Why Should People Choose Nidhi Company?

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Why Should People Choose Nidhi Company?

Nidhi Company comes from the Hindi word Nidhi which means fund. Nidhi companies are registered under the Companies Act, 2013. These companies can be called a habit of savings between the members of the company. The company consist of investment structure consists of realigning funds within a growing group of the member who benefits from the returns at fixed duration.

Nidhi company is similar to NBFC. It refers to any mutual benefit by Ministry of corporate affairs. These companies have been incorporated with the aim of utilizing money in the best possible manner and savings amongst its members, receiving deposits from and lending to its members only for their mutual benefit. Nidhi companies are also called mutual benefit societies because their dealings are restricted only to the members.

Features of a Nidhi company

• Company's work is to borrow and lend money. This can only be done between members.
• Deals are restricted between the members and membership is limited to individuals.
• The loan can be approved and deposits can be accepted between its members.
• Entry can into any partnership arrangement in it's borrowing and lending activities.
• Companies do not require to conduct any activities related to chit funds, leasing, hire purchase.
• The company is are highly localized and mostly single office institution.

Benefits of Nidhi Company

• It is the cheapest and easiest form of NBFC and can be easily formed.
• It is a Secured means of investment.
• Lower and middle-class savings are promoted.
• External involvement or accept deposits are not required.

Requirements to form a Nidhi Company

• Digital Signature Certificate(DSC) of all the Directors.
• Director identification Number-DIN of all the Directors.
• Copy of a PAN card
• Copy of Id Proof(Aadhar Card, DL, Passport, Voter id)
• 2 Passport size photograph.
• Proof registered office address (Electricity Bill, Phone Bills,etc.)
• Proof registered rented office address(Bills and Rent Agreement with rent receipt).

The registration process of a Nidhi Company

• Initial process-DSC and DIN are applied for filing the registration documents and form is filled.
• Verification and Approval of the Name-Reservation of the company name are done in this process.
• Prepare appropriate MOA and AOA.
• Make the application of incorporation.
• RBI approval is not necessary for the registration.

Also Read: Secretarial Compliance and Annual Compliance for a Nidhi Company

Term and Conditions in Nidhi Company

• The company requires a minimum of 3 directors and 7 members including subscribers for incorporation.
• The company should have at least 200 members or shareholders within a particular time period from its commencement.
• Net owned funds should be minimum Rs 10 lacs or above.
• There should not exceed of 20times from its net owned funds.
• Nidhi company can only issue the right shares.
• Nidhi Company should allow any new preference to share anytime.
• Another company can be acquired by purchase of securities or controls composed of the board of directors of other companies.
• The company cannot pay any brokerage or incentive for mobilizing deposits from members.

According to government law, Nidhi Company is governed by Nidhi rules. These companies are incorporated under the nature of a limited company. These comply with two rules one under Companies Act, 2013 and Nidhi Rules 2014. Nidhi Company provides the benefit of the mutual fund, Permanent fund, etc.

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