{"id":51679,"date":"2023-01-09T12:22:15","date_gmt":"2023-01-09T06:52:15","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=51679"},"modified":"2023-01-09T12:23:57","modified_gmt":"2023-01-09T06:53:57","slug":"what-is-the-structure-of-nidhi-company-in-india","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/what-is-the-structure-of-nidhi-company-in-india\/","title":{"rendered":"What is the Structure of Nidhi Company in India?"},"content":{"rendered":"\n<p>Nidhi means funds. One of the sub-categories of the Indian non-banking\nfinance sector is the Nidhi Company. It is recognised under <em>Section 406<\/em> of the Companies Act of\n2013.<\/p>\n\n\n\n<p>The term \u2018Nidhi\u2019 has been defined under <em>Rule 3 (da)<\/em> of the Nidhi Rules of 2014, which means a company has\nto be incorporated with the following objectives:&nbsp;<\/p>\n\n\n\n<ul><li>Encourage\n     the members to invest in profitable schemes and save money&nbsp;<\/li><li>Receiving\n     deposits and lending money to its members for their mutual benefit.<\/li><li>Duly\n     complying with the rules and regulations formed by the Central Government.<\/li><\/ul>\n\n\n\n<p>To\nput it simply, the company&#8217;s core business activities include borrowing and\nlending money to its members. Nidhi means a company that has been incorporated solely\nwith the objective of develop a habit of thrift and reserve funds among its\nmembers and receiving deposits and lending to its members only for their mutual\nbenefit. This article talks about the structure of a <strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/nidhi-company-registration\">Nidhi company in India<\/a><\/strong> and other important aspects of the Nidhi\nCompany. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-structure-of-nidhi-company-in-india\/#Governing_laws_for_Nidhi_Company_in_India\" >Governing laws for Nidhi Company\nin India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-structure-of-nidhi-company-in-india\/#Activities_That_Are_Prohibited_For_a_Nidhi_Company_in_India\" >Activities That Are\nProhibited For a Nidhi Company in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-structure-of-nidhi-company-in-india\/#Selecting_a_Name_for_a_Nidhi_Company_in_India\" >Selecting a Name for a Nidhi\nCompany in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-structure-of-nidhi-company-in-india\/#Basic_Structure_of_a_Nidhi_Company_in_India\" >Basic Structure of a Nidhi\nCompany in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-structure-of-nidhi-company-in-india\/#What_Are_The_Documents_Required_To_Register_A_Nidhi_Company_In_India\" >What Are The Documents\nRequired To Register A Nidhi Company In India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-structure-of-nidhi-company-in-india\/#Annual_Compliance_for_a_Nidhi_company_in_India\" >Annual Compliance for a\nNidhi company&nbsp;in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/corpbiz.io\/learning\/what-is-the-structure-of-nidhi-company-in-india\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Governing_laws_for_Nidhi_Company_in_India\"><\/span>Governing laws for Nidhi Company\nin India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A Nidhi company is incorporated in the\nnature of a Public Limited Company as per the provisions of the Companies Act of\n2013. Considering the fact that a Nidhi Company only limit its activities to\nits members, therefore RBI does not directly govern the functioning of the\ncompany. The Reserve Bank of India has exempted Nidhi Companies from the\nprovisions of the RBI Act and other directives issued by RBI. It is governed by\nthe Nidhi rules of 2014 enacted by the central government. Some of the\nimportant rules that you must know are listed below:<\/p>\n\n\n\n<ul><li><em>Rule<\/em>3(d) of\nthe Nidhi Rules talks about the net owned funds;<\/li><li><em>Rule<\/em>3(e) of\nthe Nidhi Rules talks about the non-performing asset;<\/li><li><em>Rule<\/em>4 of\nthe Nidhi Rules talks about the incorporation and incidental matters;<\/li><li><em>Rule<\/em>5 of\nthe Nidhi Rules talks about the requirements for minimum number of members, net owned\nfund etc.;<\/li><li><em>Rule<\/em>6 of\nthe Nidhi Rules talks about the general restrictions or prohibitions;<\/li><li><em>Rule<\/em>7 of\nthe Nidhi Rules talks about the share capital and allotment;<\/li><li><em>Rule<\/em>8 of\nthe Nidhi Rules talks about the membership;<\/li><li><em>Rule<\/em>11 of\nthe Nidhi Rules talks about the acceptance of deposits by Nidhi;<\/li><li><em>Rule<\/em>12 of\nthe Nidhi Rules talks about the application form for deposit;<\/li><li><em>Rule<\/em>15 of\nthe Nidhi Rules talks about the loans;<\/li><li><em>Rule<\/em>16 of\nthe Nidhi Rules talks about the rate of interest; <\/li><li><em>Rule<\/em>17 of\nthe Nidhi Rules talks about the rules relating to Directors;<\/li><li><em>Rule<\/em>21 of\nthe Nidhi Rules talks about the filing of half yearly return;<\/li><li><em>Rule<\/em>22 of\nthe Nidhi Rules talks about the auditor\u2019s certificate;<\/li><li><em>Rule<\/em>23 of\nthe Nidhi Rules talks about the power to enforce compliance;<\/li><li><em>Rule<\/em>24 of\nthe Nidhi Rules talks about the penalty for non-compliance.