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Nidhi Company Registration

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Nidhi Company Registration

Are you a start-up and not sure about the finance business license requirement? Register a Nidhi company, which is a type of Non-Banking Financial Company (NBFC) that is allowed to take deposits from its members and lend to its members. Nidhi company is regulated under Section 406 of the Companies Act, 2013. Nidhi company contributes to society in several ways and is not limited to helping its members only. It promotes and cultivates the habit of saving among its members and provides them with financial assistance in terms of loans.

Nidhi company acts as a very popular lending mechanism for secured loans, and the operations of Nidhi company are very similar to that of a co-operative society. The prime rationale behind establishing a Nidhi company is to encourage its members to save so that they can smoothly satisfy their financial requirements arising from time to time.

The Minimum capital requirement for Nidhi company registration is Rs. 5 lacs, and seven members are required for registration. On issuance of the certificate of registration by the Ministry of Corporate Affairs, you can use initial capital to give loans to members. Further, you can take deposits from members, which will be equal to 20 times the capital invested in Nidhi company. Nidhi company registration is completely an online process, and you can achieve such registration in 15 days; the cost of incorporation will approximately arrive at Rs. 15,000 - 25,000.

The approval from the Reserve bank of India (RBI) has been exempted for Nidhi companies. For the ease of doing business in India, a Nidhi company can start its business just after obtaining approval from the Ministry of Corporate Affairs. For the first three years of operations, a Nidhi company will continue to operate within one district, and after three years, it can work within the State. In case you are willing to operate in more than one district, then you will need to register another Nidhi company.

Basic Requirement for Nidhi Company Registration

  • Minimum Members:

A minimum number of 7 members are needed to run a Nidhi company, out of which 3 members should be the company’s directors. Relatives and Spouse can be directors or members.

  • Shareholders’ funds:

To start a Nidhi company, a minimum of Rs. 5 lacs is required as equity share capital. Moreover, it cannot raise preference share capital.

  • Financing Object:

The object of the Nidhi company shall be receiving deposits from and lending to its members only for their mutual benefits. Any other object in its MOA shall be void.

  • The nominal value of shares:

The nominal value of equity shares issued by every Nidhi company should not be less than Rs. 10 per share.

  • Minimum shares to each holder:

A Nidhi company must allow a minimum of 10 equity shares or shares equivalent to Rs. 100 to each deposit holder.

Process of Nidhi company registration

 We offer assistance in filling complex forms, guiding on minimum requirements, and fulfilling government procedures for successful Nidhi company registration.

Step 1: DSC and DIN

Apply for Digital Signature Certificate (DSC) and Director’s Identification Number (DIN) required for all the directors/shareholders of the company.

Step 2: Apply for name approval

The proposed names must be unique and should not match to the names of already registered companies. The name can be reserved through Reserve Unique Name (RUN) facility.

Step 3: Prepare required documentation

Prepare all requisite documents MOA, AOA, INC 9, INC 10, DIR 2 to be filed with the ROC. These must mention the main objective of incorporating a Nidhi company.

Step 4: Incorporation

File the company incorporation with SPICE Form INC 32. Obtain an incorporation certificate with the corporate identification number (CIN). It usually takes 15-25 days to form a Nidhi company.

Step 5: PAN, TAN and bank account

Apply for PAN, TAN, and Bank Account. Get a bank account opened by submitting the Certificate of Incorporation, MOA, AOA, and PAN to the bank.

Documents required for Nidhi Company Registration 

  • From Directors and Shareholders
  1. PAN card copies of the members
  2. Photographs of the members and Directors
  3. Digital Signature Certificate (DSC)
  4. ID and Address Proof of all directors
  5. Director Identification Number (DIN) of the directors
  • For Registered office
  1. Proof of the registered place of business "OR"
  1. Ownership documents/ rent or lease agreement
  2. No Objection Certificate signed by the owner of the property
  • Documents to be prepared by CA/ CS
  1. Memorandum of Association (MoA) of the company
  2. Articles of Association (AoA) of the company
  3. MCA form Attestation

Checklist/essential requirements to be satisfied post-Nidhi Company Registration

For acquiring the status of “Nidhi company,” the following conditions need to be met by it:

Here, net owned funds mean the aggregate of paid-up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet.

