Nidhi Company

What is Nidhi Company? Know it’s Registration Procedure

calendar21 Nov, 2019
timeReading Time: 5 Minutes
Nidhi Company Registration

One can easily fall short of financial goals if they don’t have the habit of saving money. Money is such a treasure which can easily slip off through the cracks before you realize it. And hence, it is essential to develop the habit of savings and make it your nature. Whoever wants to cultivate the habit of money saving can opt to become a member of Nidhi Company as it confines to its members and shareholders only. Nidhi Company is a mutual benefit society and is exempted from the core provisions of the RBI Act, 2013. The procedure of Nidhi Company Incorporation is quite lengthy and requires certain eligibility criteria. Let’s have a look at the entire concept of Nidhi Company Registration.

What is Nidhi Company?

Nidhi Company is the class of the NBFC Company which has been incorporated for the mutual benefits of its members. It is recognized under section 406 of the Companies Act, 2013[1]. No License is required from the RBI, unlike the NBFC (Non- Banking Financial Companies). Also, it does not require any background check or verification for registering a Nidhi Company. They take deposits from their members and lend it to their members only. Therefore the fund rests in the company itself and is used among the shareholders of the company. And this is why these companies cannot deal with anybody other than its members.

Why choose Nidhi Company?

  • These companies are helpful for the lower and middle classes.
  • There is no external involvement in management.
  • Minimum documents and formalities make things easy for registering a Nidhi Company.
  • The investment is secured, and there is a low rate of interest.

Benefits of having Nidhi Company

  • There is no requirement of minimum share.
  • It becomes easy for Nidhi Company to get funding from group members, and at the same time, lending is also easy.
  • There is an easy transfer of ownership.
  • Lower rate of interest and secured investment.
  • Exemptions and Privileges under Companies Act, 2013
  • No Stamp Duty and relaxation in Compliances

Think before selecting the name in Nidhi Company

  • One must be careful while choosing the name of the Nidhi Company. It must be easy to attractive and relevant.
  • Short and meaningful.
  • It should not be illegal and offensive. The name of the limited liability partnership company (LLP) should not be against the law. It must not contain any such words or phrases which can harm the sentiments of a particular community.
  • The company’s name should not be identical to an existing LLP or company or trademark or for which a trademark has been applied for.

What is the Registration Requirements of a Nidhi Company?

The following are the pre and post registration requirements of a Nidhi Company:

Pre-Registrations Requirements of a Nidhi Company:

  • The minimum number of members and directors required is 7 and 3 respectively.
  • There is no minimum capital requirement.
  • No preference shares are allowed to be issued at the time of incorporation. In case, before the incorporation procedure, the company has issued the preference share, then those shares must get redeemed as per the terms of the issue.
  • The minimum authorised share capital required for running a Nidhi Company is INR 5 Lakhs.
  • The last word of a Nidhi Company must be Nidhi Limited.

Post-Registration Requirements of a Nidhi Company:

  • Minimum 200 members should be there in the company within 12 months of registration. It has to maintain the requirement of 200 members during the course of time. If anytime thereafter the strength falls below 200, the company will be a default. In case if the company is unable to reach the limit of 200 members, then the company must apply for the registration within 30 days of closure of the financial year in form NDH-2 with regional directors, Ministry of corporate affairs.
  • There should be a minimum net owned fund of 10 lakh or more.
  • There should be at least 10% of the outstanding deposits.
  • The company must not make body corporate, trust, or minor as a member.
  • The ratio of Net Owned Funds to deposits should be 1:20.

For example – If you have a net owned fund of 10 lakh, then your total deposit limit should be two crores.

Documents checklist for the incorporation of a Nidhi Company

For the Members and Shareholders

  • PAN Card copy
  • Passport size photograph.
  • Bank statements and bills like electricity and telephone bills.

Proof of Registered office

  • Copy of Rent Agreement of office premises
  • Copy of latest Electricity, water, telephone bill of registered office
  • No Objection Certificate(NOC) from the landlord.
  • Proof of Registered office

Procedure of Nidhi Company Registration

  • Applying for DIN and DSC

 The Directors of the Nidhi Company shall apply for DIN (Director’s Identification Number) and for DSC (Digital Signature Certificate). MCA issues the DIN and the DSC is a digital signature that will be used for all the e-filing processes.

  • Name Approval

For Nidhi Company name approval the person applying shall choose and suggest 3 different names for the company to the MCA. Only one will be accepted out of these 3 names by the MCA. The proposed name has to be unique and should not match with the names of other companies that are already registered and the approved name shall remain valid for 20 days only.

Any company which proposes to be Nidhi Company must have last words as Nidhi Limited as part of its name. After this, one doesn’t require the digital signature of the applicant for name availability.

  • File Form SPICe32 (Simplified Performa for Incorporating Company Electronically)

After the name approval, File form SPICe32 can help the company with a single application for reservation of name. File form SPICe 32 with the following attachments for the incorporation of Nidhi Company.

  1. Memorandum of Association.
  2. Articles of Association.
  3. PAN Card of subscribers
  4. Id proof of Subscribers
  5. Address Proof of Directors.
  6. Address proof of Registered Office(Rent Agreement)
  7. Latest utility bill of Registered Office like Electricity or telephone bills)
  8. NOC of the owner
  9. Self Declaration from first directors and Subscribers in form INC-9
  • Approval of Incorporation Certificate

It will take 15-20 days to get the incorporation certificate of Nidhi Company after all the documents have been filed and registration fee and stamp duty is paid.

  • GST registration

The GST Registration is an obligatory process that needs to be in compliance for all the business entities in India that goes beyond the threshold limit of turnover or profits. On failure, the business entity shall be liable purpose of tax evasion which is a criminal offense and is subject to prosecution, penalties and jail term.

  • Opening of a current bank account.

Concerns related to Nidhi Company

  • It provides services to only small and medium-income groups.
  • People are afraid to deposit funds because these companies are not licensed from the RBI.
  • One can deposit in these companies only if they have trust in them as everything is highly dependent on the honesty and loyalty of its members.

Areas in which Nidhi Companies cannot engage

  • Nidhi Company cannot enter into the business of chit funds, insurance, and hire purchase.
  • Lending or accepting funds to/from outside the companies as the funds remain inside the company.
  • These companies cannot pay any brokerage or incentives for deploying deposits from members.


Nidhi Company is basically a kind of Mutual Benefit Company as it promotes the habits of saving and utilizing the funds in the future amidst its members. As everything has it own benefits and other drawbacks, Nidhi Companies are operated by the newbies due to lack of funds and also they are not licensed by the RBI due to which people are afraid of depositing in the Nidhi Company.

Read our article:Why you should Start a Nidhi Company in India?

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