Nidhi Company Registration

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Nidhi Company Registration - An Overview

A Nidhi Company is a type of company in the Indian financial sector, recognized under Section 406 of the Companies Act, 2013. Its primary objective is to cultivate the habit of thrift and savings among its members, offering a safe and convenient method of saving funds. Nidhi Companies are categorized as Non-Banking Financial Companies (NBFCs) and are regulated by the Ministry of Corporate Affairs (MCA), though they are exempt from the core provisions applicable to NBFCs as regulated by the Reserve Bank of India (RBI).

Nidhi Companies operate on a principle of mutual benefit and are strictly membership-based, dealing only with their registered members. The main purpose is to encourage savings and thrift among its members by receiving deposits and lending funds to them for their mutual benefit. Governed by the Nidhi Rules, 2014, they fall under the category of NBFCs but don’t require a RBI license. However, they must comply with the rules and regulations laid down by the MCA. Here activities are limited to accepting deposits and lending to their members only, and they are forbidden from dealing with securities, chit funds, leasing, hire purchase or insurance.

Nidhi Companies play a crucial role in promoting thrift and offering financial services to a specific member base, especially in areas where banking services are limited. They offer a unique blend of traditional savings and modern banking practices, making them a vital part of India’s financial inclusion strategy. However, the decision to operate as or invest in a Nidhi Company should be taken with a clear understanding of its operational limitations and regulatory requirements.

Process for Nidhi Company Registration in India

The proposed directors of the Nidhi Company need to obtain Digital Signature Certificates (DSC), as the registration process is online and requires digital signatures.

The next step is for the directors to obtain their Director Identification Number (DIN), which can be done online through the MCA portal. If the directors already have a DIN, this step can be skipped.

Apply for the company name through the RUN form on the MCA website. The name should be unique and indicative of the company’s business nature. Usually, it ends with ‘Nidhi Limited’.

Draft the Memorandum of Association and Articles of Association. These documents are crucial as they detail the objectives, rules and regulations of the company. For a Nidhi Company, the MOA must state that the main objective is to cultivate the habit of thrift and savings amongst its members, receiving deposits, and lending to its members only for their mutual benefit.

This form is an integrated application for allotment of DIN, reservation of name and incorporation of a new company.

PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) are automatically allotted during the incorporation process.

Once incorporated, the company needs to ensure it fulfills the requirements for a Nidhi Company as per Nidhi Rules, 2014. This includes having a minimum of 200 members, Net Owned Funds of INR 10 Lakhs or more and meeting the specified ratios between Net Owned Funds and deposits.

Within 90 days from the end of the first financial year after its incorporation, or within 90 days from the second financial year, whichever is earlier, file Form NDH-1, duly certified by a company secretary in practice or a chartered accountant in practice or a cost accountant in practice.

If a Nidhi Company cannot meet the requirement, it may apply for an extension to the Regional Director in Form NDH-2.

File half-yearly returns with the ROC in Form NDH-3.

Documents Required for Nidhi Company Registration in India

PAN Card of proposed Directors

Both PAN and Aadhaar Card of all Indian Shareholders and Directors.

Business Address Proof

Either of the latest Utility Bill (Electricity, Telephone, Gas, Water) or Property Tax Bill of the registered office address. Rent agreement and NOC from the owner in case of rented property.

Document of proposed Directors

(Utility Bill/Telephone Bill/Mobile Bill/Bank Statement not older than two months.)

Mail id and Mobile number

Mail id and Mobile number of proposed Director along with Draft Articles of Association and Draft Memorandum of Association.

Latest passport size photograph of proposed Directors

Latest passport size photographs of all the Shareholders and Directors.

Aadhaar Card/ Passport of proposed Directors

Either Voter ID, Passport, or Driving License of the Shareholders and Directors.

Advantages of Nidhi Company

Nidhi Companies are focused on encouraging their members to save money. They offer various savings schemes and foster a habit of financial discipline among their members.

One of the primary benefits for members of Nidhi Companies is the accessibility to loans. Loans are provided at relatively reasonable rates compared to the market, and the procedure for loan approval is usually simpler and quicker than traditional banks.

