What is AoA for Nidhi Company Formation?

AoA for Nidhi Company is a document that contains the purpose of the Nidhi Company and its operational guidelines. AoA is an important document for setting up business procedures. The day-to-day operations or daily activities that oversee the corporation are outlined in the articles of association document. Before registering a company, an AoA must be approved by the Registrar of Companies (ROC). Now let us delve into the realm of AOA of Nidhi Company.

Nidhi Company- An Insight into the Concept

The Companies Act 2013 introduced the concept of Nidhi Company, a Non-Banking Financial Company (NBFC). It functions on the tenet of mutual benefit and instils in its members the habit of saving. But the question arises- How? This Company’s principal objectives include raising capital from its members and providing loans and advances to them as the only sources of financial assistance. Since it’s a publicly traded corporation, “Nidhi Limited” must come at the end of its name. Nidhi is simple to set up because it doesn’t require an RBI (Reserve Bank of India) license.

Characteristics of Nidhi Company

The characteristic features of Nidhi Company are

• Minimum capital– The minimum paid-up share capital for Nishi Company is Rs. 10 lakhs.
• Composition– Three directors and a minimum of seven shareholders are required for a Nidhi Company.
• Membership– The membership system of Nidhi Company sets it apart. Members must hold shares in the company to be qualified for loans and other financial services from the organisation.
• Net-owned funds– A minimum of Rs. 20 Lakhs should be Nidhi’s net-owned funds; this would safeguard the organisation’s members and ensure that it has sufficient funds to fulfil its responsibilities.

Nidhi Company Registration Requirements

The Nidhi Company registration requirements are as follows-

• Nidhi Company requires a minimum of seven shareholders.
• It takes three directors to run Nidhi properly.
• Nidhi will not issue preference shares.
• Within 4 months of incorporation, Nidhi needs to have 200 shareholders or members at a minimum.
• The goal of the organisation is to develop in its members the habit of saving by “depositing” and “lending” from them only when it is most advantageous for their own and the community’s well-being.

Incorporation of Nidhi Company

The procedure for incorporation of Nidhi Company is:

• Applicants are required to indicate the availability of their name in the RUN facility of the MCA portal. Any company proposed to be registered as “Nidhi” will have the last words “Nidhi Limited” as part of its name. Now, the digital signature of the applicant is not required for the availability of the name. 
• The Proposed Directors of Nidhi must obtain a Director Identification Number (DIN) and Class 2 Digital Signature Certificate (DSC). 
• After approval of the name, file Form SPICe 32 with the following attachments
• MoA and AoA 
• PAN Card Id 
• Card of First Director 
• Registered Owner’s NOC Office 
• Consent and Declaration of First Director in the form DIR-2 
• Address Proof of First Director 
• Proof of Address of registered office  
• Latest Utility Bill of Residence 
• Self-Declaration from First Directors and Subscribers in Form INC-9.
• It takes approximately 15-20 days to acquire the Certificate of Incorporation of Nidhi Company after submitting all the documents, paying a registration fee, and stamp duty. This Certificate of Incorporation is evidence that all formalities related to the incorporation of the company have been complied with.

What is an Article of Association (AoA)?

Articles of Association (AoA) outline the company’s purpose and the rules that regulate its day-to-day operations. The Company’s MOA governs and subjects the AOA. An AOA is necessary for any business since it defines internal rights, operations, governance, and responsibilities. The MoA and the Companies Act of 2013 shall be followed in the substance of the AOA.

• It includes provisions based on the organisation’s requirements.
• It outlines the dynamic between the members and the company as well as between them.
• Shareholders may approve actions that go outside the AOA’s parameters.
• At the Annual General Meeting (AGM), a special resolution might be passed to alter the AOA.
• Any clause in the AOA that conflicts with the terms of the MoA is null and void.

AoA and Nidhi Company

The AoA is an important document for Nidhi Company for the following reasons-

• Legal Action– The Corporation may bring legal action against the offending member if these agreements are broken.
• Activities must align with MoA and AoA- All business operations ought to be governed by the MoA and AoA.
• Regulates internal relations- The AoA establishes rules that control how the group interacts internally with its members.
• Showcases responsibilities- It also outlines the responsibilities and rights that come with being a member of a business.

Components of AoA of Nidhi Company

The following are the essential components for AoA of Nidhi Company-

• Company Definition: This section defines a company type i.e. private or public limited company.
• Share Capital and Changes in Share Capital: It contains the information on share capital, including share class, value, call, transfer, and forfeiture of shares. The corporation may alter its share capital by passing an ordinary or special resolution in accordance with its requirements.
• Profit: The business is entitled to capitalize its profits. Dividends or additional shares may be issued to shareholders as a result of the profit from the available amount.
• Buyback shares: Under this clause of the AOA, companies may repurchase their own shares at a fixed price.
• Board of Directors and General Meeting: Talks about voting rights, adjournments, and procedures. Meeting procedures and minute-taking are also covered. It also specifies how auditors are to be appointed and paid.
• Dividends and Accounts: This section specifies how the books of accounts are to be kept. AOA guarantees that stockholders will receive their dividends.
• Clause on Indemnification: Every partner in the business is entitled to receive payment from the company’s assets to cover the liabilities he has incurred.
• Winding up a company: In accordance with the Companies Act of 2013, a company may choose to wind up voluntarily or by compulsion.

Takeaway

It can be concluded that the AoA of Nidhi Company is an essential document containing procedures for the internal operation and administration of the company. It provides for governing rules and regulations of the company. Before registering a Nidhi Company, the Registrar of Companies (RoC) must authorize an AoA.

In case of any query regarding AOA of Nidhi Company, a team of expert advisors from Legal Window is here to assist you at every step. Feel free to reach us at admin@legalwindow.in.