Nidhi Company Registration is gaining steam in India because of many communities coming together to promote the habit of thrift and saving. This article will provide you everything you need to know about a Nidhi Company.
You can consider a Nidhi Company to be a type of NBFC or Non Banking financial Company. it provides a multitude of financial services, but only to its members. Members of this company lend and borrow money from other members. It establishes a financial community with its members being the only beneficiaries.
Therefore, you can consider its purpose to be to promote the habit of thrift and savings among its members.
Because of a sense of financial community it promotes, Nidhi Company are often established in Southern India. However, the Nidhi Company registration process is still governed as per Companies Act, 2013.
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What Activities a Nidhi Company have permission to undertake
A nidhi company is a Non banking Financial business entity. Thus, you can condense the activities it is allowed to undertake in the following points:
- Lending money to the members: Money can be lent to the members of the company on interest basis.
- Borrowing money from the members: The company can borrow money from the lenders can provide them interest.
- Providing specialized financial services including deposits and withdrawal: Nidhi company is full within its rights to provide financial services that include withdrawal and deposits.
What Activities a Nidhi Company doesn’t have the permission to undertake
A Nidhi Company doesn’t have a free reign over the nature of financial services it provides. The Companies act therefore puts restrictions on the activities it’s allowed to perform:
- No Chit Funds: It is a rotating savings and credit association system that involves borrowing and receiving money based on a lottery system. In layman’s terms, we call it committee’s investment.
- No hire purchasing: Nidhi Company can’t provide a service where it takes lends deposits to the members to buy expensive items.
- Leasing Finance: A Nidhi Company doesn’t have the regulatory powers to provide leasing finance services.
- Insurance and Securities: A nidhi company without the proper IRDA authorization cannot provide insurance and securities services.
How many Members are there in the Company?
There should be at least 7 members in a Nidhi company. 3 of these members must be the directors of the company.
At max, this company can have 200 members. Furthermore, throughout the financial year, it must retain this maximum membership count once it has started operations.
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Share Capital Requirement for a Nidhi Company
To start a Nidhi company, you need at least 5 lakh rupees as the equity share capital. Furthermore, you can’t issue preference shares within this company. If you do, MCA would consider it contravention of the conditions under which you’ve obtained Nidhi Company Registration.
Documents to incorporate a Nidhi Company
In order to establish this company, you need the following documents:
- Address proof of the place of business:
- If the place is on rent, you need rent agreement along with the NOC of the property owner, or
- The Sale Agreement if you own the place.
- Identity proof of the directors and the shareholders
- Address proof of the directors and the shareholders
- Member’s photographs (passport size)
- Copies of the PAN Card of the members.
- DIN of the directors
- Memorandum of Association, and
- Articles of association of the company.
A Nidhi company is a business entity that you establish as per the companies act. Structure-wise, it has the same features of a Non banking Financial company with special emphasis to exclusively cater to only to the members.
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It’s a business that has gained a lot of steam in recent times and you’d do well to start one of your own to instil a sense of financial responsibility within your community.
Even though Nidhi Company is not an enigma? Are you sure you know everything there is to know about. Read this blog to learn about Nidhi Company Registration.