All You Need to Know about Nidhi Company and it’s Registration Procedure in Udaipur

The meaning of the term “NIDHI” is a treasure and also a very common name of girls in India. While in legal terms there is no definition of a word NIDHI, so we adopted the general meaning. In recent years, Nidhi Companies have gained popularity as a form of micro-financing and savings institutions, particularly in rural and semi-urban areas of India. Nidhi Companies are regulated by the Ministry of Corporate Affairs (MCA) and are governed by the Nidhi Rules, 2014, which provide the regulatory framework for their operations. In this article, we will discuss about the Nidhi Company and its registration procedure in Udaipur.

Meaning of Nidhi Company

A Nidhi Company, also known as a Nidhi Mutual Benefit Company, is a type of non-banking financial company (NBFC) that is registered under Section 406 of the Companies Act, 2013, and is regulated by the MCA in India. Nidhi Companies are primarily formed for the purpose of cultivating thrift and savings habits among their members and providing them with financial assistance.

The main objective of a Nidhi Company is to promote the habit of savings and thrift among its members and lend money to them in the form of loans or advances against collateral or security. Nidhi Companies are allowed to accept deposits and provide loans only to their members, who are also shareholders of the company. The funds for lending are sourced from the deposits received from its members, and the loans are usually provided for purposes such as small business activities, housing, education, and other personal financial requirements.

Nidhi Companies are required to have a minimum of 200 members and a minimum net owned fund (NOF) of INR 10 lakhs (approx. USD 13,500) as per the regulations set by the MCA. They are also subject to certain restrictions on activities such as lending, accepting deposits, and investment to ensure that they operate primarily for the benefit of their members and do not engage in speculative or high-risk activities.

Commercial importance of Nidhi Company’s registration in Udaipur

Nidhi Company Registration in Udaipur is of great commercial importance due to the following reasons:

• Easy Access to Funds: It is a non-banking financial institutions that primarily cater to the funding requirements of its members. By registering a Nidhi company in Udaipur, businesses can access easy funding options without relying on traditional financial institutions such as banks or NBFCs. 
• Low-cost Funding: It offers low-cost funding as they operate on the principle of mutual benefit, where the profits are shared among the members in the form of dividends. Since, Nidhi companies do not have to pay high-interest rates to depositors like traditional banks, they can offer loans and other financial services at lower rates to their members.
• Ease of Doing Business: The process of registering a Nidhi company in Udaipur is relatively simple and straightforward. The compliance requirements for Nidhi companies are also minimal compared to other financial institutions such as banks and NBFCs. Therefore, Nidhi companies can operate with fewer regulatory hurdles, making it easier for businesses to operate.
• Limited Liability: Nidhi companies have a separate legal entity and are not affected by the personal liabilities of its members. Therefore, the members of the Nidhi company are only liable for the amount of share capital they have invested in the company, reducing their personal risk exposure.
• Better Control: Nidhi companies are owned and managed by its members, providing better control over the company’s affairs. Members have a say in the company’s functioning, and they can participate in the decision-making process.

Eligibility criteria for Nidhi Company’s registration in Udaipur

To be eligible for Nidhi Company registration in Udaipur, an applicant must meet the following criteria:

• Minimum number of members: A Nidhi Company must have a minimum of 200 members within one year of incorporation.
• Net owned funds: The net owned funds of the company must be at least INR 10 lakhs.
• Directors: The company must have at least three directors, of which at least one director must be a resident of India.
• Name: The name of the company must include the words “Nidhi Limited”.
• Objectives: The primary objective of a Nidhi Company should be to promote thrift and savings amongst its members, and to accept deposits and lend to its members only.
• Share capital: The company must have a minimum equity share capital of INR 5 lakhs.
• No branch operations: A Nidhi Company cannot open branches until it has earned a net profit after tax continuously for three years.
• Compliance: The company must comply with all the applicable provisions of the Companies Act, 2013 and the rules made thereunder.

Documents Required for Registration of Nidhi Company in Udaipur

The registration of a Nidhi Company in India requires several documents to be submitted to the Registrar of Companies (ROC). The exact documents may vary based on the specific requirements and location, but generally, the following documents are required for the registration of a Nidhi Company:

• Identity Proof: Identity proof of all proposed directors and shareholders of the Nidhi Company, such as PAN Card, Aadhaar Card, Passport, or Voter ID Card.
• Address Proof: Address proof of all proposed directors and shareholders, such as Aadhaar Card, Passport, Voter ID Card, or Bank Statement (not older than 2 months).
• Passport Size Photographs: Passport size photographs of all proposed directors and shareholders.
• Proof of Registered Office: Documents proving the registered office address of the Nidhi Company, such as rent agreement or ownership deed, electricity bill, or property tax receipt.
• Memorandum of Association (MOA) and Articles of Association (AOA): Drafted and notarized MOA and AOA of the Nidhi Company, which outline the objectives, rules, and regulations of the company.
• Declaration and Affidavit: Declaration and affidavits from all proposed directors and shareholders stating their eligibility to become a director or shareholder of a Nidhi Company, and their non-involvement in any disqualifications under the Companies Act, 2013.
• Director Identification Number (DIN): DIN for all proposed directors of the Nidhi Company.
• Digital Signature Certificate (DSC): DSC for all proposed directors of the Nidhi Company.
• Payment of Fees: Payment of requisite fees for filing the incorporation documents with the ROC.
• Other Documents: Any other documents or forms as required by the MCA or ROC, if applicable.

