Benefits of Nidhi Company Registration in India

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Benefits of Nidhi Comapny registration

 

Nidhi Company is a company that deals with the non-banking finance sector. The significant feature of this company which makes it different from other companies is that the Nidhi Company deals with the deposits from and loans to its members only and works for mutual benefits of its members. Nidhi Company Registration is regulated by Ministry of Corporate Affairs, Companies Act and Nidhi Companies Rules, 2014. Section 406 of Companies Act, 2013 governs the affairs of Nidhi Companies. The Reserve Bank of India (RBI) regulates the business activities of the Nidhi Companies, as it is just like to that of a Non-Banking Financial Corporation (NBFC). However, RBI has exempted Nidhi Companies from the core provisions of RBI Act, 1934 and other regulations prevalent on an NBFC, as these companies’ deals only with the money of its shareholders.

Further, the Nidhi Company is allowed to have branches but it cannot open more than three branches. It is pertinent to take into consideration that all these branches must be opened in the same district. If, in case the company wants to open more than three branches or in a separate district, a prior permission of Regional Director (RD) is required. Before registration, it is also seen, if the Company is not engaged into activities which fall outside the limit of the provision governing the company.

The Basic Requirements for Nidhi Company Registration

Following are some basic requirements for Nidhi Company Registration:

  • The company name must contain ‘Nidhi Limited.’
  • A minimum of seven shareholders or members is required and a minimum of three directors are required for the incorporation of a Nidhi Company.
  • The company must have a minimum paid up equity share capital of Rs. 5,00,000/-.
  • The Nidhi Company shall be a ‘Public Company’ that has to be incorporated under the Act.
  • The Nidhi Company should not issue preference shares and if any preference shares had already been issued by the Company, before the commencement of the Act, then such preference shares should be redeemed in harmony with the terms of issue of such shares.
  • There should be issuance of Director Identification Number (DIN) for all the Directors.
  • The minimum value of each equity share issued should not be less than Rs.10 per share.
  • A minimum of 10 equity shares should be issued to each deposit holder.
  • The ultimate objective of Nidhi Company should be to imbibe in its members or shareholders, the habit of saving by receiving deposits from and lending to them only for their mutual benefits.

Benefits of a Nidhi Company Registration

Also, to nurture the noble habit of savings, there are numerous advantages of Nidhi Company Registration. Let's go through some of these-

·        Limited capital requirement

As stated in the Nidhi Rules, 2014, the minimum capital requirement to register a Nidhi Company is Rs 10 Lakhs only.

·        Less RBI regulatory compliance

Nidhi Companies incorporates similar lines to that of Public Limited Companies. And hence, no RBI consent should register such a company. They need to comply with the less stringent Nidhi Rules, 2014 and the Companies Act 2013 for their activities. As RBI has released these companies from strict compliance of its core provision, they can get help from the ease of regulatory compliance.

·        Simple procedure of formation

The process of initiating a Nidhi Company is fairly easy and is void of severe legal complications. It will help if you had seven members initially; a few simple documents and need to go through an easy Nidhi Company Registration process to incorporate with the MCA.

·        Uninterrupted operations

The company can assure uninterrupted operational existence even at the death or departure of any member. The company will continue to exist irrespective of the inevitable change in any membership.

·        More certainty

Everyone prefers to save in India, and the primary aim of a Nidhi Company is to foster this habit of saving. However, this means the 'Nidhi Business' is a going concern and a specific business as the members always save.

Conclusion

Recently, Nidhi Company has been evolved as a popular lending mechanism for obtaining secured loans. These companies have gained momentum mostly in Southern most parts of India. Its operations and business structure is very similar to that of a Co-operative Society. The foremost reason for the incorporation of these companies is to inculcate the habit of saving amongst its members, so that they can easily satisfy their financial needs, arising from time to time. Nidhi Company Registration is regulated by Ministry of Corporate Affairs, Companies Act and Nidhi Companies Rules, 2014. Section 406 of Companies Act, 2013 governs the affairs of Nidhi Companies.

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