Introduction:-
Nidhi Companies play a crucial role in the financial sector, particularly in providing credit facilities to their members. However, like any other financial institution, Nidhi Companies need to adhere to a set of legal compliances to ensure smooth operations. In this article, we'll delve into the process of Nidhi Company registration and the associated legal requirements.
What is a Nidhi Company?:-
A Nidhi Company is a type of non-banking financial company (NBFC) that is primarily engaged in the business of borrowing and lending money among its members. The key objective of a Nidhi Company is to cultivate the habit of thrift and savings among its members. These companies are regulated by the Ministry of Corporate Affairs and are subject to specific legal provisions.
Nidhi Company Registration Process:-
Step 1: Minimum Requirements
Before applying for registration, a Nidhi Company must meet certain criteria:
- It should have a minimum of 200 members.
- It must have a minimum net owned fund of Rs. 10 lakhs.
- The company must be incorporated as a public company.
Step 2: Name Approval
Choose a unique name for the Nidhi Company. The name should end with "Nidhi Limited" to reflect its status.
Step 3: Memorandum and Articles of Association
Draft the Memorandum of Association (MOA) and Articles of Association (AOA) in accordance with the Companies Act, 2013.
Step 4: Application Submission
Submit the necessary documents and forms to the Registrar of Companies (ROC) along with the prescribed fee.
Step 5: Obtaining Certificate of Incorporation
Once the ROC is satisfied with the documents, they will issue the Certificate of Incorporation. This marks the formal establishment of the Nidhi Company.
Legal Compliance for Nidhi Companies:-
1. Minimum Capital Requirement
A Nidhi Company must have a minimum net owned fund of Rs. 10 lakhs as per the RBI guidelines.
2. Membership and Shareholding
Each member must hold at least 10 equity shares or higher, as specified in the AOA.
3. Restrictions on Loans
Nidhi Companies are restricted from providing loans exceeding 2 times of their net owned funds to a single member.
4. Deposits
Deposits from members must be kept in a scheduled bank and not utilized for lending purposes.
5. Compliance with Income Tax Act
The Nidhi Company must comply with the provisions of the Income Tax Act, including filing returns and paying taxes.
6. Periodic Reporting
Regular filing of financial statements, annual returns, and other required documents with the ROC is mandatory.
Conclusion:-
Setting up a Nidhi Company involves meticulous planning and adherence to legal provisions. By following the prescribed registration process and complying with the necessary legal requirements, a Nidhi Company can contribute significantly to financial inclusion and economic growth.