Difference between Nidhi Companies and Co-Operative Society

Nidhi Companies and Cooperative Societies are two common choices for structuring and overseeing financial operations inside a community. Do you want to know how these two differ as well? Go on to read! Let us discuss about Nidhi Company and Co-Operative Society.

What is a Cooperative Society?

A cooperative society is often a collection of individuals who come together voluntarily to cooperate and promote their social, economic, and cultural needs. These communities are based on the principles of mutual and self-help. The primary goal is to help members.

The Cooperative societies need to be registered under the Cooperative societies act, 1912 as a legal entity.

Characteristics of Cooperative Society

The features of a cooperative society are-

• Separate Legal Entity– In order for a cooperative society to function, it must be registered. The cooperative is a separate legal entity from the company and is not affected by the entry or exit of its members.
• Limited Liability– Members of the cooperative have a limited amount of duties. Members’ liability is limited to the amount they have donated.
• No external involvement– Decision-making power rests with the elected management committee. Voting members can choose who will be a member of the management committee.
• Voluntary Membership– Membership in the organization is completely voluntary. An individual has the right to join and leave a cooperative organization at any time. Anyone can join, irrespective of caste, gender or religion.
• Mutual Welfare– The cooperative societies are governed by the principle of mutual welfare and help.

What is a Nidhi Company?

Nidhi company is specifically made to satisfy the financial requirements of people who are part of a specified community, like residents of a certain place or a collection of individuals who have similar interests. In accordance with the Companies Act of 2013, Nidhi must register and acquire an incorporation certificate. This certificate serves as evidence of the company’s legal existence and authorization to operate as a financial institution.

Characteristics of Nidhi Company

The features of Nidhi Company are-

• Minimum capital– A Nidhi company’s minimum paid-up share capital is Rs. Ten lakhs, and it must always be a public company.
• Composition– Three directors and a minimum of seven members are required for a Nidhi Company.
• Membership– One of the things that sets Nidhi apart is its membership system. Members must hold shares in the company in order to be qualified for loans and other financial services from the organization.
• Net-owned funds– A minimum of Rs. 20 Lakhs should be Nidhi’s net owned funds; this would safeguard the organization’s members and ensure that it has sufficient funds to fulfill its responsibilities.
• Ending word– “Nidhi Limited” needs to be added by Nidhi as the last word in the company name.

Nidhi Company vs Cooperative Society

Takeaway

It is important to understand the difference between Nidhi Company and Cooperative Societies. Both play a crucial role, however, they differ in terms of ownership structure, services offered, management and ownership structure. Cooperative societies are organizations for mutual benefit that are owned and managed by its members for their welfare and mutual advantage, whereas Nidhi Companies are non-banking financing corporations that serve only their members.

In case of any query regarding Nidhi Company and Co-Operative Society, a team of expert advisors from Legal Window is here to assist you at every step. Feel free to reach us at [email protected].