On satisfaction of these conditions, the Nidhi company needs to file form NDH-1 (duly certified by practising CA/ CS/ CWA) within 90 days from the close of the 1st financial year after commencement.

By submitting from NDH-2 to the Regional Director, the company may avail of an extension of another financial year, if the same is filed within 30 days from the close of the 1st financial year after commencement.

If even on the completion of 2nd financial year, it fails to meet the requirements, then it cannot accept deposits until the compliance of these provisions, and can also attract penal consequences.

At any point in time, the members of a Nidhi company shall not be reduced to less than 200.

Furthermore, Nidhi companies need to file a half-yearly return with the Registrar in Form NDH-3 (duly certified by practising CA/ CS/ CWA) along with the prescribed fees. Such form should be filed within 30 days from the close of each half year.

Acceptance of Deposits

  • Nidhi Companies cannot accept deposits exceeding twenty times of its net owned funds.
  • Nidhi companies can accept fixed deposits for a minimum period of 6 months and a maximum period of 60 months.
  • Similarly, recurring deposits shall be accepted by Nidhi companies for a minimum period of 12 months and a maximum period of 60 months.

Ceiling limits on Loans

A Nidhi company shall provide loans only to its members up to the below limits:

Amount of Deposits

Permissible Loan limits

The total deposit amount is less than Rs. 2 crore

Rs. 2 lacs

The total deposit amount is between Rs. 2 crore to less than Rs. 20 crore

Rs. 7.50 lacs

The total deposit amount is between Rs. 20 crore to less than Rs. 50 crore

Rs. 12 lacs

The total deposit amount is Rs. 50 crore or more

Rs. 15 lacs

Interest on Loan

  • It is stipulated that the rate of interest charged on any loan given by Nidhi companies should not exceed 7.50 per cent above the highest rate of interest offered on deposits accepted by Nidhi companies.
  • Such interest shall be computed on reducing balance method.

Branches

Benefits of Nidhi company registration

The benefits enjoyed by a Nidhi company are as follows:

  • No external involvement in management
  • Easy to fund capital or borrowings from or lend money to group members
  • Easy manageability
  • Low capital requirement
  • Relaxation in the number of compliances
  • Cost-efficient registration
  • Many exemptions and privileges under the Companies Act, 2013
  • The minimal intervention of RBI
  • Secured investment and low rates of interest
  • Low level of risk
  • A better option for savings
  • A single regulatory body, i.e., Nidhi company Rules

Compliances after Nidhi company registration

A Nidhi company shall have to ensure adherence to all the provisions and sections as applicable to a Public Company except the provisions which have been specifically exempted for Nidhi companies. The following are the annual compliances as entailed under the Companies Act, 2013 read with Nidhi Rules, 2014:

Form

Nature

Time period

Form NDH-1

Return of statutory compliances to be filed with the Registrar

Within 90 days from the close of the 1st financial year after commencement

Form NDH-2

Application made to Regional Director for extension of time for complying statutory compliances

Within 30 days from the close of the 1st financial year after commencement

Form NDH-3

Half-yearly return duly certified by practicing CA/ CS/ CWA

Within 30 days from the conclusion of each half-year

Auditor’s certificate

To the effect that the company has complied with all the requisite provisions

Annexed to the Audit report yearly

Form AOC-4

Annual financial statements and other related documents

Within 30 days of the annual general meeting

Form MGT-7

Annual return to be filed with MCA

Within 60 days of the annual general meeting

Activities prohibited under Nidhi Rules, 2014

Nidhi companies are strictly prohibited from entering into some transactions as specified under the Companies (Nidhi Companies) Rules, 2014. These are enumerated below:

  • They cannot deal with chit funds, hire-purchase finance, leasing finance, insurance, or securities business.
  • They cannot accept deposits from or lend money to, any other person except their members.
  • They cannot advertise themselves to ask for any deposits.
  • They cannot admit a body corporate, trust, or minor as a member.
  • They cannot issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever
  • They cannot open any current account with its members
  • They cannot engage in any business other than the business of borrowing or lending in their own name.

Penalty for non-compliance of Rules

Any non-compliance of the provisions defined under the Companies (Nidhi Companies) Rules, 2014 shall attract:

  • A penalty on the company and every defaulting officer of the company in terms of fine extendable up to Rs. 5000
  • In the case of continuing contravention, a further fine is imposed, which is extendable up to Rs. 500 for each day during the period when the contravention continues

How Enterslice helps you to get Nidhi Company Registration?

