According to Section 406 of the Companies Act of 2013, a Nidhi company is a particular form of entity in the non-banking financing sector. Between their members, they conduct their main activity of borrowing and lending money. They are additionally known as Benefit funds, Permanent funds, Mutual benefits, and Mutual Benefit Funds firms. In India, the Ministry of Corporate Affairs is in charge of these organisations and retains the authority to give instructions regarding deposit acceptance procedures. These organisations' main goal is to help their serving members develop a habit of saving money and being frugal. In India's southern region, the Nidhi Company concept is quite well-liked.
Major benefits of Nidhi company registration in India include the following:
A fairly straightforward procedure is used to create a Nidhi Company. A minimum of seven members, of whom three will be appointed as directors, as well as a simple and straightforward documentation process are necessary for the formation of Nidhi Company.
Any Reserve Bank of India regulations are not necessary for a Nidhi Company to follow. Therefore, the Nidhi Company is free to establish its own policies.
As only members conduct lending, borrowing, and depositing operations, the chance of any financial problems in the Nidhi Company is reduced.
Since the Nidhi Company registration process is more simpler than other NBFC registration processes, it has less financial impact on the Director. Additionally, it assists the Nidhi Company in obtaining commercial financing as needed for corporate expansion.
The idea behind the goal of a Nidhi Company is to encourage saving among Indians.
Eligibility criteria for applying to become a Nidhi Company are listed below:
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Because a Nidhi company is registered as a public limited company, the minimal requirements to establish one are essentially identical to those of a public limited company, particularly in terms of the number of shareholders, directors, and company name. The sole exception here is that the Nidhi company's main line of business is restricted to collecting deposits from and lending money to its members alone.
The specific steps for the registration process for Nidhi Companies are as follows:
All directors must receive their DSC (Digital Signature Certificate) and DIN (Directors Identification Number) from MCA-certified organisations as their initial step. The aforementioned agencies request simple documents in exchange for the services they provide and charge typical costs. DSC essentially serves as an electronic document authentication method. It is unquestionably the safest and legal way to sign papers, including e-forms.
The MCA must get suggestions for the top three names for one's Nidhi Company before choosing one of the suggestions. Nidhi Company's name ought to be distinctive. Only 20 days are left until this authorised name expires.
Following approval of the name, the directors must submit an application for registration with the articles of association (AOA) and memorandum of association (MOA).
The proper government must give a certificate for a Nidhi Company's incorporation within 15 to 20 days. The Company Identification Number (CIN) is also included in this certificate.
