Nidhi Company Registration in India

An Overview of Nidhi Company Registration

A Nidhi Company is a company registered under the Companies Act, 2013 and regulated by the Ministry of Corporate Affairs (MCA) and Nidhi Rules, 2014. It must meet certain requirements, such as having 200 members or more and having at least INR 20 lakhs as net-owned funds within 120 days of its incorporation.

Nidhi Companies encourage members to practice thrift and saving by limiting their ability to accept deposits and provide loans. Their efficient operation depends on adherence to RBI regulations and annual reporting requirements.

What is a Nidhi Company?

A Nidhi Company is a non-banking financial company (NBFC) registered under Section 406 of the Companies Act of 2013 in India. Its main goals are to encourage members to save and share benefits, and taking deposits and making loans to them helps to create financial stability within a particular community.

Purpose of Nidhi Companies

In India, Nidhi Companies encourage members to save by taking deposits and providing loans only available to them. Their aim is indicated by the term "Nidhi," which translates to "treasure" in Hindi. Although not directly governed by the Reserve Bank of India (RBI), these businesses fall under the category of Non-Banking Financial Companies (NBFC). They are bound by RBI regulations regarding deposit activities.

The special relationships that Nidhi Companies have with member shareholders set them apart from other NBFCs and exclude them from certain important requirements of the RBI Act. Because of their unique legal structure, Nidhi Companies can function as independent financial institutions catering solely to their member base. 

Benefits of a Nidhi Company

Nidhi Company registration comes with a lot of benefits for the management and shareholders, making sure that the customers also gain something from the company. These benefits are as follows –

1. Formation

The Nidhi Company Registration process is very easy and quick, making it feasible for those who look forward to forming such entities.

2. RBI Non-Compliance

RBI governs all banks, but its guidelines do not bind Nidhi companies in a similar sector. It requires these entities to establish their own rules and regulations and run their businesses accordingly.

3. Lesser Risk

All the operations related to borrowing, lending, or even depositing are done by the members of the entity, thereby reducing the risk of losses and ensuring the entity's safety.

4. Promoting Savings

These Nidhi Companies ensure that the individuals involved with the entity are following the concept of saving for future use and better financial conditions.

5. Registration Procedure

The Nidhi Company Registration process is cost-effective and smooth compared to other Non-Banking Financial Company registrations. It makes it easier for these companies to access financing options and business loans.

6. Funding System

The net-owned funding system is typically adopted by the Nidhi companies, which makes it cost-effective. It positively impacts their business by using their funds and resources.

Requirements for a Nidhi Company Registration

The requirements for a Nidhi Company Registration are mentioned below –

• The minimum number of members required for the registration of a Nidhi company in India is Seven.
• The minimum number of directors required for the registration of a Nidhi company in India is Three.
• The maximum number of members in a Nidhi Company can be up to 200.
• The minimum paid-up capital of the entity must be Rs 10 Lakhs.
• The Net Owned Funds of the entity should be Rs 20 Lakhs within 120 days of its incorporation.
• The company’s total deposit must have at least 10% unencumbered term deposits.
• Net owned funds to deposits should be more than a 1:20 ratio. This ratio does not include intangible assets or accumulated losses; it only covers equity share capital and free reserves.
• A minimum of 10% of the total deposits should be kept as a Fixed Deposit in any of the nationalized banks recognized by the Reserve Bank of India.

Documents Required for Nidhi Company Registration

Certain documents are required for the Nidhi Company Registration in India. These documents are listed below –

• Photographs of Promoters and all the members
• PAN card of promoters and all the members
• Identity Proof of promoters and all the members (Aadhar Card, D/L, Voter ID, Passport)
• Address Proof of promoters and all the members (through Utility bills or bank statements)
• Address proof of the business premises (through utility bills)
• NOC from the premises owner, if applicable
• Property Documents or Rent agreement, if applicable
• Form DIR – 2 with the consent of directors
• DSC & DIN of Directors
• Director specimen signatures
• Subscriber sheet duly signed
• Company Registration Questionnaire

Process for Nidhi Company Registration

There is a set procedure for a Nidhi Company Registration that must be followed. The process is stated below –

1. Application for DSC & DIN

The first step for a Nidhi Company Registration is for the directors to acquire the Digital Signature Certificate and apply for the Director’s Identification Number issued by the Ministry of Corporate Affairs. Directors who already have the DIN can skip the process. The DSC is essential for all e-filling processes. 

