registration of nidhi company [compatibility mode]

8/12/2019 Registration of Nidhi Company [Compatibility Mode]

1/33


2/33

Nidhi Company

In the Indian financial sector, Nidhi Company refers to any mutual

benefit society notified by the Ministry of Corporate Affairs (MCA).

They are created mainly for cultivating the habit of thrift and savings

amon st its members. The amount of business conducted b NidhiCompanies is not as big as commercial banks or deposit taking Non-

Banking Finance Companies. Nidhi Companies are highly localized and

mostly single office institutions. They are also referred to as mutual

benefit societies, because they accept deposits and give loans to only

their own members; and membership is limited to individuals. The

principal source of funds is the contribution from its own members. Theloans are given to the members at relatively reasonable rates for

purposes such as house construction or repairs and are generally secured.


3/33

Although Nidhi Companies have been in operation for long years, there was no

legal definition for them. The Central Government had constituted a committee in

March 2000 called the Shri P. Sabanayagam Committee (Committee)to look

into various aspects of Nidhi Companies. Taking into consideration the manner offunctioning of Nidhis and the recommendations of the the Committee in its report

and also to prevent unscrupulous persons using the word Nidhiin their name

without being incorporated by Department of Company Affairs (DCA)(which

now is the Ministry of Corporate Affairs (MCA))and yet doing Nidhi business,

the Committee suggested the following definition for Nidhi Companies:

Nidhi is a company formed with the exclusive object of cultivating the habit of

t r t, sav ngs an unct on ng or t e mutua ene t o mem ers y rece v ng

deposits only from individuals enrolled as members and by lending only to

individuals, also enrolled as members, and which functions as per Notification

and Guidelines prescribed by the DCA. The word Nidhi shall not form part of the

name of any company, firm or individual engaged in borrowing and lending

money without incorporation by DCA and such contravention will attract penal

action.

A part of this definition is present in the Companies Act, 2013 at Section 406.


4/33

Regulatory Framework

Nidhi Companies are companies registered under Section 620A of the

Companies Act, 1956 (Section 406 of the new Companies Act, 2013) (both

referred together as the Act)and is regulated by MCA. Even though Nidhi

Companies are regulated by the provisions of the Act, they are exempted from

certain provisions of the Act, as applicable to other companies, due to limiting

t e r operat ons w t n t e r own s are o ers mem ers.

Nidhi Companies are also included in the definition of Non-Banking Financial

Companies (NBFC)under the regulatory ambit of the Reserve Bank of India

(RBI). Non-banking financial entities partially or wholly regulated by the RBI

include:

NBFCs comprising equipment leasing (EL), hire purchase finance (HP), loan

(LC), investment (1C) (including primary dealers (PDs)) and residuary non-banking (RNBC) companies;

mutual benefit financial company (MBFC), i.e. nidhi company;


5/33


6/33

A Nidhi company is classified at present as MutualBenefit Financial

Companyby RBI and regulated by RBI for its deposit taking activities

and by DCA for its operational matters as also the deployment of funds.

Nidhi Com anies on account of bein under the re ulator su ervisionof MCA enjoy exemption from core provisions of the RBI Act so as to

prevent regulatory overlap. In relation to compliance with RBI norms,

DCA has vide its Notification dated September 29, 2003 provided that,

Nidhi Companies cant offer interest on fixed and recurring deposits

which exceeds the maximum rate of interest prescribed by the RBI that

the NBFCs can pay on their public deposits.


7/33


8/33

Incorporation procedure of Nidhi

Company

A company is not a Nidhi Company from inception and has to file with

MCA to be granted status of a Nidhi Company. The process for

incorporation is as follows:-

Objects of the company mentioned in Memorandum of Association shall

cover only those activities permissible for Nidhi Companies as

prescribed in DCAsNotification GSR No. 555 (E) dated July 26, 2001

and GSR 308 (E) dated April 30, 2002 (details of are discussed later in

this article);

Upon incorporation of the company, a proposal for application to MCAto declare the company as a Nidhi Company will have to filed to which

extent a board resolution will need to be passed;


9/33

Apply to MCA in Form 63 for declaration as Nidhi Company. The other

documents that need to be submitted along with Form 63 are as follows:-

Certificate from a chartered accountant is required if the company has complied

with the directions contained in the notifications GSR No. 555 (E) dated the July

26, 2001 and GSR 308 (E) and 309 (E) dated the April 20, 2002;

Certificate from a chartered accountant regarding whether the ratio of loan on

immovable property is within the prescribed limit;

Copy of resolution of the board of directors in support of the proposal of the

company for recognition as a Nidhi Company;

Certificate signed by two directors regarding the number of members as on the

date of application (membership should not be less than 500 at any time)

Certificate from the auditors of the company to the effect that the company has

complied with the directions of MCA issued from time to time and has

maintained its books of account according to the recognised principles of

accounting; and

Any other information can be provided as an optional attachment.


