Note on Incorporation of Nidhi Company

Sub.: Note on Incorporation of Nidhi Company.
Dear Sir,

We are clarifying you detailed note:

1. Application.- These rules shall apply to,-

(a) Every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956;

(b) every company functioning on the lines of a Nidhi company or Mutual Benefit Society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956; and

(c) Every company incorporated as a Nidhi pursuant to the provisions of section 406 of the Companies Act, 2013.
To incorporate a Nidhi company first step is to incorporate a limited company under Companies Act, 2013. Minimum 3 directors & seven shareholders

2. Incorporation and incidental matters.-

(1) A Nidhi to be incorporated under the Act shall be a public company and shall have a minimum paid up equity share capital of five lakh rupees.
(2) On and after the commencement of the Act, no Nidhi shall issue preference shares.
(3) If preference shares had been issued by a Nidhi before the commencement of this Act, such preference shares shall be redeemed in accordance with the terms of issue of such shares
(4) Except as provided under the proviso to sub-rule (e) to rule 6, no Nidhi shall have any object in its Memorandum of Association other than the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.
(5) Every Company incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name.

3. Requirements for minimum number of members, net owned fund etc.- –

(1) Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has:
a) not less than two hundred members;
b) Net Owned Funds of ten lakh rupees or more;
c) Unencumbered term deposits of not less than ten per cent. of the outstanding deposits as specified in rule 14; and
d) Ratio of Net Owned Funds to deposits of not more than 1:20.
(2) Within ninety days from the close of the first financial year after its incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in Form NDH-1 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 with the Registrar duly certified by a company secretary in practice or a chartered accountant in practice or a cost accountant in practice,
(3) If a Nidhi is not complying with clauses (a) or (d) of sub-rule (1) above, it shall within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application.
Explanation.- For the purpose of this rule “Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;
(4) If the failure to comply with sub-rule (1) of this rule extends beyond the second financial year, Nidhi shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions contained in sub-rule (1), besides being liable for penal consequences as provided in the Act.

4. General restrictions or prohibitions- No Nidhi shall-

1) carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by anybody corporate;
2) issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;
3) open any current account with its members
4) acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;

Explanation. – For the purposes of this sub-rule, “control” shall have the same meaning assigned to it in clause (27) of section 2 of the Act;
5) carry on any business other than the business of borrowing or lending in its own name;

Provided that Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent. of the gross income of the Nidhi at any point of time during a financial year,
6) accept deposits from or lend to any person, other than its members;
7) pledge any of the assets lodged by its members as security;
8) take deposits from or lend money to anybody corporate;
9) enter into any partnership arrangement in its borrowing or lending activities;
10) issue or cause to be issued any advertisement in any form for soliciting deposit:
Provided that private circulation of the details of fixed deposit schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits
11) pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or for granting loans.

5. Share capital and allotment:

a) Every Nidhi shall issue equity shares of the nominal value of not less than ten rupees each:
Provided that this requirement shall not apply to a company referred to in sub-rules (a) and (b) of rule 2.
b) No service charge shall be levied for issue of shares.
c) Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees:
Provided that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten. –

6. Membership:

 A Nidhi shall not admit a body corporate or trust as a member
 Except as otherwise permitted under these rules, every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any time. –
 A minor shall not be admitted as a member of Nidhi: Provided that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi. –

7. Net owned funds:
Every Nidhi shall maintain Net Owned Funds(excluding the proceeds of any preference share capital) of not less than ten lakh rupees or such higher amount as the Central Government may specify from time to time.

8. Branches:

A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding three financial years.
Subject to the provisions contained in sub-rule (1), a Nidhi may open upto three branches within the district.
If a Nidhi proposes to open more than three branches within the district or any branch outside the district, it shall obtain the prior permission of the Regional Director and intimation is to be given to the Registrar about opening of every branch within thirty days of such opening.
No Nidhi shall open branches or collection centres or offices or deposit centers, or by whatever name called outside the State where its registered office is situated.
No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called unless financial statement and annual return (up to date) are filed with the Registrar.
A Nidhi shall not close any branch unless it-
1) publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least thirty days prior to such closure, informing the public about such closure;
2) fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least thirty days from the date on which advertisement was published under clause (a) ; and
3) Gives intimation to the Registrar within thirty days of such closure.

9. Acceptance of deposits by Nidhis:

 A Nidhi shall not accept deposits exceeding twenty times of its Net Owned Funds (NOF) as per its last audited financial statements.
 In the case of companies covered under clauses (a) and (b) of rule 2and existing on or before 26th July, 2001 and which have accepted deposits in excess of the aforesaid limits, the same shall be restored to the prescribed limit by increasing the Net Owned Funds position or alternatively by reducing the deposit according to the table given below:
 TABLE
 Ratio of Net Owned Funds to Deposits (as on 31.3. 2013)  Date by which the company has to achieve prescribed ceiling of 1:20
 a) More than 1:20 but upto 1:35  By 31.3. 2015
 b) More than 1:35 but upto 1:45  By 31.3. 2016
 c) More than 1:45  By 31.3. 2017

 The companies which are covered under the Table in sub-rule (2) above shall not accept fresh deposits or renew existing deposits if such acceptance or renewal leads to violation of the prescribed ratio.
 The ratio specified in sub-rule (2) above shall also apply to incremental deposits.

