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Company Setup
 
Nidhi Company (Mutual Benefit Society)
 
Nidhi Company is a company registered under Companies Act and notified as a Nidhi Company by Central Government under Section 620-A of Companies Act. It is a non-banking finance company doing the business of lending and borrowing with its members or shareholders.

It is a non-banking finance company doing the business of lending and borrowing with its members or shareholders.A minimum of seven members are required to form a mutual benfit/Nidhi company. It must have minimum paid–up capital of Rs 5 lakhs. There is no restriction on maximum number of members. The shares allotted to the members are freely transferable.


These companies can raise funds from general public through open invitations by selling its shares or accepting fixed deposits. These companies are required to write either ‘Mutual Benefit’ or ‘Nidhi’ after their names.. In these Company one director is not responsible or liable for another Director's misconduct or negligence; this is an important difference from that of a partnership form of business organisation. The Liability of Directors are limited to the extent of amount remaining unpaid on shares subscribed by him.

Nidhi Companies can open SB Accounts for its members. There are certain restrictions like a Director can hold office for a continuous period of 10 years only and an Auditor for a period of 5 years.

Nidhi is a company formed with the exclusive object of cultivating the habit of thrift, savings and functioning for the mutual benefit of members by receiving 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. Thus if you want to deposit any amount in a nidhi Company or want to avail a loan from a Nidhi Company, first you have to become a member by subscribing to shares of the Company.

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

Under the existing Law, Nidhi Companies are not allowed to raise deposits beyond Rs. 20 crores. Nidhi Companies, which have deposits beyond Rs. 20 crores on the date of Notification on November 1.1999, cannot accept further deposits. If the deposits exceed the limits as on November 1,1999, the company would cease to be a Nidhi Company. Further , a Nidhi Company cannot have more than three branches in a State where it is registered.

Features:

Can raise small deposits from general public.
Shares are freely transferable.
Better Brand Image.
Limited Liability of Directors.
Perpetual existence irrespective of changes in Directors.
Taxation @ 30%.
Minimum Capital Requirement is Rs 5,00,000.
Company has its own entity distinct from its Directors.

 
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