Nidhi Company Registration

Nidhi Company is a company registered under the Companies Act, 2013, which is incorporated with the sole objective of encouraging and cultivating the habit of savings amongst its members. Its only objective is to accept deposits and lend money in between its members.

A Nidhi company is a Public Company doing limited financial transactions between its members confined in territorial restrictions. It is regulated by the Ministry of Corporate Affairs under section 406 of the Companies Act, 2013. The Nidhi Company is exempted from the core of the directions and regulations of the Reserve Bank of India Act, 1934 regardless of accepting deposit and lending business.

It is allowed to accept deposits from its members and lend to its members only. Hence, the funds that are contributed to Nidhi company are only from its members and used only by its members.

Main Objectives of Nidhi Company

• Savings: Similar to banks, a Nidhi Company has a right to open Saving Accounts of its members in order to promote and encourage the habit of saving among members.
• Ease of Fund: Just like banks a Nidhi Company can also raise funds. Nidhi Company is the safest way to raise funds from the general public (just by registering them as members) through deposits, RDs (recurring deposits), and FDs (fixed deposits).
• Loan: Nidhi Company is allowed to lend money to its members only. However, they can provide only secured loans to their members.
• Micro Banking: There are many remote areas which still devoid of nationalized banks and NBFs. Nidhi Company is the solution to this, as it can provide rural banking services to these locations.

Why to Choose Nidhi Company

• Easily affordable, manageable, and small amount of investment is required to start a finance business in India.
• A Nidhi company can own property and can also incur debts.
• Change in management – It can be done easily just by filing forms to the Registrar of Companies of the respective state.
• Perpetual Succession – Just like any other company, a Nidhi company being a separate legal entity also have the benefit of' perpetual succession', i.e. it continuous existence and is unaffected by the death or departure of any member until it is legally dissolved.
• A Nidhi company is a juristic person, who can buy, or own property in its name.

Requirements for Nidhi Company

• The name must contain - Nidhi Limited as the suffix
• A minimum paid-up capital of Rs. 20,00,000/- is required
• It can’t issue preference shares.
• At least 3 Directors and 7 Members are required. All directors need to be members of the proposed Nidhi Company.
• The objective of Nidhi Company solely would be to develop the habit of thrift and saving and the services of Nidhi company are only restricted to its members.

• Proof of Address- Bank / Electricity Bill/ Telephone bill/ Mobile bill
• Proof of Identity-voters Identity Card/Passport/ Driving License
• Address proof of company registered office - Rent agreement, Possession letter, NOC, Utility Bills not older than two months)

Step 1: Obtain DSC (Digital Signature Certificate)

• It’s necessary to apply for a Digital signature of the all the director and members before starting the Nidhi company registration.
• The DSC is important as all the documents before submission are required to be digitally signed.

Step 2: Apply for DIN (Director Identification Number)

• The requirement is conditional as the Incorporation Form itself can issue DIN of at least 3 Director. Other than Above, the application for DIN is mandatory for each director.
• The DIN application has to make in Form DIR-3.

 Step 3: Name Approval and its Reservation

• The Nidhi company name approval is an important step in order to establish a company.

RUN (Reserve Unique Name) form is filled for the reservation of the name given by Nidhi company.

Step 4: Preparation of form INC 33 and INC 34

• This step involves the drafting of MOA and AOA. These are drafted under INC 33 and INC 34 respectively.

Step 5: Incorporation of Nidhi limited company

• For the Incorporation of  company, the incorporation forms (INC 33, INC 32, AGILE) are uploaded with SPICe Form. These are to be submitted with Central Registrar of Company.

Step 6: Approval of the documents

• Once the SPICe Form is approved, the registrar provides the company identification number (CIN) along with PAN and TAN of the company

• Financial assistance (can be deposits or loans) with minimum documentation and formalities.
• One can get the loans easily with minimum eligibility criteria
• A Nidhi Company takes funds from its members and further sanction loan to its members only, which suggests that there is no external involvement of the other company or organization in the working process of a Nidhi Company.
• Limited Liability for the directors and shareholders, which suggests their personal assets remain protected and can’t be used to clear the debts of the company.
• Perpetual Successions
• Better credibility

Conditions to be Fulfilled 

The following conditions are to be taken care by the Nidhi Company within one year of its registration 

• Nidhi Company is required to have a minimum of 200 members within one year from its incorporation
• The net owned funds must be 10 lakh rupees or more.
• Unencumbered deposits (free of debt of financial liability) must be 10% or higher of the outstanding deposits
• The ratio of the deposits cannot be over 1:20 times of its net owned funds.

Compliance Have to be Done After Nidhi Company Incorporation 

Nidhi Company is regulated by the Ministry of Corporate Affairs (MCA). MCA has provided a set of guidelines for Nidhi company’s operations which are all mentioned in Nidhi Rules, 2014.

A Nidhi company is a deposit-taking entity and hence requires a higher level of diligence regulatory norms. Consistent with the Nidhi Rules, following are the compliances that are needed to be followed

• Form NDH-1 – Within 90 days after the Closure of the Financial year
• NDH-2 – If a Nidhi Company fails to complete 200 members in its 1st Financial Year then within 30 days from closing of first financial year, is required to file with MCA..
• Form NDH-3- This is for the filling of half-yearly returns, and this is submitted along with CA/CS Certificate
• Board Meetings – Quarterly
• Member Meetings – Annually
• AOC 4 – Need to File-one In a Year
• MGT 7- Once in a Year
• Accounting & Book Keeping – Regularly
• Income Tax Return – by 30th September

Prohibited Activities for the Nidhi Company 

As far as Nidhi companies are involved in the financial transactions, they are prohibited from some activities, which are -

• Chit funds
• Lotteries
• Insurance 
• Unsecured lending
• Leasing Finance and Hire-Purchase finances
• Advertise themselves for deposits
• Sell the assets of its members
• Entering into a partnership firm so as to hold out lending and borrowing activities
• Accepting deposits or lending funds aside from its members

Tax Advice For Nidhi Company:  

Preparing & file business taxes can be complicated. Our expert CA/CS will help you to prepare and file tax forms correctly with a minimal fee and on time for your Nidhi company 

Annual Audits & Compliances For Nidhi Company: 

Our expert CA/CS will complete annual audits and compliances for your Nidhi Company on time.