10/33

Non-Permissible activities for Nidhi

Companies

Pursuant to Notifications GSR 555 (E) dated July 26, 2011 and GSR 308 (E)

dated April 30, 2002, MCA directed Nidhi Companies to not carry out certain

activities such as:-

Carrying on the business of chit fund, hire purchase finance, leasing finance,

insurance or acquisition of shares or debentures issued by any body corporate

except the shares of another Nidhi Company, if specifically permitted by MCA;

Opening any new current account with its members;

Admitting as member, any body corporate or trust;

Issuing any equity share of nominal value less than rupees 10/- except in case of

Nidhi Companies incorporated on and after July 26, 2001:

Levying service charge for issue of shares to members;

Making any preferential allotment of shares to any persons or group of persons

but shall make only rights issue of shares and the unsubscribed portion can be

apportioned by the Board of Directors.


11/33


12/33

Post Compliances

Once the company receives status of Nidhi Company and start operating

as one, it shall:-

Ensure that its membership is not reduced to less than five hundred

Obtain certificate every year from the statutory auditors certifying that it

has complied with the directions specified in this notification and has

maintained its books of account according to recognised principles of

accounting; and

Ensure that its Net Owned Fund (excluding the proceeds of preference

share capital) is not less than ten lakh rupees or such amount as theCentral Government may specify from time to time.


13/33

Branches of Nidhi Company

A Nidhi Company has to satisfy certain criteria as provided by MCA to

open branches which are as follows:-

Nidhi Company may open up to three branches within a revenue district

Nidhi Company may open beyond three branches outside the revenue

district subject to above condition and prior permission of MCA; and

Nidhi Company cantopen branches or collection centres or offices or

deposit centres, by whatever name called, outside the state of its

Registered Office.


14/33

Deposit Ceiling

A Nidhi Company may accept deposits not exceeding twenty times its

Net Owned Funds (NOF)as per last audited balance sheet subject to

certain NOF to deposit ratio exceptions provided in MCAsNotification

GSR 308 E dated A ril 30 2002. Net Owned Funds as defined by MCA means the aggregate of paid up

equity capital and free reserves as reduced by accumulated losses and

intangible assets appearing in the last audited balance sheet of the

company. A reserve shall be considered as a "free reserve" if it is

available for distribution as dividend. Further, the amount representing

the proceeds of issue of preference shares shall not be included forcalculating Net Owned Funds.


15/33

Accounts

Subject to the aforesaid limits, a Nidhi Company can only open the

following types of accounts:-

Fixed Deposit Account: Fixed deposit account can be opened for a

Recurring Deposit Account: Recurring deposit account can be opened

for a minimum period of 12 months and maximum period of 60 months,

provided that in the case of recurring deposits relating to mortgage

loans, the maximum period of recurring deposits shall correspond to the

repayment period of such loans granted by the Nidhi Company; and

Saving Deposit Account: The maximum balance at any given timequalifying for interest shall not exceed INR 20,000/- and the rate of

interest shall not be more than 2% above the rate of interest payable on

savings bank account by nationalised banks.


16/33

Consult the Experts

Complete assistance for making the necessary filings,

applications etc. for obtaining MCAsapproval to operate

as Nidhi Company.

Informal discussion with contact ersonnel within MCAso as to perfect the application before the same is

submitted.

Follow up support at various points in time during and

after the pendency of the application so as to ensure that

any additional documents/records requested by MCA is

submitted in a systematic and timely manner.

Updating Company on a regular basis as to the status of

the pending application.


17/33


18/33

About Us

Equi Corp Associates (ECA) is a mission driven, start-up law practice based in New

Delhi, India and founded in 2012 for providing affordable access to legal counsel

benefitting start-ups, small and growing businesses, social business enterprises, impact

investors and non-profit organizations. Our boutique service offerings are primarily at the

intersection of start-up, sustainable development, social enterprise and investment

sectors, designed to help clients wade through laws that were not originally designed

with them in mind.

The basic idea behind starting ECA was to be a part of Indias growth by reaching out to

novel start-ups and established businesses, and helps them adapt best global

practices/technologies in local conditions and in advising them about legal aspects

involved in modern markets in order to keep our clients in pace with the dynamic

competitive environment.

ECA is instrumental in advising various social enterprises and start ups in setting up

their business in India.

ECA not only having some of the best legal minds, but the best business minds too:

lawyers are intimately familiar with the business environment, and know the emerging

risks and opportunities of their industries and practice groups.


19/33

ECAs Network Presence

Delhi/NCR

Dehradun

Jaipur Allahabad Guwahati

Mumbai

Bangalore

Our Associated

Office

Kolkata

Hyderabad

Chennai

ECA


20/33

WHY Equi Corp Associates??

ECA is a multispecialty law firm, with its founding partners having a vastexperience for providing legal services to a variety of domestic & internationalclients, corporations, financial entities & government agencies.

Our respected clients - from individuals to small businesses to Fortune 500companies -- turn to us for trusted legal counsel.

ECA is equipped with required professional setup of Qualified, Experienced and

now e gea e mem ers. We advise and assist NRIs/PIOs, Foreign Investors and Indian entrepreneurs

with legal services that enables them to compete with best in world in themodern economy characterised by technology based, venture capital funded,futuristic businesses governed by complex and ever evolving legal andstatutory framework.

