Non-banking financial company (NBFC) has got many branches and one such branch of it goes with the name “Nidhi Company”. The main reason behind its existence was to serve the purpose of:
- Accepting deposits and
- Lending money to its members.
The concept of Nidhi companies emerged in India in the year 2000. Since then, they have become a popular way for small groups of people. This community can now:
- Pool their resources and
- Create a source of funding for their mutual benefit.
The Ministry of Corporate Affairs (MCA) regulates such a type of company. The process of registering a Nidhi company can be a complex one. In this article, we will discuss the steps involved in registering a Nidhi company in India.
Its Working and Benefits
A Nidhi Company is a type of non-banking financial company (NBFC) that primarily deals with lending and borrowing activities among its members. Setting up a Nidhi Company involves obtaining a certificate of incorporation, fulfilling the minimum capital requirements, fulfilling the minimum membership requirements etc.
The benefits of a Nidhi Company include providing financial assistance to its members. Members can also benefit from attractive interest rates on their deposits and loans. As a regulated entity, Nidhi Companies provide a secure and transparent environment for financial transactions.
Step 1: Get Digital Signature Certificate (DSC)
The first step towards registering a Nidhi company starts with Digital Signature Certificate (DSC). One can sign documents online with the aid of this signature. The government-approved agency holds the responsibility to verify the details. Agencies that the government operates imposed some conditions for the same. It is now mandatory for all directors of the company to get a DSC. And that too before proceeding with the registration process.
Step 2: Director Identification Number (DIN) Requirement
Director Identification Number (DIN) acquisition is of great importance. The proposed directors here again play a vital role in providing such numbers. A DIN is a unique identification number that is assigned to every individual. The condition is that he/she wishes to become the director of a company in India. The Ministry of Corporate Affairs (MCA) monitors the issuing process. It is again mandatory for all company directors to apply or hold the same. There is a need to get whatever this blog mentions and that too before the registration process.
Step 3: Apply for Name Approval
The next step is to apply for name approval for the Nidhi company. The name that company can take must be:
- Unique and
- Not like any existing company or trademark in India.
- Last words of the company must be ‘Nidhi Limited’
The name should stick to the guidelines laid down by the Ministry of Corporate Affairs (MCA). Once the name gets approved, the company can proceed with the registration process.
Step 4: (MOA) and (AOA) Drafting
The process lies with the submission of a Memorandum of Association (MOA) and Articles of Association (AOA). These are termed legal documents. It provides knowledge towards:
- Rules and regulations of the company
The mentioned documents need verification. The reason behind this is to check whether these adhere to the guidelines laid down. Everyone including the proposed directors of the company is obliged towards signing it.
Step 5: Filing of Form INC-32
The next step is to file Form INC-32 with the Registrar of Companies (ROC). It is also known as the Simplified Proforma for Incorporating Company Electronically (SPICe). It is a single form that combines the following clauses:
- The application for DIN,
- Name approval and incorporation of the company.
There must not be any error while filling it. There might be consequences which are hard to solve if the credentials are wrong. Keep the necessary documents a priority as any registration involved considers it primary.
Step 6: Filing of Form INC-33 and INC-34
Along with Form INC-32, the company should also file the mentioned forms:
- Form INC-33 (e-Memorandum of Association)
- Form INC-34 (e-Articles of Association)
These forms need to follow the prescribed format as laid down under the guidelines. Again, all directors must sign it thoroughly after going through the same.
Step 7: Obtaining a Certificate of Incorporation (COI)
Once all the forms and documents are submitted, the Registrar of Companies (ROC) will review the application. If there are no errors and difficulties and everything is in order you are doing great. The Certificate of Incorporation (COI) will now get issued to your company. This official document:
- Contains the company’s CIN (Corporate Identification Number),
- Date of incorporation and
- Other relevant information.
It is the final step in the process of registering a Nidhi company. The last steps comprise the application for:
- Permanent Account Number (PAN) and
- Tax Deduction and Collection Account Number (TAN)
The Income Tax Department of India holds the authority to provide this permanent account number to the candidates who have applied for the same. The same is necessary for all entities that engage in financial transactions to have a PAN. Whereas, TAN is a unique identification number that the Income Tax Department of India provides. It is basically for entities that deduct or collect tax on behalf of the government.
Registering a Nidhi company in India can be a complex and time-consuming process. It becomes important for the company to showcase that the same:
- Operates legally
- Complies with all the regulations laid down by the Ministry of Corporate Affairs (MCA)
The process involves:
- Obtaining a Digital Signature Certificate (DSC)
- Director Identification Number (DIN)
- Applying for name approval, drafting the Memorandum of Association (MOA) and Articles of Association (AOA)
- Registrar of Companies (ROC) will guide towards the document filling process.
- Obtaining a Certificate of Incorporation (COI), and applying for PAN and TAN
Follow these steps and ensure that all the necessary documents and forms are:
- Submitted without any errors
- On time
These are must to register a Nidhi company successfully. After the same is done you can begin operations as a legally recognized entity in India.