2. Memorandum of Association & Articles of Association

Drafting of Memorandum of Association & Articles of Association is essential for establishing the purpose of the Nidhi Company. These are necessary things in an organization and should be filed with the registrar of the companies.

3. Name Approval

The Nidhi company seeking registration needs to obtain approval over the entity’s name through the Ministry of Corporate Affairs. The chosen name must be unique and should not be copied from the name of any other company or trademark. The objective and business nature should be reflected through the name selected for such entities. They need to propose at least three names out of which MCA chooses the appropriate one. The application for approval is sent through PART A of the SPICe+ application form.

4. Incorporation Application

After the name is approved by the MCA, the company can begin the process of incorporation. For incorporation, you must go to the MCA official website and fill out the SPICe+ application form. After filling out the application form online, divided into two parts, PART A & PART B, any one director has to sign it. The signed application form must be submitted online along with the other required documents attached to it.

5. Certificate of Incorporation

The form is sent to the registrar of companies, who is responsible for looking at the application. A thorough check is made to be sure that all the documents and the form being filled and submitted correctly and in the right manner. If everything is alright, a certificate of incorporation is issued to the applicant for Nidhi Company Registration. A unique Corporate Identification Number is provided to the Nidhi Company by the ROC.

6. Nidhi Company License

Following its incorporation, a business must apply for a NIDHI Company license by fulfilling criteria about member count, net assets, term deposits, and other conditions outlined in the Companies Act of 2013. The company has four months from the date of its incorporation as a NIDHI Limited Company to file an application to the Central Government using form NDH 4. This time frame may be extended with the regional director's consent if necessary.

Nidhi Limited Company Mandatory Compliance

Though Nidhi Limited Company can be incorporated without RBI consent, they are still responsible for its regulation, the same as NBFCs. They must include ‘Nidhi Limited’ as a suffix to their company name. the other mandatory compliances for a Nidhi company are stated below –

• A Nidhi Pvt Ltd has to mandatorily fill out Form NDH – 1 within 90 days of the end of such financial year.
• In the event that Nidhi Pvt Ltd fails to accumulate 200 members in its organization in the first financial year, it must fill out Form NDH-2 with the Ministry of Corporate Affairs.
• For filling the half-yearly returns, Form NDH-3, along with the certificate of CA/CS, is submitted.
• A Nidhi Finance Company/ Nidhi Company has to hold a board meeting quarterly and annually hold a members meeting.      
• A Nidhi Finance Company/ Nidhi Company must fill out Form AOC 4 & Form MGT 7 on an annual basis.
• They must maintain their books of accounts regularly.
• A Nidhi Pvt Ltd must file the income tax returns by September 30th every year.  
• The rental income generated through providing lockers to the members must be less than 20% of the total revenue generated by the entity in a financial year.

Prohibition Activities for a Nidhi Company

Certain activities are prohibited for a Nidhi Company, and these are as follows –

• Dealing with chit funds is prohibited for a Nidhi Company.
• Dealing with hire-purchase finance is prohibited for a Nidhi Company.
• Dealing with the leasing of finances is prohibited for a Nidhi Company.
• Dealing with insurance business is prohibited for a Nidhi Company.
• Dealing with securities business is prohibited for a Nidhi Company.
• Other than members, Nidhi companies are prohibited from accepting deposits by another person.
• Other than members, Nidhi companies are prohibited from lending funds to any other person. 

Nidhi Company Registration Fees

The Nidhi Company Registration fees depend on various factors like application for DIN, DSC, GST Registration, etc, before application for incorporation of Nidhi Company. However, the fee may range between Rs 10,000 – 15,000, excluding the professional fee.

Registration is mandatory, and the applicant might need professional help dealing with complex documentation and requirements.

Timeline for Nidhi Company Registration

The timeline for obtaining the license of incorporation of Nidhi Company mostly depends on how well and quickly the applicant arranges the documents and fills out the form with the correct documentation. Generally, it takes around 30-45 days to get the license of incorporation of Nidhi Company.  

Why Corpbiz?

Corpbiz can help applicants obtain DIN & DSC along with the Nidhi Company Registration in the desired timeframe through experienced professionals. We have expertise in the matter, and our executives will guide you through all the necessary procedures to get the licenses to run the business. We have –

• Excellent Client Retention Rate
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