
In India, Nidhi Companies were established with the intention of encouraging their members to save money and be thrifty. Nidhi businesses are permitted to lend to and borrow from their members. As a result, a Nidhi company receives only contributions from its members (shareholders). When compared to the banking industry, Nidhi businesses are relatively insignificant and are primarily utilized to encourage group savings.
Restrictions on Nidhi Company
A few of the restrictions that the Nidhi Rules, 2014 impose on a Nidhi Company are as follows: A Nidhi Company registration in Chennai shall not, in accordance with Rule 6 of the Nidhi Rules, 2014:
· the operation of a chit fund, leasing finance, insurance, hire purchase financing, or the acquisition of securities issued by anybody corporate;
· issue preference shares, debentures, or any other type of debt instrument under any name or form;
· any current account that its members may have;
· unless it has passed a special resolution in its general meeting and also obtained the prior approval of the Regional Director having jurisdiction over such Nidhi, it cannot acquire another company by purchasing securities, control the composition of the Board of Directors of any other company, or enter into any arrangement for the change of its management;
· Operate any other business than borrowing or lending money in its own name: Provided, however, that Nidhis that have complied with all of the provisions of these guidelines are permitted to rent lockers to their members, provided that the rental income from those lockers does not exceed twenty percent of the Nidhi's annual gross income at any given time.
· lend to anyone other than its members or accept deposits from them;
· pledge as security any assets that its members have contributed;
· accept deposits from any company or lend money to any company;
· in its activities of borrowing or lending, enter into any partnership arrangement;
· Issue or cause to be issued any form of advertisement for deposit solicitation: Nonetheless, the inclusion of the statement "for private circulation to members only" on the details of fixed deposit schemes that are distributed privately to Nidhi members is not considered an advertisement for deposit solicitation.
· Pay any brokerage or give an incentive for getting member deposits, spending money, or giving loans.
Nidhi company registration in Chennai
Under the Companies Act of 2013, incorporating a Limited Company is the first step in starting a Nidhi Company registration in Chennai. As a result, in order to initiate the Limited Company incorporation process, a minimum of three Directors and seven shareholders are required.
During the Nidhi Company registration in Chennai, care must be taken to ensure that the limited company's stated goal is to promote thrift and savings among its members by only accepting deposits from and lending to them for their mutual benefit.
All of the following requirements must be met by the Nidhi Company within one year of the Limited Company's incorporation:
· not have less than 200 shareholders (members);
· have at least ten lakh rupees in Net Owned Funds (NOF);
· Have at least 10% of the outstanding deposits in unencumbered term deposits; and not exceed a ratio of 1:20 between deposits and Net Owned Funds.
The sum of paid-up equity share capital and free reserves reduced by accumulated losses and intangible assets reflected in the most recent audited balance sheet is referred to as "Net Owned Funds."
A return of statutory compliance in Form NDH-1 duly certified by a practicing CA/CS/CWA and the necessary fees must be filed by the Nidhi Company within ninety days of the close of the first financial year after Nidhi Company registration in Chennai and, if applicable, the second financial year, if the Nidhi Company meets the above requirements for operating as a Nidhi Company.
The Nidhi Company may submit a Form NDH-2 to the Regional Director for an extension of time within thirty days of the end of the first financial year in the event that it is unable to meet the aforementioned requirement one year after its commencement.
The Nidhi Company after having Nidhi Company registration in Chennai shall not accept any further deposits from the beginning of the second financial year until it complies with the provisions for operating as a Nidhi Company and shall be subject to penal consequences if the Nidhi Company fails to meet the requirements for a Nidhi Company even after the second financial year.
Reasons to establish Nidhi Company
A Nidhi business that has Nidhi Company registration in Chennai has additional advantages in addition to encouraging thrift and savings. Let's check them out:
· Form Accessible:
Building a Nidhi business is easy and doesn't involve a lot of legal work. To register as a public company with the MCA, you need seven people, a few documents, and can have simple Nidhi Company registration in Chennai. As a result, inject the required capital in accordance with the Nidhi Rules of 2014, and you are prepared to go.
· RBI's lack of compliance with regulations:
Because they are a part of the NBFC, Nidhi businesses don't need much RBI approval. These businesses are only subject to the Nidhi Rules of 2014, and the RBI has exempted them from strict compliance requirements. Therefore, if you are starting a Nidhi Company & having Nidhi Company registration in Chennai, you won't have to worry as much because the RBI won't stop you in the middle.
· Requirement for Limited Capital:
In the beginning, the MCA established a Nidhi company's minimum capital requirement of INR 5 lakhs, which was later increased to INR 10 lakhs under the Nidhi Rules of 2014.
· Ongoing issue:
When you own a Nidhi business, no one can take your property until your business is in operation. The Nidhi businesses are entitled to acquire and dispose of property in their names. Also they can have Nidhi Company registration in Chennai.
· Existence unhindered:
A Nidhi business can continue to operate without interruption due to the principle of perpetual succession. It implies that the departure or death of any member has no effect on the business. No matter what kind of membership changes, the Nidhi Company will continue to exist.