Procedure for Incorporation of Nidhi Company

Khushboo Sharma

Khushboo Sharma

Published on: Nov 8, 2023

Darshi Dave

Updated on: Nov 8, 2023

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Introduction:

Company refers to a legal entity construed by a class of individuals to conduct business—commercial or industrial and erstwhile becomes a distinct entity separate from its promoters, members, directors, workforce, etc. upon being legally incorporated under the Companies Act, 2013 or any previous Company Law. There are numerous forms to choose from for incorporating a Company such as One Person Company, Private Company, Public Company, Small Company, Section 8 Company, Producer Company, Nidhi Company etc. each of which has its respective pros and cons.

Nidhi Company: Nidhi refers to a company which has been incorporated with the primary objective of developing the habit of thrift and savings amongst its members, receiving deposits from, and lending to its members for their mutual benefits. Nidhi shall be a public company having a minimum paid up equity share capital of Rs. 10,00,000/- (Rupees Ten Lakh Only) and is required to add the words “Nidhi Limited” at the end of its name.

Applicable Provisions:

1. Rule 3A, 3B, 4, 5, 6, 8, 10, 11, 22 of Nidhi Rules, 2014 read with Nidhi (Amendment) Rules, 2022.

Mandatory Requirements:

1. The words “Nidhi Limited” shall be added at the end of its name.
2. Nidhi shall be a public company having a minimum paid up equity share capital of Rs. 10,00,000/- (Rupees Ten Lakh Only) *.
3. Nidhi shall, within a period of 1 year from the date of its incorporation, ensure that it has:
   • not less than 200 members
   • Net Owned Funds of Rs. 10,00,000/- or more
   • unencumbered term deposits of not less than 10% of the outstanding deposits and
   • ratio of Net Owned Funds to deposits of not more than 1:20.
4. A return of statutory compliances in Form NDH-1, shall be filed within 90 days from the close of first financial year after its incorporation and also second financial year, as the case may be.
5. The chosen name should co-relate with the objects to be undertaken by the company.
6. The company shall ensure to own a registered office, within thirty days of its incorporation and at all times thereafter, where all the communications and notices addressed to it can be received and acknowledged.
*Note:
• Every Nidhi existing as on the date of commencement of the Nidhi Amendment Rules, 2022, shall comply with the requirement of having minimum paid up equity share capital of Rs. 10,00,000/- (Rupees Ten Lakh Only) within a period of 18 months from the date of such commencement.
• The provisions of Rule 5 of Nidhi Rules, 2014 shall not be applicable for the companies incorporated as Nidhi on or after the commencement of the Nidhi (Amendment) Rules, 2022.

Procedure:

