Earning or generating revenue from your work or business is perhaps one of the most satisfying things in life. Although it is not the reason we live for, bad money management can easily halt your progress and could potentially tie you to the rat race forever. Thus, businesses often find it necessary to have the right investment platforms to be in for greater financial security.

As important as it is to earn revenue is to save a share of it for your future as well. Everyone knows this, but people often give savings the least priority and end up having nothing left for rough days. This is where Nidhi Company brings its enormous value to your financial management. You may also be interested in learning on Internal Auditing and Management Consultancy in Kerala

The Nidhi model of savings

Nidhi Company is not a banking company, but a group of financial companies aimed at helping individuals have a healthy savings routine.

Registered and compliant under the Ministry of Corporate Affairs under the Central government as per the Companies Act 2013 and the Companies Incorporation Rules 2014, Nidhi companies in India are transparent business entities that encourage savings based on a shareholder model.

Why choose Nidhi?

Unlike other fund management firms, Nidhi companies provide three significant benefits for their members to either lend or borrow funds among shareholders.

1. No Licenses required – A Nidhi company can be registered as a public company without requiring any license from the Reserve Bank of India.
2. Owning only limited liability – The liabilities of the members or shareholders of the Nidhi Company extend only to their share capital and not a dime beyond that.
3. Transferable ownership – The financial modal of Nidhi is such that the ownership of the company is held in the form of shares. Thus, ownership is not people-dependent and can be transferred with ease.
4. Funding ventures – Raising funds from the members of the Nidhi company is easy as all its members follow a limited liability policy where their primary goal is to foster the practice of savings.

How to get incorporated into a Nidhi Company

Members can follow a simple nine-step process to get incorporated into a Nidhi Company. Here’s the order in which you could reach there.

1. Name Reservation
2. Providing a Digital Signature
3. Propose the Directors
4. Memorandum of Association
5. Articles of Association
6. Company Incorporation
7. Proof of Registered Office
8. Getting a Share Certificate

It is mandatory to have at least seven members when you form a Nidhi company, and three among them must be the designated directors. There are a few more conditions that we list below which a Nidhi company must have within a year of incorporation.

Also, the minimum equity share capital while you register for a Nidhi company must be Rs.5 Lakhs.

Parpella makes it easy for you to follow them get incorporated into Nidhi Company without delay or red tapes.

Things to check after Incorporation

There are a few conditions that member companies or shareholders of the Nidhi must comply with after incorporating.

• The minimum number of shareholders in the Nidhi Company must be 200.
• The net owned funds in the Nidhi Company should not be less than Rs.10 Lakhs within one year of registration.
• It must be ensured that the net unencumbered deposits of the company is not less than 10% of the outstanding deposits.
• The net owned funds to deposit ratio should never exceed 1:20.

 

Apart from the above conditions, here are the forms that are necessary to be filled post incorporation

• Form NDH1 should be submitted within 90 days of incorporation.
• Form NDH2 to be submitted in case there is an extension request to meet the 200 members target.
• Form NDH3 must be filled as half-yearly requirements along with Form NDH1.

 

Member documents for Nidhi Company

There is a clear list of requirements for the documents and details of the Directors and subscribers for a Nidhi Company.

1. List of subscribers and directors.
2. PAN card and Aadhar card of members
3. The latest bank statement that clearly mentions the address of the member
4. Either the Driving license, passport, or voters ID
5. Email address and phone number
6. Place of birth
7. Educations qualification
8. Occupation
9. Permanent and present address
10. Duration of stay in present address
11. DIN if any of the subscribers or the directors is a director of another company
12. Photo.

Here are some other details that may be required for incorporating into Nidhi company not pertaining to individual subscribers or directors.

• Authorized capital
• Ratio or percentage of shareholding by the subscribers
• Company email address
• Address of the registered office
• Rent agreement, NOC, and other declarations if the building is rented
• Building tax receipt for self-owned buildings
• Electricity bill and consumer profile or the telephone bill for address proof

 

Restrictions of a Nidhi company

Although a highly beneficial business model of running an investment company, Nidhi comes with an obvious list of restrictions under rule 6 of the Nidhi Rules 2014. Here are some of them:

• A Nidhi company cannot do chit fund businesses, lease finance, or hire purchase. It cannot acquire body corporate securities as well.
• The company cannot open current accounts with its members.
• No business apart from lending or borrowing can be made in its own name.
• They cannot lend or borrow funds from body corporates.
• They cannot undertake any marketing publicizing efforts to get deposits in any form.
• No amount of brokerage or incentive should be given for granting loans, deployment of funds, or mobilizing deposits from Nidhi members.
• Nidhi company is restricted from issuing preference shares, debentures, or any other debt instrument by any name or form.
• Until adopted by the Regional Director based on special resolution in a general meeting, no concessions, acquisitions, or arrangements can be made by a Nidhi company.
• Nidhi companies can only lend or borrow funds from their members.
• Partnership arrangements in lending or borrowing are strictly restricted for a Nidhi company.
• No assets lodged by members can be pledged as security.

 

Leave the paperwork to Parpella

As you can see, there is a reasonable amount of paperwork that goes into a Nidhi company’s approval process. With years of experience in the finance industry, we make it easy for companies to launch their businesses and help them with their registration, accounts, and advice on how to manage their funds while running a company. Contact your Business and Company Registration Consultant in Kerala today.

To explore our full range of services, visit our website today.