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Nidhi Company

Introduction:

A Nidhi company, also known as a mutual benefit company, is a type of non-banking financial company (NBFC) that is registered under the Companies Act, 2013 in India. Nidhi companies are created for the specific purpose of cultivating the habit of thrift and savings among its members, and for receiving deposits from, and lending to, its members only. Nidhi companies are required to comply with the guidelines and regulations set by the Ministry of Corporate Affairs and the Reserve Bank of India (RBI).

Features:

  • A Nidhi company is a non-banking financial company (NBFC) registered under the Companies Act, 2013.

  • Nidhi companies are created for the specific purpose of cultivating the habit of thrift and savings among its members.

  • Nidhi companies can receive deposits from, and lend money to, its members only.

  • Nidhi companies are required to maintain a minimum net owned fund (NOF) of Rs. 5 Lakhs.

  • Nidhi companies are required to invest at least 85% of its deposits in government securities or other approved securities.

Procedure:

  • Choose a unique name for the Nidhi company and ensure it is not already in use by another business.

  • Obtain the Digital Signature Certificates (DSC) and Director Identification Number (DIN) of the directors.

  • File the Incorporation documents with the Registrar of Companies (ROC) including the Memorandum and Articles of Association, Form INC-7, and the declaration by the directors.

  • Obtain the Certificate of Incorporation from the ROC.

  • Register for GST and PAN.

  • Obtain the Nidhi Company license from the Ministry of Corporate Affairs

  • Register for the DIN and DSC of the directors.

Documents Required:

  • PAN card of the proposed directors

  • Address proof of the registered office

  • Identity proof of the proposed directors

  • Affidavit and declaration by the directors

  • Memorandum and Articles of Association

  • Incorporation documents

  • GST and PAN registration

Advantages:

  • Easy to set up: Nidhi companies are relatively easy to set up and do not require as much paperwork or compliance as other types of NBFCs.

  • Exclusive member-based lending and borrowing: Nidhi companies can lend and borrow money only from its members, which can be beneficial for the members as it may result in better interest rates and terms on loans and deposits compared to other financial institutions.

  • Low capital requirement: Nidhi companies are required to maintain a minimum net owned fund (NOF) of Rs. 5 Lakhs, which is lower than other types of NBFCs.

  • Tax benefits: Nidhi companies are eligible for tax benefits under the Income Tax Act, 1961.

  • Disadvantages:

  • Limited business activities: Nidhi companies are restricted to carrying out certain specific activities such as receiving deposits and lending money to its members only.

  • Stringent compliance requirements: Nidhi companies are subject to strict compliance requirements set by the Ministry of Corporate Affairs and the Reserve Bank of India (RBI).

  • Limited scope for expansion: Nidhi companies can only transact business with its members and therefore have limited scope for expansion and diversification.

Conclusion:

A Nidhi company is a type of non-banking financial company (NBFC) that is registered under the Companies Act, 2013 in India. Nidhi companies are created for the specific purpose of cultivating the habit of thrift and savings among its members, and for receiving deposits from, and lending to, its members only. While Nidhi companies have some advantages such as easy to set up and low capital requirement, they also have some disadvantages such as limited business activities and stringent compliance requirements. It's always recommended to consult legal and professional advice before proceeding with Nidhi Company registration.

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