What is the difference between Private Limited, Section 8 & Nidhi Company?

Differences between Private Limited, Section 8 & Nidhi Company

This article contains the basic difference between Private limited, Section 8 & Nidhi Company in terms of their basic definitions, minimum requirements for registration, and documents required for each of these forms of entities.

Definition

First, let us understand what are these companies and how do Privately limited, Section 8 & Nidhi Company differ in their basic definition:

What is a Private Limited Company?

A private limited company is a small business entity that is privately held. This is a  type of business entity that limits owner liability to their shares, limits the number of shareholders to 50, and also restricts the shareholders from trading of shares publicly. These are generally formed for trading and business purposes. These are profit-making entities.

What is a Section 8 Company?

In India, a non – profit organization that is often known as NGO can be registered as a Company under Section 8 of the Companies Act, 2013 (worthwhile Section 25 of the Companies Act, 1956) and it can also be registered as a  Trust and a Society. Section 8 Company format of an NGO is the most popular form of NGO in India. It is, however, easy to register, run, or manage a Section 8 Company in comparison to a Trust and a Society.  This, however, enables the government to register any association who has charitable objectives such as to promote sports, commerce, art and culture, education, research, etc as a limited company, without adding the words ‘Pvt. Ltd.’

What is a Nidhi Company?

Nidhi Company is one of the categories of a Non-Banking Financial Company (NBFC) that does not require any of the  Reserve Bank licenses. It is recognized under section 406 of the Companies Act 2013. The Nidhi Company is very easy and cheap to form to register. They basically borrow and lend money to their members. They are also called Benefit Fund, Mutual Benefit Fund.

Minimum Shareholders and Directors Required

Companies Act 2013 has stipulated the minimum number of Directors and Shareholders for each of these types of companies. Required minimum number of Directors and Shareholders in Private limited, Section 8 & Nidhi Company are:

Private Limited Company

To register a private limited company, a minimum of 2 shareholders and 2 directors are required. A natural person can, however, be both a director and a shareholder, while a corporate legal entity can only be a shareholder.

Section 8 Company

However, in section 8 company, there must be a minimum of 2 shareholders and 2 Directors, whereas the directors and shareholders can be the same person. At least one of the directors shall be a  resident of India.

Nidhi Company

In a Nidhi company, it is to be seen that a minimum of 3 directors and 7 shareholders are required to start a limited company incorporation process.

Minimum Capital Contribution

At the time of company registration, the capital contribution is made by each of the promoters. To ensure that a company has funds to carry on business activities basic minimum capital contribution amount is fixed by the government. Minimum capital contribution for Private limited, Section 8 & Nidhi Company are

1. Private limited company: Minimum Authorized Share Capital shall be Rs. 100000 (INR One Lac).
2. Section 8 company: No minimum requirement of capital has been specified.
3. Nidhi Company: Minimum paid-up equity share capital of Rs. 500000 is required.

Documents required for Registration

The documents that are required for registration of the private limited company are:

• A Coloured PP Photograph
• PAN Card which is to be  Self Attested
• An Identity Proof – Any One Self Attested
  (Driving License / Passport / Aadhar Card / Voter ID Card)
• The Address Proof – Any One Self Attested
  (Latest Bank Statement / Electricity Bill / Telephone Bill / Mobile bill)

The documents that are required for registration of section 8 company are:

• Anyone of the Identity Proof (Voter ID/Aadhar Card/Driving License/Passport); A Passport is a mandatory requirement for proof of identity in case of the foreign nationals;
• Anyone Proof of Residence be it an Electricity Bill/Telephone Bill/Mobile Bill/Bank Statement
• The Registered Office address proof be it a rent agreement along with the latest rent receipt and a copy of the latest utility bill in the name of the landlord and also a no-objection certificate from the owner of the premises, in case the premises are rented
• In case the premises in which the work is carried out are owned by a Director and Promoters, any of the documents establishing the ownership such as a Sale Deed/House Tax receipt, etc is required along with the no-objection certificate.

The documents that are required for registration of  Nidhi company are:

Documents required for registration as Members are –

• PAN Card
• An Identity Proof – (Voter ID, Passport, Aadhaar Card, DL – Anyone)
• An Address Proof which can either be a Bank Statement/Passbook, Electricity Bill, Telephone Bill, Mobile Bill. anyone amongst the Should not be older than two months.
• A Passport Size Photograph

The documents that are required for Registered Office are as under:

• If the premises are on rent: Rent Agreement + Utility bill + Signed NOC
• If the Premises are owned: Ownership Proof + Utility Bill + Signed NOC

Conclusion

There is a huge difference between the Private limited, Section 8 & Nidhi Company. Every type of company is useful in its own aspects.

For more information regarding the registration process, you can visit Company Registration Online today.

Why opt Private Limited Company over LLP