1. Registration on the MCA Portal:
   The first step to avail incorporation services through SPICe+ Web form is creating a login account in case of new users as under:
   • Click on the ‘Sign In/Sign Up’ option on the top right-hand side of the homepage then click on register button
   • Next select User Category as Business User* and then Select the User Role fill the required login details and click the Create My Account button
   • An OTP will be generated to user’s Mobile number, and after feeding the OTP a registration confirmation shall be sent to the email address of user.
   *Note:
   • Registered User having access to all the basic e-services of MCA and has a password-based login
   • Business User having access to certain specific services in addition to all the basic e-services of MCA available to the registered users and has a Digital Signature Certificate-based login. This category of users covers practicing members of ICSI/ICAI/ICWAI and individuals associated with companies such as Directors, Managers, secretaries, etc.
2. Fill Part–A of the SPICe+ Form:
   • The next step is to reserve the name of the proposed company by filling in the information as under in Part-A of the SPICe+ form:
     • Type, class, category, and sub-category of Company (as per Annexure A)
     • Main Division of Industrial Activity of the Company and description of the main division (as per Annexure B) Select 5-digit NIC codes (user can select maximum 3 NIC codes) In case the user selects more than 1 NIC codes, then he / she shall select one of the NIC codes as primary NIC code to identify the CIN number
     • Proposed names (Maximum 02 names) for the prospective company ensuring that the proposed names do not contain any word prohibited under the provisions of the Companies Act, 2013 and the rules made thereunder
   • Upon filling in all the information as stated above, the applicant shall submit the Part-A of the SPICe+ form choosing either to apply for name reservation separately and pay a fee of Rs. 1000/- (One Thousand Only) or proceed with the company incorporation (Note: Direct incorporation option should be chosen only if the applicant is sure about the availability of its proposed name).
   Note:
   • It is recommendable to attach objectives in detail so that there will be no ambiguity in the mind of the approver while approving the name of the proposed company and No Objection Certificates (NOCs) [in case approval from any Sectoral Regulator is required and had been applied for the proposed name] is mandatory to be attached along with Part A of SPICe+ form.
   • Only one file is allowed to be uploaded as an attachment of a maximum 6MB size for Part-A of SPICe+ form
   • Applicant to ensure that the name chosen for its entity:
     • Does not resemble the name of any existing company or
     • Is not undesirable or does not include the name of a registered trade mark or a trade mark which is subject of an application for registration, unless the consent of the owner or applicant for registration, of the trade mark, as the case may be
     • Does not have such words or expressions that require prior approval of Central Government.
3. Fill Part-B of the SPICe+ Form:
   • The next step in the incorporation procedure is to fill the information in Part-B of the SPICe+ form as under:
     • Details of Company’s Capital Structure
     • Details of Registered Office Address
     • Details of the First Subscribers and Directors
     • Particulars of Payment of Stamp Duty
     • Details about jurisdiction for obtaining Permanent Account Number/Tax Collection Account Number
   • The application for incorporation of a company shall be supported with the following attachments:
     • Memorandum of Association
     • Articles of Association
     • Utility Bill of registered office (not older than 02 months)
     • Declaration by the First Director(s) and Subscriber(s)
     • Subscriber of Memorandum of Association shall nominate a person as a nominee and Consent of the nominee director attached in Form INC-3.
     • Identity and Residential Proof of all the Subscribers (such as Permanent Account Number, Aadhaar Card, Bank Statement, Voter ID, Driving License, Passport)
     • Identity and Residential Proof of Applicant I (such as Permanent Account Number, Aadhaar Card, Bank Statement, Voter ID, Driving License, Passport)
     • Identity and Residential Proof of Applicant II (such as Permanent Account Number, Aadhaar Card, Bank Statement, Voter ID, Driving License, Passport)
     • Rent Agreement duly notarised and NOC from the Owner of the property (in case of rented property)
     • Form DIR 2 and INC-9 (declaration and consent from all the Directors to act in such capacity)
     • Optional Attachments (if any)
   • After attaching all the necessary documents, the applicant shall submit the Part-B of the SPICe+ form.
   Note:
   • In case the number of subscribers and/or directors to e-MoA and e-AoA is up to twenty and all such subscribers and/or directors have Director Identification Number/Permanent Account Number, it shall be mandatory for each one of them to obtain a Digital Signature Certificate
   • First directors not having Director Identification Number or Subscribers having Permanent Account Number shall associate their Digital Signature Certificate under ‘authorized representative’ by providing their Permanent Account Number. Once Director Identification Number is allocated for first directors’ post-approval of SPICe+, Digital Signature Certificate may be updated against Director Identification Number by using the ‘Update Digital Signature Certificate ‘ service
   • In case a body corporate is one of the subscribers/promoters, then the Digital Signature Certificate of an authorized representative be affixed along with the form
   • Declaration by all Subscribers and first Directors in INC-9 shall be auto-generated in pdf format and would have to be submitted only in electronic form in all cases, except where:
     • Total number of subscribers and/or directors is greater than twenty and/or
     • Any such subscribers and/or directors have neither Director Identification Number nor Permanent Account Number
   • In case the person seeking appointment is a national of a country which shares land border with India, necessary security clearance from the Ministry of Home Affairs, Government of India shall also be attached along with the consent.
4. Filing Other Relevant Forms (SPICe-AOA, SPICe-MOA, and AGILE-PRO):
   • The next step in the incorporation procedure is to submit the following forms:
     • Fill the details in the e-form SPICE-AOA
     • Fill the details in the e-form SPICE-MOA. Company shall have object of receiving deposits from and lending to its members only for their mutual benefits
     • Fill the details in the e-form AGILE-PRO for obtaining Goods and Services Tax Identification Number/ Employees’ Provident Fund Organisation/ Employee’s State Insurance Corporation /Profession Tax Registration and Opening of Bank A/c (as may be applicable)
     Note:
     • Registration for Employees’ Provident Fund Organization and Employee’s State Insurance Corporation (if applicable for the applicant) is mandatory for all new companies incorporated w.e.f 23rd February 2020 and no separate Employees’ Provident Fund Organization & Employee’s State Insurance Corporation registration nos. will be issued by the respective agencies. All new companies incorporated through SPICe+ web service (w.e.f 23rd February 2020) would also be mandatorily required to apply for opening the company’s Bank account through the AGILE-PRO linked web form.
     • For main Objects (Field 3(a)), character limit is 20,000 and for furtherance of objects (Field 3(b)), it is 1,00, 000 characters.
     • Companies getting incorporated through SPICe+ with an Authorized Capital up to INR 15,00,000 would continue to enjoy ‘Zero Filing Fee’ concession. Such companies will be levied with only stamp duty fees as may be applicable on state-to-state basis.
5. Upload the Documents for Final Submission:
   • After the completion of filling all the requisite information, the applicant shall convert all the linked e-forms
     i.e., PART-B of SPICe+ form, SPICE-MOA, SPICE-AOA, AGILE-PRO, and INC-9 into PDF format and affix Digital Signatures on them for uploading in the sequence provided as under:
   • After the payment of applicable incorporation fees (as per Annexure D), the incorporation procedure gets completed.
   • Any further changes/modifications to SPICe+ (even after generating pdf and affixing Digital Signature Certificate), can be made up to five times by editing the same web form application which has been saved, generating the updated pdf affixing Digital Signature Certificates and uploading the same.
   • The Incorporation Certificate may be received within 3-4 working days of successful submission subject to Central Registration Centre-Registrar of Company approval.
6. Declaration by Nidhi:
   • Nidhi incorporated under the Act on or after the commencement of the Nidhi (Amendment) Rules, 2019 shall file Form NDH-4 within 60 days from the date of expiry of:
     • 1 year from the date of its incorporation or
     • the period up to which extension of time has been granted by the Regional Director under the provisions of Nidhi Rules, 2014.
   • On and after the commencement of Nidhi (Amendment) Rules, 2022, any public company desirous to be declared as a Nidhi shall make an application to the Central Government in the said Form NDH-4, within a period of 120 days of its incorporation subject to the fulfillment of the following conditions:
     • it has not less than 200 members and
     • it has Net Owned Funds of Rs. 20,00,000/- or more*.
   • Such public company shall attach a declaration with regard to fulfilment of fit and proper person criteria, by all the promoters and directors of the company, along with the Form NDH-4 so filed.
   • The Central Government shall convey its decision within a period of 45 days. If the Central Government fails to convey its decision within the said period, the application of a company is deemed to be approved.
   • If the company fails to comply with this rule, it would be restricted to file form SH-7 (Notice for Alteration of Share Capital) and PAS-3(Return of Allotment).
   Note:
   • Nidhi’s shall abstain from raising any deposits from its members or provide any loan to its members in case it has not complied with the provisions of Rule 3A or that of Nidhi (Amendment) Rules, 2022 or if its application-cum-declaration in Form NDH-4 above has been rejected by the Central Government. In case any deposit is raised after any of the aforesaid non-compliance then it shall be deemed to be raised in pursuance of Chapter V (Acceptance of Deposits) of the Act.
   • The provisions of this rule shall not be applicable to a public company incorporated under the Act before the date of commencement of the Nidhi (Amendment) Rules, 2022.
7. Post Incorporation Compliances:
   • In case the registered address is not provided in SPICe+, then e-Form INC-22 is required to be filed within 30 days of its incorporation, for intimating the registered office address to the concerned authority.
   • The company shall maintain and preserve at its registered office copies of all documents and information as originally filed whilst incorporation process till its dissolution under this Act.
   • Every company that conducts online business or otherwise shall disclose/publish its name, registered office address, Corporate Identification Number, telephone number, fax number, email and name of the contact person in case of any queries or grievances.
   • A statement shall be filed within 180 days of incorporating the company with the Registrar in Form INC 20A along with the charges as might be agreed by a director that each subscriber to the memorandum has share value consented to be taken by them on the date of creation of such an assertion to obtain certificate of commencement of business. In case of Nidhi’s, the decision of the Central Government approving the application filed in Form NDH-4, shall be filed with the Registrar along with Form INC 20A.
   Note:
   Nidhi shall commence its business only once the decision of the Central Government approving its application is obtained, pursuant to the declaration given in the said Form INC 20A above.

