Overview

Overview

Nidhi Companies are created to cultivate a habit of saving among their members and to ensure mutual benefit by pooling the resources of members for their collective good. These companies operate within a specific geographical region, and their operations are restricted to members only. They are often referred to as Mutual Benefit Societies because their primary objective is to benefit their members.

Types

Types

Nidhi Companies are not categorized into different types; they are a specific type of NBFC designed to serve the mutual benefit of their members through savings and credit facilities.

Eligibility

Eligibility

1. Members: Minimum of 200 members within one year of incorporation.
2. Directors: Minimum of three directors.
3. Share Capital: Minimum paid-up equity share capital of ₹5 lakhs.
4. Net Owned Funds: Minimum net owned funds should be ₹10 lakhs or more

Process

Process

1. Incorporation: Incorporate the company under the Companies Act, 2013, with the MCA.
2. Application: File Form NDH-1 with the MCA within 90 days from the end of the first financial year after incorporation.
3. Compliance: Ensure compliance with all regulatory requirements within one year of incorporation.
4. Membership Increase: Ensure the company has at least 200 members within one year.
5. Deposits and Loans: Start accepting deposits and lending to members only after meeting all compliance requirements.

Required Document

Required Documents

1. DIN and DSC of Directors
2. Identity Proof and Address Proof of Directors
3. MOA and AOA
4. Registered Office Address Proof
5. Affidavit and Declaration by Subscribers and Directors
6. PAN and TAN
7. List of Members
8. Net Owned Fund Proof

Benifit

Benefits

1. Member-Exclusive: Operations are restricted to members, ensuring a close-knit, trustworthy community.
2. Limited Liability: Members have limited liability protection.
3. Regulatory Recognition: Recognized and regulated under the Companies Act, 2013.
4. Encourages Savings: Promotes a habit of savings among members.
5. Mutual Benefit: Aims at mutual benefit, ensuring members can access credit facilities easily.
6. Tax Benefits: Certain tax exemptions and benefits.

Compliances

Compliances

1. Annual Return: File annual returns with the ROC.
2. Financial Statements: Submit audited financial statements annually.
3. Statutory Audit: Conduct statutory audits by a certified auditor.
4. Board Meetings: Hold regular board meetings as per the AOA.
5. Membership Compliance: Ensure at least 200 members within one year of incorporation.
6. Net Owned Funds: Maintain net owned funds to deposits ratio of 1:20.
7. Reporting: File half-yearly returns on deposits with the ROC.

Penalties

Penalties

1. Non-filing of Returns: Penalties for late or non-filing of annual returns and financial statements.
2. Statutory Non-compliance: Penalties for not adhering to statutory compliance requirements.
3. Membership Requirements: Penalties for not achieving the minimum membership requirement.
4. Financial Penalties: Monetary fines for non-compliance with financial regulations.
5. Legal Action: Potential legal action against the company and its directors for non-compliance.

Common Mistake

Common Mistakes

1. Non-compliance: Failing to comply with regulatory requirements.
2. Improper Documentation: Incomplete or incorrect filing of incorporation documents.
3. Ignoring Membership Criteria: Not meeting the minimum membership requirement.
4. Fund Mismanagement: Mismanagement or improper utilization of funds.
5. Poor Record Keeping: Inadequate maintenance of financial and operational records.
6. Delaying Meetings: Not conducting board meetings and AGMs as required.

FAQ

FAQ

Q: What is a Nidhi Company?
A: A Nidhi Company is a type of NBFC in India, recognized under the Companies Act, 2013, that engages in borrowing and lending money among its members to promote savings and mutual benefit.

Q: How is a Nidhi Company different from other NBFCs?
A: Unlike other NBFCs, Nidhi Companies operate exclusively for the mutual benefit of their members and are not permitted to deal with non-members.

Q: What are the benefits of forming a Nidhi Company?
A: Benefits include limited liability, member-exclusive operations, regulatory recognition, promotion of savings, mutual benefit, and tax exemptions.

Q: What documents are required to form a Nidhi Company?
A: Required documents include DIN and DSC for directors, identity and address proof, MOA and AOA, registered office address proof, affidavit and declaration by subscribers and directors, PAN, TAN, list of members, and net owned fund proof.

Q: What are the common mistakes to avoid when forming a Nidhi Company?
A: Common mistakes include non-compliance with regulatory requirements, improper documentation, ignoring membership criteria, fund mismanagement, poor record keeping, and delaying mandatory meetings.

Q: What are the penalties for non-compliance with Nidhi Company regulations?
A: Penalties include fines for non-filing of returns, statutory non-compliance, not meeting membership requirements, financial penalties, and potential legal action against the company and its directors.