Often as an investor people face problems in choosing between Nidhi Company and One Person Company. This write-up will solve the above problem of choosing between them. It will give you an idea about the difference between both of them. If we talk about One Person Company, it is the simplest form of business. In it, business is carried by one person only whereas in Nidhi Company, more than one person can run the business. Nidhi Company is a non-banking financial entity and its prime focus is lending and borrowing of money among its members only. On the other hand, One Person Company means any business that has the features of a company and has only one proprietor. Both the above mention companies are governed by the Companies Act, 2013.

What does One Person Company mean?

One Person Company is mentioned or defined under Section 2(62) of the Companies Act, 2013. As per this section, One Person Company is a company that runs on the name of one person only. As its member it has only one shareholder. It has only one founder or promoter. This type of company is preferred by the new entrepreneurs who want to start their business. Here founder is the sole proprietor of the Company. Before the Companies Act, 2013  One Person Company does not exist. 

Mandatory requirements of One Person Company

1.     As per Section 12 of the Companies Act, 2013 its name must contain “One Person Company” in it. 

2.     Minimum one director is required.

3.     Generally One Person Companies are exempt from annual financial meetings. But when there is more than one director, Section 173(5) of the Companies Act, mandates the company to have met every six months of the calendar year. The minimum space should be of ninety days between the appointments. 

4.     The decision of the meeting is passed when it is signed by the sole member. 

5.     While signing a Memorandum of Association sole person has to make a nominee. This nominee will take over after the sole member. He can withdraw at any time.

Documents required for the registration of the One Person Company

∙       Articles  of Association.

∙       Memorandum  of Association.

∙       PAN Card of the Nominee appointed by the sole owner. It also requires the Aadhar Card. 

∙       Consent of nominee in Form- INC 3.

∙       Registered office proof.

∙       Proof of the proprietorship. 

∙       Authorization letter from the owner. 

∙       Declaration as well as consent proposed under INC-9 and DR-2.

What does Nidhi Company mean?

Section 406 and Section 620A of the Companies Act 2013 define Nidhi Company. As per the Companies Act, 2013 it is a non-banking financial entity. Its main function and objective is borrowing and lending money among its members. The main motto of Nidhi Company is developing the habit of thrift and savings. It is also known as Mutual Benefit Society or Company. It is secure as well as user-friendly. Its primary source of funding is its member themselves. Ministry of Corporate Affairs^[1] will be the governing body of the Nidhi Company. 

Mandatory requirements of Nidhi Company

1.     It must be a public Company.

2.     Lending and borrowing can only be done between the members only. 

3.     The minimum capital required to incorporate a Nidhi Company is 10 lakhs. 

4.     Nidhi Company Registration is mandatory. 

5.     Nidhi Rules are mandatory for this Company.

6.     200 members must be there to start this company.

7.     Deposit of the Company must be 20 times more than the paid-up capital.

8.     10% is mandatory to be deposited as revived in the bank on behalf of the company.

9.     NDH-1 must be filed within 90 days after one year of formation of the company.

10.  NDH-2 for the extension of the date of filing. 

11.  NDH-3 is for the filing related to half-yearly.

12.  Appointment of the auditor is done by form ADT-1.

13.  Form AOC-4 must be filed for the Financial Statements of the Company.

14.  Annual return of the company must be filed with the help of the form MGT-7.

Documents required for Nidhi Company Registration

∙       Article of Association.

∙       Memorandum of Association.

∙       DIN of the Directors.

∙       Documents related to the property.

∙       Rent agreement or lease agreement.

∙       No Objection Certificate of the owner or landlord.

∙       PAN number of all the members of the company.

∙       Address proof of all the members of the company.

∙       Identity proof of all the members of the company is required mandatorily. 

Conclusion 

Both Nidhi Company and One Person Company fall under the Companies Act, 2013. However, Nidhi company is also required to do certain compliances of as stipulated by RBI. The most common difference between these two companies is about its member. Nidhi Company requires at least 200 members whereas One Person Company can be started with one member only. The rest of the formalities to the extent of incorporation of both the companies are almost the same. Nidhi Company is a public Company whereas One Person Company is mostly a private Company. For any type of query regarding these two companies or their registration, you can take help from BizAdvisors.

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