Nidhi Company in India
What are the benefits of registering Nidhi Company in India?
There are several advantages of starting a Nidhi Company in India. We will have a look into some of these:
· Limited RBI regulatory compliance
Nidhi Companies need to incorporate themselves as Public Limited Companies with the MCA. And it’s not mandatory for them to get an RBI license to operate. However, they need to comply with the less stringent Nidhi Rules, 2014 and the Companies Act 2013 for their financial activities. As RBI has exempted the Nidhi companies from stringent compliance of its core provisions. They have the much-needed ease of regulatory compliance.
· Less Risky proposition
As per provisions of the rules, 2014, a Nidhi Company can provide loans to and accept deposits from its members only. This makes it a less risky proposition as the risk of loan default is less as compared to other businesses of similar nature. Also, as all financial activities are restricted to the members-only, there is less risk of external factors affecting the working of such companies. However, it’s one of the safest and the easiest way of inviting deposits from the public. Register them as members.
· Limited capital requirement
As mentioned in the Nidhi Rules, 2014, the minimum capital requirement to register a Nidhi Company is Rs 10 Lakhs only.
· Simple procedure of formation
The process of forming this type of company is fairly simple. You just need 7 members to start with, a few simple documents and then need to incorporate your company with the MCA through a simple registration process.
· Uninterrupted operations
The normal operations of a Nidhi Company are not uninterrupted even at the death, insolvency, insanity or retirement of any member, thanks to the practice of perpetual succession. However, the Company will remain in operation irrespective of any such inevitable change in any type of membership.
Rule 6 provides general restrictions. According to this rule, no Nidhi shall:
Carry on the business of
a. Chit Fund,
b. Hire Purchase Finance,
c. Leasing Finance,
Insurance or Acquisition of Securities issued by anybody corporate;
a. Preference Shares,
b. Debentures or
c. Any other debt instrument by any name or in any form whatsoever;
- Open any Current Account with its members;
Acquire another company by;
a. Purchase of securities or
b. Control the composition of the Board of Directors of any other company in any manner whatsoever or
- Enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over Nidhi;
- Carry on any business other than the business of borrowing or lending in its own name;
- Accept deposits from or lend to any person, other than its members;
- Must not pledge any of the assets that have been lodged by its members as security;
- Take Deposits from or lend money to anybody corporate;
- Enter into any Partnership Arrangement in its borrowing or lending activities;
Issue or cause to be issued any advertisement in any form for soliciting deposit;
12. Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans.
It’s imperative to note that Nidhis which have adhered to all the provisions of these rules may rent out facilities of lockers to its members. The rent must not exceed 20% twenty per cent of the gross income of the Nidhi at any point of time during a financial year.