Nidhi Company

Nidhi Company Registration: A Complete Guide

A Nidhi Company is a company that has been recognized under section 406 of the Companies Act 2013. It belongs to the non-banking Indian Finance Sector and a category under NBFC. The primary function of the business of the Nidhi Company is to do borrowing and lending of money between their members only. The members who are registered with the Nidhi Company. This article describes the Complete Guide on Nidhi Company Registration.

The aim of the formation of Nidhi Company is to increase the saving between its registered members only.

The regulatory body of Nidhi Company is the Ministry of Corporate Affairs (MCA)^[1], Section 406 of Companies Act, 2013 and Nidhi Companies Rules, 2014, which govern the Nidhi Companies. Nidhi Companies are excused from the Core provisions or regulations applicable to NBFC.

It can be said that Nidhi Companies are a type of Company that takes a deposit from its members and lends loans to its members only. The funds are contributed by the members/shareholders and are distributed amongst the shareholders only.

Nidhi Companies are also one category of the NBFC, which has been categorized, and RBI has been empowered to issue directions for them concerning the matters of deposit acceptance activities.

Eligibility of Nidhi Companies

Nidhi Company Registration Requirement

1. Members
   It must have minimum 7 members.
2. Directors
   It must have at least 3 directors.
3. Minimum Capital
   No minimum capital required.
4. Issue of shares
   No preference shares allowed to be issued.
5. Objective

The objective of a Nidhi Company is the receiving deposits and lending to its members only.

Read our article:A Complete Guide on How to Register a Nidhi Company

Nidhi Company Registration/Post Incorporation Requirements

1. The Company is to be incorporated under the Act as a Public Company.
2. The name of the Company must include “Nidhi Limited.”
3. Minimum members must be 200.
4. It must have net owned funds of Rs 10, 00,000/-.
5. The ratio of net owned funds to deposits must not be more than 1:20.

The procedure of Nidhi Company Registration

1. Obtaining the approval

The first step is checking the name availability for that particular Nidhi Company. Check the name on the RUN feature of the MCA portal.
The Nidhi Company has to add the word Nidhi Limited at the end as part of its name.

2. Digital Signature Certificate (DSC)

The next step is to obtain the digital signature certificate of the proposed directors/proposed promoters/applicants have to get DSC under the class 2 of DSC.

3. Form SPICe 32

The SPICe 32 has to be filed and attached with the following documents for the incorporation of Nidhi Company.

The documents such as:

a. Memorandum of Association
b. Article of Association
c. PAN card of the subscribers to Memorandum
d. ID Proof of the subscribers
e. Address Proof of the First Directors
f. Address Proof of the Registered Place of Business
g. Last Utility Bill
h. No Objection Certificate of the owner of the premises
i. Consent of the First Director in form DIR 2
j. Self Declaration in the Form INC-9 from the first Directors/ Subscribers

4. Certificate of Incorporation

Once the documents are submitted along with the SPICe 32 and the requisite registration fees and stamp duty paid.

The Incorporation Certificate shall be issued within 15-20 days after submission of all the documents.

The Certificate of Incorporation is considered as the proof or evidence that all the formalities have been complied with.

5. Documents required from members/office

a. A copy of the PAN card
b. Passport size photograph
c. Copy of Aadhar Card
d. Bank Statement/Electricity Bill/
e. Copy of rent agreement of office premises executed in the name of Nidhi Company
f. Copy of latest electricity bill on the registered premises
g. NOC from the landlord owner- registered owner of the premises for using as the registered place of business.

6. Annual Compliance

a. NDH-1 Return

The Nidhi Company has to file the return of statutory compliances, NDH-1within 90 days of closure of the financial year, and certified by a Company Secretary with the registrar.

b. NDH-2

The Company has to file a document for the extension of time to its regional Director if, within 90 days, it is not able to comply with the minimum members’ directors. Regional Directors, after considering the application, may pass the orders within 30 days of the receipt of the application.

c. NDH-3 Return

The Nidhi Company has to file within 30 days after the conclusion of half-year, certified by the Company Secretary.

Restrictions on the business of Nidhi Company

There are restrictions which have been imposed upon the transactions of the Nidhi Company, such as:

The Nidhi Company shall not carry the business of:

• Cannot carry the business of –

1. Chit Funds
2. Hire Purchase Finance
3. Leasing Finance
4. Insurance

• Open current account of members. It can open only a savings account.
• It cannot acquire shares or securities or control the composition of the Board of Directors of any company in whatsoever,
• It cannot change the objective of business from borrowing or lending to any other type of business.
• It cannot accept deposits from any member, except for registered members.
• It cannot enter into a partnership agreement or lending activities or borrowing
• It cannot issue or cause to issue any advertisement in any form for soliciting the deposits
• It cannot pay any brokerage or incentive for mobilizing deposits from members or deploying funds, or granting the loan.

Conclusion

The purpose of Nidhi Company is to maximize the lending and deposits from its shareholders. The Nidhi Company is a type of the NBFC Company, however it is not an NBFC; the NBFC can go and lend the loans to people outside from the cartel or group of members registered in it. The purpose of NBFC is different from the traditional banking system. The NBFC is whole together to maximize the growth of the economy by making lending or deposits easy. Where traditional funding is dependent on restrictions and lot of compliances, a growth of Nidhi Company is to secure the shareholders within that group to have the borrowing or deposits easily done, whenever the capital is required.

Read our article:Nidhi Company Registration Procedure & Benefits in India