Note on Nidhi Company Registration or Formation

Brief Information:-
Section 406 of the Companies Act, 2013, governs the “Nidhi” Companies in India. According to the Act,

“Nidhi” means a Company which has been incorporated as a “Nidhi” with the object of :-

1) Cultivating the habit of thrift and savings amongst its members,
2) Receiving deposits from and lending to, its members only, for their mutual benefits,

and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.

The Nidhi Rules Applies To The Following:-

 Every Company formed as “Nidhi” or Mutual Benefit Society under section 620a of the Companies Act, 1956;

 Every Company functioning as “Nidhi” or Mutual Benefit Society but either has not applied for declaring as a “Nidhi” or has applied and are awaiting for declaring as a “Nidhi” or Mutual Benefit Society under the Companies Act, 1956 and

 Every Company incorporated as a “Nidhi” pursuant to provisions of section 406 of the Companies Act, 2013.

Requirements for Nidhi Company:-

 A Nidhi company to be incorporated under this Act shall be a Public Company; therefore essentially 3 Directors and 7 Shareholders required.

 There is no minimum paid up equity share capital requirement.
 The object of the company shall be cultivating the habit of thrift and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefits;

 It shall have the words ‘Nidhi Limited’ as part of its name;

Requirement after Incorporation:-

Every Nidhi Company shall, within a period of one year from the Incorporation or commencement of these rules, ensure that it has :-

 Minimum number of members should be 200;

 Net owned funds shall be Rs.10,00,000/or more

 Ratio of net owned funds to deposit shall be not more than 1:20;

 Unencumbered term deposits of not less than 10% of the outstanding deposits as specified in Rule 14;

General Restriction or prohibitions on Nidhi Companies :-

“Nidhi” Companies shall not;

 carry on the business of chit funds, hire purchase finance, leasing finance, insurance or acquisition of securities issued by anybody corporate;

 Issue preference shares, debentures or any other debt instrument by any manner or in any formwhatsoever;

 Open any current account with its members;

 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 arrangements for the change of its management, unless it has passed a resolution in its general meeting and alsoobtained a previous approval of the Regional Director having jurisdiction over such “Nidhi”. Here Control shall mean the same as in section 2(27) of the Companies Act, 2013.

 Carry on any business other than the business of borrowing and lending in its own name Exception that a “Nidhi” which adhere with all the provisions of the “Nidhi” Rules, 2014 may provide locker facility to its members on rent subject to that the rental from such locker facility shall not exceed 20% of the gross income of the “Nidhi” at any point of time during a financial year;

 Accept deposit or lend to any person, other than its members;
 Pledge any of the assets lodged by its members as security;

 Take deposit from or lend money to anybody corporate;

 Enter into any partnership arrangements in its borrowing or lending activities;

 Issue or cause to be issued any advertisement in any form for soliciting deposits. But “Nidhi” can issue private circulation to its members with the words “for Private Circulation to Members Only” and this shall be constitute an advertisement for soliciting deposit;

 Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or for granting loan

Membership:-

 A Nidhi shall not submit 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 200 members at any time.

 A minor shall not be admitted as a member of Nidhi.

 But 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.

Share Capital and allotment:-

 “Nidhi” shall issue equity shares of the nominal value of not less than Rs.10/- each. But this rule shall not apply to a Company formed under sub-rule (a) & (b) of rule 2 (Nidhi or Mutual Fund Society formed under Section 620a of the Companies Act, 1956).

 No service charge shall be levied for issue of shares

 “Nidhi” shall allot to each deposit holder at least a minimum of 10 equity shares or shares equivalent to Rs.100/-;

 A saving account holder and a recurring account shall hold at least 1 no. of equity share

Acceptance of deposits:-

 A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Assets as per last audited financial statements.
 The fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.

 Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.

 In case of recurring deposits relating to mortgage loans, the maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi

 The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed Rs.1,00,000 and the interest shall not exceed 2% above the rate of interest payable to savings bank account by nationalized banks.

 Interest for fixed and recurring deposits shall be at a rate not exceeding the maximum rate of interest prescribed by RBI which the NBFC can pay on their public deposits.

Every Nidhi shall invest and continue to keep invested, in unencumbered term deposits with a scheduled commercial bank or post office deposits in its own name an amount which shall not be less than 10% of the deposits outstanding at the close of the business on the last working day of the second preceding month.

In case of unforeseen commitments, temporary withdrawal may be permitted with the prior approval of the Regional Director for the purpose of repayment to depositors, subject to such conditions and time limit which may be specified by the Regional Director to ensure restoration of the prescribed limit of 10%

Loan :-

A Nidhi shall provide loans only to its members. The loans given to a member shall be subject to the following limits:-

 Rs.2,00,000/where the total amount of deposits from members is less than Rs.2 crores;

 Rs.7,50,000/where the total amount of deposits from its members more than Rs.2 crores but less than Rs.20 crores;

 Rs.12,00,000/where the total amount of deposits from its members is more than Rs.25 crores but less than Rs.50 crores;

 Rs.15,00,000/where the total amount of deposits from its members is more than Rs.50 crores.