For members who need financial assistance, Nidhi Companies typically offer loans at interest rates that are lower than those of conventional banks and financial institutions.

The process of borrowing money or accessing other financial services through a Nidhi Company involves minimal documentation and formalities, making it more convenient for members.

Since these companies only deal with their registered members, they have a strong understanding of their member base. This familiarity allows them to tailor their services to the specific needs and circumstances of their members.

Unlike other NBFCs, Nidhi Companies are not regulated by the Reserve Bank of India (RBI), but by the Ministry of Corporate Affairs (MCA). This means they have to comply with fewer stringent regulations, which can lead to more streamlined operations.

Nidhi Companies often provide better interest rates on deposits compared to traditional banks, which is a benefit for members looking to save money with higher returns.

Since their operations are limited and localized, with a focus on a known group of members, the risk factor in lending and other financial activities is comparatively lower.

Nidhi Companies often operate within a specific community or region, contributing to the financial empowerment and development of that locality.

These companies are managed by their members, which ensures that the decisions taken are more likely to align with the interests of the members themselves.

Members can also benefit from dividends, as Nidhi Companies can distribute profits amongst their members in the form of dividends, subject to certain regulatory caps.

How apkireturn team will help in the Nidhi Company Registration Process?

We believe in complete hand holding of our client, we will assign a personal manager to help you complete the entire process of Nidhi Company Registration.

We will assist you in following areas:

Steps to be taken care of Post Incorporation of the Company

There are few compliances which needs to be done as per the schedule of the MCA, major activities are listed below for your reference, as our time will also help you out not to miss any of the compliances.

This is a one-time activity, to be done once every year.

This is a one-time activity, to be done once every year. As per Income Tax Laws ITR-6 needs to be filed by the Companies along with Tax Audit report (if applicable) to be digitally signed.

As per Companies Act, within 30 days of incorporation, the company is required to appoint the C.A. for conducting the ROC audit.

This is a one-time activity, to be done once every year. At the end of the financial year, when income tax return has been filed and ROC Audit report has been prepared, the Annual Return under Form AOC-4 & Form MGT-7 are required to be uploaded on the MCA portal which are required to be digitally signed by Director’s and C.A. who has conducted the Audit.

File half-yearly returns with the RoC in Form NDH-3.

FAQs

A Nidhi Company is a type of Non-Banking Financial Company (NBFC) in India that is recognized under Section 406 of the Companies Act, 2013. It functions primarily for the purpose of encouraging savings and thrift among its members, receiving deposits, and lending to its members for their mutual benefit.

Unlike other NBFCs, a Nidhi Company deals only with its members and works on the principle of mutual benefit. It is exempt from the core provisions applicable to other NBFCs as regulated by the Reserve Bank of India (RBI).

The primary activities of a Nidhi Company include accepting savings from and lending to its members. These activities are carried out for the mutual benefit of all members.

To become a member, an individual needs to subscribe to the shares of the Nidhi Company and abide by its terms and conditions as laid out in the membership agreement.

Nidhi Companies are regulated by the Ministry of Corporate Affairs (MCA) and are considered relatively safe for small savings. However, like all investments, they carry inherent risks, and members should exercise due diligence.

No, Nidhi Companies are only allowed to accept deposits from their registered members.

Nidhi Companies are governed by the Nidhi Rules, 2014 and are subject to provisions of the Companies Act, 2013. They are regulated by the MCA, not the RBI.

To start a Nidhi Company in India, it is required to have a minimum of seven shareholders and three directors at the time of incorporation. The company must also meet certain financial criteria as per the Nidhi Rules, 2014.

No, all loans given by Nidhi Companies to their members are secured. The nature and extent of security are determined by the Nidhi Company’s policies.

The process of winding up a Nidhi Company is governed by the provisions of the Insolvency and Bankruptcy Code, 2016, and the Companies Act, 2013. It involves settling all debts, distributing any remaining assets to members, and fulfilling other legal obligations.

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