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Activities_That_Are_Prohibited_For_a_Nidhi_Company_in_India\"><\/span>Activities That Are\nProhibited For a Nidhi Company in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As per the\nNidhi rules of 2014, a company cannot indulge itself in certain activities. All\nthe Nidhi Companies that are registered in India are required to abide by these\nprohibitions\/restrictions which are imposed on them in terms of their\nactivities. These activities are as follows:<\/p>\n\n\n\n<ul><li>Nidhi Companies cannot indulge in the\nactivities of chit funds;<\/li><li>Nidhi Companies cannot indulge in the activities\nto hire-purchase finance;<\/li><li>Nidhi Companies cannot indulge in leasing of\nfinances;<\/li><li>Nidhi Companies cannot indulge in the activities\nof the insurance business;<\/li><li>Nidhi Companies cannot indulge in the\nactivities of business securities;&nbsp;<\/li><li>Nidhi Companies are restricted from accepting\ndeposits from any other person except its members;<\/li><li>Nidhi Companies can only lend funds to its\nmembers and not to any other person.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Selecting_a_Name_for_a_Nidhi_Company_in_India\"><\/span>Selecting a Name for a Nidhi\nCompany in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The name of a company plays a very\nimportant role as it is the first impression of the company. The following\nfactors are to be kept in mind while selecting a name for a Nidhi Company in\nIndia:<\/p>\n\n\n\n<ul><li>The\nmeaning of the name is the first and foremost consideration to be taken.\nIdeally, the name should be relevant to the company&#8217;s activities.<\/li><li>The name\nshould be short and meaningful. It is important to keep it short as it also\nmakes your prospective customers recall the name easily.<\/li><li>The\nuniqueness of the name is very important. It should not resemble or be\nidentical to the name of any existing company. This increases the chance of\nbeing rejected.<\/li><li>The name\nof the company should not violate the provisions of Emblems and Names Act of 1950.<\/li><li>The name\nof the company should not be against the Indian laws. Use of abusive words in\nthe name is prohibited. Also one must not use any such word in a way which\nmight be against the belief or customs of any caste, creed, or religion.<\/li><li>The name of\nthe company should not include the phrase &#8216;British India&#8217; in it.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Basic_Structure_of_a_Nidhi_Company_in_India\"><\/span>Basic Structure of a Nidhi\nCompany in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Before\nyou go for the process of registration, you must go through the structure\nrequirements by a Nidhi Company in India. The following is the list of the requirements\nfor the structure of a Nidhi Company in India:<\/p>\n\n\n\n<ul><li>The\n     company needs to be incorporated as a Public Limited Company as per the\n     provision of Companies Act of 2013<\/li><li>The\n     company must appoint a minimum of 7 shareholders.<\/li><li>The\n     company must appoint a minimum of 3 directors.<\/li><li>The\n     company must have minimum of 200 members.<\/li><li>All\n     the directors of the company must have the Director Identification Number\n     (DIN).<\/li><li>The\n     company must have the minimum equity capital of INR Five Lakhs.<\/li><li>The\n     company must have net owned funds of INR Ten Lakhs or more <\/li><li>The\n     company must end with &#8216;Nidhi Limited&#8217;.<\/li><li>The\n     objective of the company should restrict to lending and borrowing of funds\n     among its members only.<\/li><li>The\n     company must have unencumbered term deposits of 10% or more of the outstanding\n     deposits.<\/li><li>The\n     company must maintain a ratio of 1:20 or less for the net owned funds. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_Are_The_Documents_Required_To_Register_A_Nidhi_Company_In_India\"><\/span>What Are The Documents\nRequired To Register A Nidhi Company In India?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As\nwe have seen above, what are the structural requirements of a Nidhi company,\nlet us now see what are the documents are required by the Nidhi Company to\nregister in India: <\/p>\n\n\n\n<ul><li>A copy of rent or\nlease agreement to establish the registered place of business;<\/li><\/ul>\n\n\n\n<ul><li>In\n     case a where place of business is rented, NOC (No Objection Certificate)\n     duly signed by the landlord of that place; <\/li><li>A\n     copy of government authorised Identity proofs;<\/li><li>A\n     copy address proofs of the members of the company;<\/li><li>Photographs\n     of the members of the company;<\/li><li>Digital\n     Signature Certificate (DSC) of the company;<\/li><li>Copies\n     of PAN cards of the members;<\/li><li>Director\n     Identification Numbers (DIN) of all the directors;<\/li><li>Certified\n     copy of the updated Memorandum of Association (MOA) of the company;<\/li><li>Certified\n     copy of the updated Articles of Association (AOA) of the company. &nbsp;<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Benefits after the\nRegistration<\/h3>\n\n\n\n<p>The\nregistration of a Nidhi company provides a lot of benefits, and these benefits\ncan be summarised as follows:<\/p>\n\n\n\n<ul><li>The first one is\nthe legal existence of the company. Registering a company under the Nidhi tile\nwill give the company a separate entity. It will be considered a separate legal\nentity, meaning the company and member will be two separate identities. This will\ngive the company the right to sue and be sued. <\/li><li>Another benefit is\nfor the members, the liability of all the menders will be limited. This means,\ndepending on the amount invested or contributed by the members of the company,\ntheir liability will be judged. Members will only be liable for their share in\nthe company, and the personal liabilities of the members will not be used to\nmeet the company&#8217;s liabilities.