NOTE: A Nidhi shall give loans to its members only against the following securities, namely:-
 Loans to the members shall be given against the securities of gold, silver and jewellery and immovable property.

 Repayment period of such loan shall not exceed one year in case of gold, silver and jewellery.

 In case of immovable property the loan shall not exceed 50% of the value of the property offered as security and the period of repayment of such loan shall not exceed 7 years.

 Loan may be given against the fixed deposit receipts, National Savings Certificates and other Government securities and insurance policies.

The rate of interest to be charged on any loan shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method.

Dividend:

A Nidhi shall not declare dividend exceeding 25% or Such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the following conditions :-

 An equal amount is transferred to General Reserve;

 There has been no default in repayment of matured deposits and interest; and

 It has completed with all the rules as applicable to Nidhis.

Director:-

 The director shall be a MEMBER of Nidhi.

 He shall hold office for a term up to 10 consecutive years on the Board.

 He shall be eligible for reappointment only after the expiration of 2 years ceasing to be a director.

 Where the tenure of any director in any case had already been extended by the Central Government it shall terminate on expiry of such extended tenure.

 The person to be appointed as a Director shall comply with the requirements ofSection 152(4) of the Act and shall not have been disqualified as provided in Section 164 of the Act.

Branches:-

 A Nidhi may open branches only if it has earned net profits after tax continuously during the preceding three financial years.

 The company may open up to 3 branches only within the district.

 If it proposes to open more than 3 branches within the district or any branch outside the district, it shall obtain prior permission of the Regional Director and intimation is to be given to the Registrar about opening of every branch within 30 days of such opening.

 No Nidhi shall open branches or collection centers or offices or deposit centers, or by whatever name called outside the State where its registered office is situated.

 Further branches or collection centers or offices or deposit centers shall be opened unless financial statement and annual return are filed with the Registrar.

Closure of Branch:-

A Nidhi shall not close any branch unless:-

 It publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least 30 days prior to such closure.

 Informing the public about such closure; 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 30 days from the date on which advertisement was published and

 Gives intimation to the Registrar within 30 days of such closure.

Returns:-

 Within 90 days from the closure 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 prescribed with the Registrar duly certified by a Company Secretary in practice or a Chartered Accountant in practice or a Cost Accountant in practice.

 Every company covered under rule 2 shall file half yearly return with the Registrar in Form NDH3 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within thirty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.

Incorporation process for Nidhi companies :-

A Nidhi company to be incorporated under this Act shall be a Public Company; therefore essentially 3 Directors and 7 Shareholders required and following Forms required to file with Registrar of Companies

1. Application for Reservation of Name Form INC-1

2. Application for Incorporation of Company Form INC-7

3. Notice of Register office of company Form INC-22

4. Particulars for appointment of Directors Form INC-12

SERVICES TO BE RENDERED:-

1. Obtaining Digital Signature Certificate (DSC) of the Directors (3 Directors)

2. Obtaining Director Identification Number (DIN) of the Directors (3 Directors)

3. Obtaining Name Availability from Registrar of Companies, India

4. Drafting Memorandum and Articles of Association of the Company

5. Drafting and Filing of various forms and documents with Registrar of Companies
(“ROC”)

6. Certifying compliance of all applicable provisions of the Companies Act, 2013 and
the Rules framed there under (“Act”) to the ROC

7. Co-coordinating with ROC for timely Incorporation

8. Obtaining Incorporation Certificate from ROC

9. Ensuring compliance of all applicable provisions, rules & regulations of the Act on or
before due dates subject to timely receipt of documents from you.

Documents Required :-

Identity Proof*:

a. PAN card- Mandatory.
b. 5 Photographs of each person

Address Proof*:

a. Bank Account statement latest 40 days
b. Passport
c. Driving License
d. Voters identity Card/Election Card
e. Aadhar Card
f. Any latest utility bill (Electricity Bill/ Telephone bill/ Gas Bill/ Mobile Bill) of home Country of applicant- Bill should not be of more than 2 months.

Other:

g. Birth Certificate (place and district)
h. Educational proof

*Note: Both Identity proof & Address proof should be Attested by Gazetted Officer (#List Gazetted Officer separately given below)

Name on Identity and Address proof should be same at both proofs. Same documents required for DSC (Digital Signature certificate) application also.

Tenure:

If documents are proper then we can get license within 6 months time span.
Place of rendering Services:

The place of rendering services generally shall be our office situated at 2 nd Floor, 496B, Om Apartment, Near KCC Classes, Kasba Peth, Pune – 411 011.

For, CS Pramodkumar R. Ladda
Company Secretary

Land line No. 020-24570055
Office Cell Nos: 9404923393, 8624919609, 9175395604
Personal Cell No. 9922735476 / 9595271145
Skype id: pramodladda
OFFICE: 2nd Floor, OM Apartment, SR. No. 496/B, Near KCC Classes,
Opp Kasba Peth Post office, Kasba Peth, Pune 411011
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