ECA is also effective in providing match making partner/locating strategicalliance, follow up and representation with Government of India or any other

incidental work related to investment or legal guidance in India.


21/33

The Verticals

Corporate & Commercial

Banking & Finance

Real Estate

Infrastructure & Project Finance

Employment & Labour

Media, Sports & Entertainment

Litigation & Arbitration

Tax & Consulting

Intellectual Property

The Firm specializes in verticals such

as IT, ITES, Bio-tech, Power, Water,

Retail Trade, Education, Mining,

Aviation, Tourism, Insurance,

Telecom, Media & Entertainment


22/33

Corporate & Commercial Services

Foreign Investment in India / Abroad

Drafting and vetting of Joint Venture Agreements, Corporate

Agreements, Management Agreement, Cross border transaction

agreements etc.,

Compliance Audit, Due Diligence & Transaction Advisory;

Formation & structuring of business entities;

Mergers & Acquisitions & Private Equity;

Competition & Fair Trade Practice;

Corporate Governance & Restructure;

Venture Fund, Mutual Fund, RE Trust Funds.


23/33

Banking & Finance Services

Credit Co-operative & Financial Institutions;

Quasi Banks & Nidhi Companies;

Urban Credit Co-operative Banks;

Micro Finance Institutions;

Banks & NBFCs and other Financial Intermediaries;

Alternative Investment Funds;

Real Estate Finance including Collective investment

Schemes;

Structured & Asset Finance;

National Pension Scheme

Securitization;

Debt recovery


24/33

Real Estate Services

Title Search & Property transactions Joint ventures in Real Estate

Build to suit campuses

Development of Technology Parks,

Integrated Townships, Warehouse &

Lo istics Parks SEZ HotelsMultiplexes Entertainment Centres,

Slum Developments, Rehabilitation

Projects etc.

Sale deeds

Lease, Leave and License Agreements

Gift deeds

Mortgage & Finance Agreements


25/33

Infrastructure & Project Finance Services

Transaction Advisory: Energy, Oil and Gas, Highway, Road,

Airport, Ports, Water & Sanitation and Telecommunications

Drafting, negotiations and review of financing & security

Tender Documents, Bidding process, PPP, Concession

Contracts, PPA, EPC Contracts

Government Approvals & Liaisoning with statutory

authorities

Structuring, negotiation & documentations of projects


26/33

Employment & Labour Services

Appointment/Offer letters, Termination practices

Employee Stock Option Plan

Labour Compliance

Service Bonds

Standing Orders & Service Rules

Migration & Emigration of Employees

Country specific employment relation

Grievance Settlement Procedures


27/33


28/33

Litigation & Arbitration Services

Commercial Litigation

Recovery/Enforcement

Civil Litigation

Medical Negligence

IP Litigation

Arbitration

White Collar Crimes

Economic Offences

Bankruptcy/Insolvency

Criminal Litigation


29/33

Tax & Consulting Services

Company Secretarial Services:

- Incorporat ion of comp anies/branches/ l iaison

off ice/represent ative off ice

- a n enance o ecre ar a ecor an recurr ng

secretarial services

- Regis t rat ion wi th Statutory Author i t ies inc luding

Incom e Tax,RBI,EoU, STPI, Custom B ond ing, Central Excise etc.

Accounting & Payroll Services

Tax and Regulatory Services

Advising on Customs & Excise matters

Immigration Services


30/33

Intellectual Property Services

IP Portfolio Management

IP Auditing

IP Strategic Alliances

Licensing

Technology Transfer Agreements

Search, drafting, filing and prosecution in :

Patents

Trademarks Copyrights

Industrial Designs


31/33

Our Commitment

Value

One stop legal boutique where assignments carried out at a fraction of

the cost of clients staff

Reduce client staff management time and overhead costs, and increase

clients profitability

Enable clients staff to concentrate on more interesting and value-added

Service

Robust management and procedures to ensure delivery on time and on

budget

Dedicated one-to-one communication with client, to ensure every

project is right first time

Full service delivery is achieved by synergies of subject matter

expertise of our in-house Lawyers, Chartered Accountants, CompanySecretaries and Tax Consultants

Quality

Two-level file review and signoff by expert Lawyers, even for the

smallest assignment


32/33

Our Core Strengths

Dedicated team of legal professionals with strong deal exposure andknowledge of regulations of various sectors.

Proactive and structured approach

Well defined rocesses

Well defined Project methodology tailored to suit the needs of clients forservice delivery

Talented team with experience of working with some of the largestcompanies in India exposure to leading cross border transactions in India

Experience & proven capabilities to handle Diversified Multi-national Clientsi.e. Information Technology, Energy, Manufacturing, Consultancy, Oil & GasSector, Retail Trading, Hospitality, Restaurant and related sectors.

Competitive advantage of costing by virtue of expertise and experiencedresources.


33/33

For further information

Contact :

Aashish Srivastava

Partner

Equi Corp AssociatesAdvocates & Solicitors

W-86, Classic House, GK-II, New Delhi

T: +91 11 40573261

Mobile : +919958709189

E-mail :[email protected]