A Nidhi Company is a Non-Banking Financial entity providing small scale borrowing and lending services to its members. The Ministry of Corporate Affairs registers it as a Private Limited Company.
Due to these factors, the checklist for establishing a Nidhi Company is longer than most business entities.
Thus, in this article, we will look at the several checklists you must keep in mind before, during, and after Nidhi Company registration in India. Read More: Startup Registration
Checklist 1: What to keep in mind before incorporating a Nidhi Company in India?
Before Nidhi Company Registration in India, you must keep in mind the following checklist:
- Cultivating the habit of saving should be your primary goal: Remember that generating profits isn’t the primary goal for a Nidhi company. It is to help lower-income group individuals save money for a better future. If you divert from this path during your business, the Ministry of Corporate Affairs can take away your monetary rights.
- You will have several identities in India: Even though a Nidhi Company is a crucial business entity, people don’t know it as such. Among the fintech entrepreneurs, Nidhi companies have names such as Mutual fund companies, Permanent fund companies and more.
- Some activities of a Nidhi Company come under the purview of the RBI: Since a Nidhi Company is a business entity that comes under the NBFC category, certain activities it partakes in – including deposits – come under the purview of the Reserve Bank of India. However, that does not mean that a Nidhi Company requires an additional NBFC license from RBI.
Checklist 2: What to keep in mind during the process of Nidhi Company registration?
During the procedure of Nidhi Company registration, the facts that you must keep in mind are as follows:
- Minimum members should be present: You need at least 200 members to incorporate a Nidhi company.
- Maintain net-owned funds to deposit ratio: The deposit you keep in your Nidhi company should be 20 times more than its net owned fund.
- Should have an adequate amount of burdenless deposit: The burdenless deposit in your company should not be less than 10% of your outstanding deposit.
Checklist 3: Things that your Nidhi Company do not have permission to do
Following is a list of activities that a Nidhi Company does not have the authority to do:
- No Nidhi company can conduct the business of chit funds, hire purchase finance, leasing finance, or acquire securities. Read More: Producer Company Registration
- A registered Nidhi company cannot issue preference shares or debts.
- Open a personal account with a member of strictly forbidden for a Nidhi Company.
- No Nidhi Company has permission to accept deposits from a person other than the members.
- Even though a Nidhi Company is a separate legal entity, it can’t enter into a partnership agreement with another entity to expand its lending and borrowing activities.
- A Nidhi Company cannot make any changes to its infrastructure before informing the Ministry of Corporate Affairs about it.
Conclusion
Before incorporating a Nidhi Company, you should learn about its purpose. During the incorporation procedure, you must familiarize yourself with the structure of the Nidhi Company.
Once you have incorporated your Nidhi Company, you must keep in mind the rules and regulations to ensure that your business persists for a lengthier period. Read More: Common Documents required to obtain the Non Network License
Nidhi company registration inculcates the habit of money-saving among the lower-income class. This article specifies the Nidhi Company checklist to start and operate this business entity.