<\/li><li>Members can borrow\nthe funds at a lower interest rate.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Annual_Compliance_for_a_Nidhi_company_in_India\"><\/span>Annual Compliance for a\nNidhi company&nbsp;in India<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every Nidhi Company that is incorporated\nin India is required to file the auditor\u2019s certificate, Form NDH-1 and Form\nNDH-3. <\/p>\n\n\n\n<p>The explanation for above mentioned\nforms are as follows: <\/p>\n\n\n\n<ul><li>As\nper the Companies Act of 2013 and <em>Rule 5<\/em>\nof Nidhi Rules of 2014 under <em>Section 406<\/em>,\nall Nidhi companies incorporated in India are required to file a return as per\nstatutory compliance form NDH 1 with a period of ninety days from the ending of\nthe first financial year. Also, such form have to be certified by a practising\nCompany Secretary or Chartered Accountant or Cost Accountant. In the case\ncompany needs an extension in filing form, then it can apply to the Regional\nDirector in Form NDH-2. The director is obliged to pass the order within a period\nof 30 days from receiving such an application.&nbsp;\n<\/li><li>As\nper <strong>the\nCompanies Act of 2013<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\"><strong>[1]<\/strong><\/a><\/sup>\nand <em>Rule 21<\/em> of Nidhi Rules of 2014,\nall Nidhi companies incorporated in India and covered under rule 2 are required\nto half yearly return with the Registrar under Form NDH-3 along with the\nprescribed fee as provided in Companies (Registration offices and Fees) Rules,\n2014 within a period of 30 days from the conclusion of each half year. Also,\nsuch form have to be certified by a practising Company Secretary or Chartered\nAccountant or Cost Accountant. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The basic concept on which a Nidhi company works is the, \u2018Principle of Mutuality\u2019. A Nidhi Company is sub-category of NBFCs (Non-Banking Financial Company). It is regulated by the Ministry of Corporate Affairs (MCA) and is incorporated under <em>Section 620A<\/em> of the Companies Act of 1956 or <em>Section 406<\/em> of the Companies Act of 2013. &nbsp;It is only partially regulated by the RBI in matters relating to their deposit acceptance. The Central government formulated the Nidhi Rules 2014 to carry out the firms&#8217; objectives. The company&#8217;s main objective is to lend and borrow money from its members. It also inculcates the habit of saving among its members. Nidhi Company isn\u2019t required to receive a license from the RBI that is Reserve Bank of India; hence it is easy to form. It is registered as a public company and should have \u201cNidhi Limited\u201d as the last words of its name.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>: <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/incorporation-procedure-nidhi-company-india\/\">What Is Nidhi Company? Know It\u2019s Registration Procedure<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Nidhi means funds. One of the sub-categories of the Indian non-banking finance sector is the Nidhi Company. It is recognised under Section 406 of the Companies Act of 2013. The term \u2018Nidhi\u2019 has been defined under Rule 3 (da) of the Nidhi Rules of 2014, which means a company has to be incorporated with the [&hellip;]<\/p>\n","protected":false},"author":48,"featured_media":51682,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[31],"tags":[3007],"acf":{"service_id":"9"},"authorName":"Astitva Kumar","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/12\/MicrosoftTeams-image-27.jpg","authorDescription":"Astitva Kumar is an advocate by profession and has completed her BBA. LLB from IP University. She is an avid reader, researcher, and legal writer. Her areas of interest include mediation, conflict resolution, finance, cyber laws, and taxation.","postViews":2909,"readingTime":6,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51679"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/48"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=51679"}],"version-history":[{"count":3,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51679\/revisions"}],"predecessor-version":[{"id":51683,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/51679\/revisions\/51683"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/51682"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=51679"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=51679"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=51679"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}