10. Application form for deposit.-
1) Every application form for placing a deposit with a Nidhi shall contain the following particulars, namely:
I. Name of Nidhi;
II. Date of incorporation of Nidhi
III. The business carried on by Nidhi with details of branches, if any;
IV. Brief particulars of the management of Nidhi (name, addresses and occupation of the directors, including DIN);
V. Net profits of Nidhi before and after making provision for tax for the preceding three financial years;
VI. Dividend declared by Nidhi during the preceding three financial years
VII. Mode of repayment of the deposit;
VIII. Maturity period of the deposit;
IX. Interest payable on the deposit
X. The rate of interest payable to the depositor in case the depositor withdraws the deposit prematurely;
XI. The terms and conditions subject to which the deposit may be accepted or renewed;
XII. A summary of the financials of the company as per the latest two audited financial statements as given below:
XIII. Net Owned Funds
XIV. Deposits accepted
XV. Deposits repaid
XVI. Deposits claimed but remaining unpaid
XVII. Loans disbursed against-
XVIII. immovable property;
XIX. deposits; and
XX. gold and jewellery
XXI. Profit before tax
XXII. Provision for tax
XXIII. Profit after tax
XXIV. Dividend per share
XXV. any other special features or terms and conditions subject to which the deposit is accepted or renewed
2) The application form shall also contain the following statements, namely:
a) in case of non- payment of the deposit or part thereof as per the terms and conditions of such deposit, the depositor may approach the Registrar of companies having jurisdiction over Nidhi;
b) in case of any deficiency of Nidhi in servicing its depositors, the depositor may approach the National Consumers Disputes Redressal Forum, the State Consumers Disputes Redressal Forum or District Consumers Disputes Redressal Forum, as the case may be, for redressal of his relief;
c) a declaration by the Board of Directors to the effect that the financial position of Nidhi as disclosed and the representations made in the application form are true and correct and that Nidhi has complied with all the applicable rules
d) a statement to the effect that the Central Government does not undertake any responsibility for the financial soundness of Nidhi or for the correctness of any of the statement or the representations made or opinions expressed by Nidhi;
e) the deposits accepted by Nidhi are not insured and the repayment of deposits is not guaranteed by either the Central Government or the Reserve Bank of India; and
f) a verification clause by the depositor stating that he had read and understood the financial and other particulars furnished and representations made by Nidhi in his application form and after careful consideration he is making the deposit with Nidhi at his own risk and volition
3 Every Nidhi shall obtain proper introduction of new depositors before opening their accounts or accepting their deposits and keep on its record the evidence on which it has relied upon for the purpose of such introduction. –
4 For the purposes of introduction of depositors, a Nidhi shall obtain documentary evidence of the depositor in the form of proof of identity and address as under:

Proof of Identity (any one of the following)
– Passport
– Income-tax PAN card (Mandatory)
– Elector Photo Identity Card
– Driving license
– Ration card
– 5 photographs (Mandatory)
Proof of address (any one of the following)
– Passport
– Voters identity card or election card
– Driving license
– Ration card
– Telephone bill
– Bank account statement (not older than 2 months)
– Electricity bill (not older than 2 months)
Place of rendering Services:
The place of rendering services generally shall be our office situated at 2nd Floor, 496/B, Om Apartment, Near KCC Classes, Kasba Peth, Pune – 411 011.
Professional & Government Fees:
Expenses for services rendered in connection to assignment of NBFC license of Rs.1.50 Lakhs Rupees (INR One Lakhs Fifty Thousands Only) only.

SD/-
Pramodkumar R. Ladda
Company Secretary

I/we accept the above terms and conditions and authorize you to submit returns and documents with the government authorities on my/our behalf and also pay requisite filing and other fees and charges on our behalf.

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Along with Company Law we are also dealing in all types of Licensing, registrations and Liasoning services. Few areas in which we had already served to our clients are :

a) Business Setup Services
b) MPCB (Maharashtra Pollution Control Board) Consent To Establish
c) MIDC (Maharashtra Industrial Development Corporation) Provisional
d) Factory Inspector Approval
e) Ministry of Environment and Forests (MOEF)
f) Water Connection Sanction from MIDC
g) MSEDCL (Power) Approval
h) PESO (Petroleum and Explosive Safety Organization)
i) CCOE (Chief Controller of Explosives) Approval
j) Support for EIA (Environmental Impact Assessment) (EIA documentation by MITCON or other Authorities)
k) MPCB Consent to Operate
l) Any other statutory approval not indicated above
m) MIDC (Maharashtra Industrial Development Corporation) approvals
n) Fire (Petroleum and Explosive) Department approvals
o) SEZ (Special Economic Zones)
p) EOU (Export Oriented Units)
q) STPI (Software Technology Park of India)
r) PSARA License for Security Guard providing Agencies
s) Hotel Setup and Subsidies
t) Finding of land (especially in MIDC area) for Companies and do necessary things till allotment of land
u) RBI (Reserve Bank of India) various permissions and compliances
– Recently we arranged FFMC (Full Fledged Money Changer) license for Pune based Company where Company now Authorised to do business of Dollar or other foreign currency conversion against INR
– FEMA (Foreign Exchange Management Act)
– FDI (Foreign Direct Investment)
– NBFC (Non Banking Financial Companies)
– Private Banking license (recent one week announcement by RBI)