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Nidhi Company

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A Guide to Nidhi Company & Registration Process

A Nidhi Company works on the principle of mutual benefits. Such a company can only borrow an amount and lend an amount from its members who also act as the shareholders. Members can access loans at better interest rates. On the one hand, such a company is governed by the Companies Act, 2013. On the other hand, it must follow the Nidhi Rules, 2014.

What Is Nidhi Company?

A Nidhi Company is a specific type of non-banking financial company (NBFC) established in India. It promotes savings habits among its members. Nidhi in Hindi means ‘treasure.’ Unlike regular banks, it does not require a license from the Reserve Bank of India (RBI) but RBI might oversee its activities related to the deposits.

A Nidhi Company in India has certain tax exemptions and relaxed annual compliances. However, it must add ‘Nidhi Limited’ t its name and get registered as a public limited company.

What is Nidhi Company Registration Process?

Nidhi Company registration in India resembles the registration process of various other companies. However, if you are looking for what is Nidhi Company registration process, you must be ready with the mandatory documents required for registration of Nidhi Company and check the Nidhi Company compliances.

Step 1:

You need to have a minimum of seven members (individuals or companies) to initiate the registration process. Out of them, three should be the directors.

Step 2:

All directors and members, as proposed in the Memorandum of Association (MoA), should possess the DSCs and DINs (only for the directors).

Step 3:

Submit a name reservation request through the SPICe RUN form on the MCA portal.

Step 4:

Prepare an MoA and AoA to clarify the objectives and operational rules for your company.

Step 5:

Fill the Form NDH-4 to declare your company as ‘Nidhi.’ Your application will be checked by the Central Government and you will get the license if they accept your application. Rejection of the application means no authority with your company to start lending and borrowing.

Step 6:

Once your application is approved, your company will receive a Certificate of Incorporation, marking the official registration.

Step 7:

Open a Nidhi bank account using the Articles of Association (AoA), MoA and certificate of incorporation. Besides that, also apply for a PAN and TAN.

Documents Required for Registration of Nidhi Company

MoA and AoA.
DSC, identity proofs, address proofs, copies of PAN Card, passport-size photos and DIN of all members and directors.
PAN and TAN of the company.
Address proof of the registered office.
Ownership proof of the office and NoC (if required).

You may return to the Nidhi Company registration in India if you have all the documents required for registration of Nidhi Company.

Are You Still Struggling with the Nidhi Company Registration? Here’s a Reliable Solution.

Nidhi Company Rules

It is easy to get confused with the definition of a Nidhi Company. Thus, here is a set of Nidhi Company Rules to explain how it stands out:

You need at least eight people for incorporation of a Section 8 Company.
It differs from a chit-fund, securities business, an insurance company and a leasing or hire-purchase financial structure.
It cannot offer insurance services.
The company has a minimum share capital of Rs. 5 lakhs (USD 5,976) for an establishment.
No investors or creditors from outside the company and no insurance services are allowed.
It cannot advertise itself asking its members to deposit money.
It cannot use assets as security as per the Nidhi Company Rules.
It should open only savings accounts and not current accounts to the members.
It cannot borrow or lend money to and from other companies.
It cannot provide any brokerage and cannot perform activities other than borrowing and lending money to its members.

Nidhi Company Compliances

Annual compliance and taxation are mandatory. Besides that, the following are the Nidhi Company compliances:

You may file the financial statements with the ROC via the AOC-4 Form.
The MGT-7 form will help your company’s annual return details.
The NDH-1 form simplifies the statutory compliance return for your company.
The NDH-2 form will help in the extension of approvals and time. This form is for sending an application to the regional director for the same.
The NDH-3 form is to be filled out for filing the Nidhi Company’s half-yearly returns.

The complexities of Nidhi Company compliances can be significant. Thus, reaching out to a reliable consultant might be beneficial to you.

Benefits and Challenges to Section 8 Companies in India

ADVANTAGES	DISADVANTAGES
The members develop a habit of saving.	It does not help the outsiders.
Relatively simple registration process.	The minimum net owned fund is Rs. 20 lakhs (USD 23,905).
Flexible regulations compared to banks.	Cannot borrow from banks.
It has fewer compliance requirements than banks.	You must fill out some forms specific to the Nidhi Company.
The financial needs of the members are met here.	It has limited growth potential and cannot attract diverse members.

Conclusion

Do not get confused between what is Nidhi Company, chit-fund, insurance companies and related financial groups. It meets the financial needs of its members but to a certain extent and has limited growth opportunities. It has a simple registration process but tedious compliances which can be easily done by reaching out to a reliable consultant in India.

FAQs

When Does a Depositor Get an Interest on the Deposit in a Nidhi Company?

The depositor gets an interest only after six months of the deposit.

What Are the Rules for Getting a Loan from a Nidhi Company?

The loan a member can get depends on the total amount of deposit that the members make. For instance, the loan can range from Rs. 2 lakhs (USD 2,390) to Rs. 15 lakhs (USD 17,928).

Who Imposes Regulations on the Nidhi Companies?

Nidhi Companies should follow the regulations imposed by the Reserve Bank of India (RBI).

What Are the Objectives of a Nidhi Company?

The objectives of the Nidhi Company are micro banking, loans, ease of funds and savings.

Which Act Does the Nidhi Company Follow?

Nidhi Companies follow The Companies Act, of 2013, and come under Section 406.