name of the proposed company in part-A of SPICe Plus (SPICe+) form. In this form choose your business activity and file for two proposed names, if CRC will reject the proposed name then file again with two new names within a certain time limit from the date of rejection (15 days).

STEP 2: APPLY FOR A DIGITAL SIGNATURE CERTIFICATE (DSC)

The process of incorporation of a Company is 100 percent online in India. Hence, we need to apply for a DSC (Digital Signature Certificate), which will be used for electronically signing the forms by proposed directors and proposed members respectively. DSC has to be mandatorily applied for each and every single member/shareholder and director of the Company.

STEP 3: FILL THE APPLICATION FOR INCORPORATION (SPICe plus Form - SPICe+)

Once, your name gets reserved under it will be valid for 20 days from the date of approval, within 20 days you have to fill-up the respective application form for incorporation along with all the requisite attachments and documents and upload it online. SPICe+ is an advanced form combination of 8 forms in one. Through this proposed company can apply for at once:

• Name reservation
• Incorporation
• Apply for DIN
• TAN
• PAN
• EPFO
• ESIC
• GSTIN

Next step is to fill the part-B of SPICe + which will contain all the detail related to incorporating company like number total number of directors and members, Authorized share capital, paid-up capital, number of share hold by members, company registered address detail, directors and member detail and will required attachments for proof. Then draft the MOA (memorandum of association) and AOA (Article of Association) of the proposed company, then fill form required for EPFO and ESIC registration with detail, then Fill the AGILE form for procuring GSTIN. After filling all these attach the signature and then upload it on the MCA website.

STEP 4: CERTIFICATE OF COMMENCEMENT OF BUSINESS

Once the application of incorporation of the company is approved and the Certificate of Incorporation is issued by the ROC, the Company shall file for seeking approval for commencing the business within 180 from the date of incorporation of the Company.

Once the application of incorporation of the company is approved and the Certificate of Incorporation is issued by the ROC, the Company shall file for seeking approval for commencing the business within 180 from the date of incorporation of the Company.

How does CORPZO help you with incorporation of your Company?

• Call or raise a request with us
• Our expert advisor(s) will understand your request and consult accordingly.
• We will collect your documents and information which will be required for incorporation
• One person from our team of professionals will get in touch with you for getting more information and documentation if required.
• Finally, professionals draft your form and submit it with MCA for getting your proposed company incorporated.

NIDHI COMPANY (AMENDMENT ) RULES 2022

• No company shall raise a deposit or make a loan to any of its members if the following conditions are met.

• It does not comply with the norms or requirements of the Nidhi firm New norms,
• If central government has rejected the application in Form NDH -4,

• Nothing in these regulations, however, shall apply to any business incorporated on or after the implementation date of the Nidhi business New regulations. Any public company that wishes to be declared as a Nidhi firm must submit an application in Form NDH-4 within 120 days of its incorporation, after completing the following conditions:

•    (i) it has at least 200 members.
•    (ii) it has at least Rs. 20 lacs in net owned funds.
• After reviewing the application, the central government informs the company of its decision within 45 days; if the company does not respond within 45 days, it is presumed to be granted.

          However, the Company will not be able to begin operations unless the central government approves its proposal.

• The required minimum paid-up share capital has been increased from 5 lakhs to 10 lakhs.
• Nidhi companies that exist on the date of the implementation of the Nidhi Company New Rules must comply with all requirements within 18 months of the date of such enforcement.
• The requirement to file the application in Form NDH 1 within 90 days of the Company's formation shall not apply to firms formed on or after the implementation of the Nidhi Company New Rules.
• The net owned funds requirement for Nidhi firm has been increased from 10 lakhs to 20 lakhs.

NIDHI COMPANY COMPLIANCE AFTER INCORPORATION

• Open the bank Current Account with Company Name in 30days
• Directors must produce a declaration stating that the subscribers contributed to the capital specified in the MOA within 180days of incorporation.
• Hold a board meeting to file an application with the central government for recognition as a Nidhi firm within 30days of incorporation.
• The central government for certification as a Nidhi firm in 60days.
• It must notify the company in the official Gazette that it is a Nidhi or mutual benefit association in 45days.
• The first fiscal year following incorporation, if relevant. In the second fiscal year, file a statutory return in 90days.
   

  MANDATORY COMPLIANCES OF NIDHI COMPANY

• Regional Director's Application:-  Application for a timeframe extension due to failure to meet member and deposit requirements after incorporation.
• Return of the Half-Year Ended:- Every Nidhi corporation is required to file a half-yearly return with the Registrar.
• Companies' Accounts: - Every corporation is required to file a balance sheet at the AGM.
• Annual Return :- Every private limited corporation is required to file an annual return of operations and annual general meeting.
• Director’s KYC:- The DIN KYC procedure must be performed for each fiscal year by the company's directors.
• Income Tax Return:- Companies incorporated in India and engaged in profit-making activities
• DPT-3:- This return contains information regarding deposits and/or outstanding loan or money-other-than-deposits receipts.