Registration of Nidhi Company [Compatibility Mode]
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Transcript of Registration of Nidhi Company [Compatibility Mode]
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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.
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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.
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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;
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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.
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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;
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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ECAs Network Presence
Delhi/NCR
Dehradun
Jaipur Allahabad Guwahati
Mumbai
Bangalore
Our Associated
Office
Kolkata
Hyderabad
Chennai
ECA
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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.
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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
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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.
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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
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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
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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
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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
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Litigation & Arbitration Services
Commercial Litigation
Recovery/Enforcement
Civil Litigation
Medical Negligence
IP Litigation
Arbitration
White Collar Crimes
Economic Offences
Bankruptcy/Insolvency
Criminal Litigation
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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
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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
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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
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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.
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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]