Step-by-Step Registration Procedure of Nidhi Company in Udaipur

The registration procedure of a Nidhi Company in Udaipur, or any other location in India, involves several steps and compliance with the relevant laws and regulations. Here are steps of the registration procedure for a Nidhi Company in Udaipur:

• Obtain Digital Signature Certificate (DSC): The first step in registering a Nidhi Company is to obtain a DSC for the proposed directors of the company. DSC is used for online filing of documents with the MCA and is required for all directors of the company.
• Obtain Director Identification Number (DIN): All directors of the Nidhi Company need to obtain a DIN from the MCA. DIN is a unique identification number assigned to directors, and it is required for filing various forms and documents with the MCA.
• Choose a Name for the Nidhi Company: The next step is to choose a unique name for the Nidhi Company and apply for the same through the RUN (Reserve Unique Name) facility provided by the MCA. The name should comply with the naming guidelines specified by the MCA and should not be similar or identical to any existing company or trademark.
• Drafting of Memorandum of Association (MOA) and Articles of Association (AOA): MOA and AOA are the constitutional documents of the Nidhi Company, which outline the objectives, rules, and regulations of the company. These documents need to be drafted and notarized as per the format prescribed under the Companies Act, 2013.
• File Incorporation Documents: Once the name is approved, the Nidhi Company needs to file the incorporation documents, including MOA, AOA, and other necessary forms, with the ROC electronically. These documents need to be filed along with the required fees and supporting documents, such as address proof, identity proof, and other relevant details of the directors and shareholders.
• Obtain Certificate of Incorporation: Upon submission of the incorporation documents and successful verification by the ROC, if all requirements are met, the ROC will issue a Certificate of Incorporation, which signifies the formation of the Nidhi Company. This certificate includes the Corporate Identification Number (CIN) of the company.
• Apply for PAN, TAN, and Bank Account: After obtaining the Certificate of Incorporation, the Nidhi Company needs to apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the respective authorities. The company also needs to open a bank account in the name of the company and obtain the necessary account details.
• Post-Incorporation Compliance: After the incorporation of the Nidhi Company, there are certain post-incorporation compliance requirements, such as obtaining statutory registrations, maintaining books of accounts, conducting annual general meetings, filing annual financial statements and annual returns with the ROC, and complying with other applicable laws and regulations.

Compliances for Nidhi Company registration

There are certain compliance requirements of a Nidhi Companies, which are divided into three sections. These are:

Pre-incorporation compliances: The said company has to follow some necessary compliances to acquire registration. These compliances are:

• To begin a Nidhi Company, a minimum seven members are required, out of those three members should be company’s directors.

• Share Capital’s minimum paid must be Rs. 5 Lakh.

• There are some businesses, which are not considered as the Nidhi’s member such as Trust, minor, and body corporate.
• Preference shares cannot be issued by company, if the company has been issued the such shares before enforcement of the Act. Then the same should be redeemed.
• The said company is not allowed to open branches, in case company is not earning profit after tax for three financial years consecutively. 
• The company’s main purpose is to develop the savings habit of its members. 
• The “Nidhi Limited” must be used as a suffix in its name and the company must be a Public Company.
• The interest rate on loan must not exceed 7.5% above the highest interest rate provided on deposits.

Post-incorporation compliances: It has to be accomplished after the incorporation and divided into two parts. Likewise General and Annual compliance. The general compliance needs to be fulfilled after one year of incorporation and must satisfy the certain conditions are:

• Within a year of its incorporation, the members should increase to at least 200 members.

• Company requires to Convene Statutory Meetings.

• Net Owned Funds (NOF) must be of Rs. 20 Lakhs as per the modification done in Nidhi (Amendment) Rules, 2022.

• Without deposits term should be not less than 10% of the exceptional deposits as mentioned under Rule 14 of the Nidhi Rule 2014.

• The Company necessarily to maintain accounts books, and the registers of statutory.

• The NOF and deposits shall be in a ratio not exceeding 1:20, which is NOF deposits is equal to 1:20.

Annual Compliance: It is followed to check the performances and functions of the company’s division. That will make the Government updated. 

• Event based compliances: Mainly, these types of compliances are needed to file only once at the time of company registration procedure. In addition, these compliances must be conducted, in case there is any alteration in the Nidhi company’s structure i.e., 

non-periodical.

Takeaway

Through the above-mentioned registration procedure, it is significant process to follow and registering Nidhi Company in Udaipur. It has provided funds for its members and its core reason for incorporating this company in Udaipur is to inspire its members to satisfy and protect their basic requirements from period to period. Its incorporation is depended upon the motive of Mutual Benefits and necessary feature is to distinguish this company from others business performances as handles with the deposits from and loans to its members.

It is advisable to seek professional guidance from a qualified company secretary, chartered accountant, or legal expert of Legal Window to ensure compliance with all the relevant laws and regulations during the registration process and ongoing compliance requirements of a Nidhi Company in Udaipur.