Some Noteworthy Points in respect of Nidhi’s:

1. Nidhi shall abstain from:
   • carrying on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate
   • having any object in its Memorandum other than the object of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only for their mutual benefit
   • issuing preference shares, debentures or any other debt instrument by any name or in any form whatsoever
   • opening any current account with its members
   • acquiring or purchasing securities of any other company or 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
   • carrying on any business other than the business of borrowing or lending in its own name
   • accepting deposits from or lend to any person, other than its members
   • pledging any of the assets lodged by its members as security
   • taking deposits from or lend money to any body corporate
   • entering into any partnership arrangement in its borrowing or lending activities
   • issuing or causing to be issued any advertisement in any form for soliciting deposit
   • paying any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans
   • raising loans from banks or financial institutions or any other source for the purpose of advancing loans to members of Nidhi.
2. A minor shall not be admitted as a member of Nidhi but deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.
3. A Nidhi may open up to 3 branches within the district, only if it has earned net profits after tax continuously during the preceding 3 financial years and subject to up-to-date filing of financial statement and annual return with the Registrar. However, in case of Nidhi Companies incorporated before or after 19th April 2022, intending to establish more than three branches outside the district or any branch outside the district, it must submit an application in Form NDH 2 along with the required fee as per the Companies (Registration Offices and Fee) Rules, 2014.
4. A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Funds (NOF) as per its last audited financial statements.
5. Every year, the Nidhi Auditor is required to provide a certificate attesting to the company’s compliance with all of the applicable provisions. This certificate is attached to the audit report, and in the event of non-compliance, the Auditor will specifically list the rules that have not been followed.