WHY SHOULD YOU FORM A NIDHI COMPANY?

Nidhi Company is one of the EASIEST WAYS TO JUMP INTO CORPORATE FINANCE WORLD.

Nidhi Company form of business is an easy and simple way to get into the corporate finance world and it is an easy way for a good start-up. As compare to Sole Proprietorship, it is a better option for the start-up as in this form of business liability of members is limited. It is a good platform for incorporating a company form of business having ownership.

BENEFITS OF NIDHI COMPANY:

a. No RBI Regulation

By its nature of the activity, Nidhi Company falls under the NBFC category but does not require approval from RBI. These companies obey Nidhi Laws, released in 2014 with respect to the company's operation and function. RBI has exempted Nidhi Company from observing strict compliances, so you don't have to be in a rush-n-hush as RBI won't bother if you start a Nidhi Company in India.

b.Can easily lend and borrow funds fund from its member

The main objective of Nidhi company is to promote the habit of saving amongst its member which means it is certain and going concern business as the members will not stop savings anytime.

c. Low rate of interest

One can borrow money as a member at a minimum rate, compared to the rate at which banks lend money. This can be a big advantage in times of need, as different individuals in the mutual benefit society would probably need funds at different times.

d. Encourage Saving

It encourages all its members to save money and encourages a sparing lifestyle. After all, a Nidhi Company is a mutual benefit society in which members can lend or borrow money, and accept financial assistance among themselves.

e No external involvement of management

f. Easy transfer of ownership

Essentials for incorporation of Nidhi Company

Pre- incorporation requirement:

➲ At least 7 members at the time of incorporation

➲ Minimum 3 directors should be there

➲ Preference shares are not allowed at the time of incorporation

➲ Objects must specify the receiving and lending of deposits from its member for their mutual benefits.

Post- incorporation requirement:

➲ Within 12 months from the date of registration member size must increase to more than 200 and further member size has to be maintained during the course of time.

➲ There should be minimum net owned fund (Paid-up share + Free reserve) of INR 10 lakh or more

➲ Unencumbered term deposits of not less than 10% of the outstanding deposits

➲ A body corporate or a minor cant act as a member of a Nidhi Company.

➲ Ratio between net owned fund to deposit must be in 1:2