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Frequently Asked Questions about Nidhi Company Registration

No, unlike other NBFCs, Nidhi Company Registration and regulation is exempted from core provisions of Reserve Bank of India.

Both such entities are different on various levels. Nidhi is not regulated by RBI and Nidhi Company Registration requires a much smaller amount of capital as compared to Rs. 2 Crore paid capital requirement for NBFCs.

Nidhi Company Registration, as well as regulation, is done by the Ministry of Corporate Affairs. All the activities are done as per the provisions of Nidhi Rules, 2014.

As Nidhi Companies are not regulated by RBI, in order to ensure smooth and transparent operations of Nidhi Company central government has introduced Nidhi Rules, 2014. These rules contain the governing principles for Nidhi company operations.

After Nidhi Company registration the most important part is to know that you can only accept deposits from your registered members.

In order to become a member of a Nidhi company following requirements are to be met:

1. Member must be an individual, no corporate body or trust can become a member.
2. The member must have attained the age of 18 years.

NO, RBI approval is not required for them. Business can be started as soon as Nidhi Company Registration process is completed.

NO. Microfinance as the term specifies is small credit facility. It is a very famous business type in semi-urban and rural areas. However, in order to conduct microfinance business RBI approval is required and can only be done any large NBFCs.

NO. Nidhi companies cannot issue following securities;

1. Preference shares
2. Debentures
3. Any other kind of Debt security

For Nidhi Company loan limit is dependent upon the amount of deposits it holds. Following are specified limits:

Deposit amount (in Rupees) Loan Limit (in Rupees)
Less than 2 Crore 2,00,000
2 Crore-20Crore 7,50,000
20 Crore-50Crore 12,00,000
More than 50 Crore 15,00,000

No. Nidhi Company cannot operate outside the state it is registered in.

Once Nidhi Company registration process is completed it is required to meet the following requirements within a year:

1. Register at least 200 members
2. Maintain minimum net owned funds of Rs. 10 Lakh.
3. Maintain net owned funds to deposit ratio of 1:20
4. Out of all the outstanding deposits, 10% must be unencumbered term deposits.

If any Nidhi company fails to meet the post-incorporation requirements within a year's time span then it must apply for an extension with Regional Director in Form NDH-2.

No, as per Nidhi companies are not authorized to promote its activities through any kind of advertisement This is done because the main object of Nidhi is to promote the habit of thrift and saving habits among its member and not to solicit deposits through promotions to non-members.

Similarly, Nidhi Company is not authorized to remit any kind of brokerage or incentive for promotion or mobilization of deposits to members or granting loans.

NO, Nidhi Company cannot purchase securities/shares of other organizations or institutions.

No. Nidhi Company is not authorized to open a current account with its members.

No, Nidhi company is neither authorized to acquire through the purchase of its securities nor does it has the power to control its management or change the composition of its management.

For any such activity previous approval from the respective Regional Director is required to be obtained after passing a special resolution in its general meeting.

Nidhi Companies are not authorized to carry on any other kind of business other than lending and borrowing on its own name.

Yes. It cannot open another branch until it has earned a net profit after tax consecutively for three straight years after successful Nidhi Company registration.

After meeting the condition of earning consecutive profits for 3 years, Nidhi Company is allowed to open 3 branches in the same district where Nidhi Company registration is done.

However, for opening any more branched either inside or outside the district boundaries prior permission from the Regional director is required.

No, Nidhi Company can only issue secured loans to its members.

Nidhi Company can issue secured loans only against following securities:

1. Gold, Silver, other precious metal and jewellery.

2. Immovable Property

3. Government securities, national saving certificates, insurance policies, Fixed Deposit receipts etc.

Nidhi Company is not allowed to issue the following type of loans:

1. Personal Loans
2. Asset/ Vehicle finance
3. Microfinance
4. Hire-purchase

Enterslice has branch office across India. As a result, we provide PAN-India services. Besides, Nidhi company registration in India is a totally online procedure. Thus, we provide Nidhi company Registration services all over India irrespective of where you want your registered office to be located at.

At Enterslice, we have a group of expert professionals like Chartered Accountants, Company Secretaries, lawyers and other industry experts who are bringing in their deep insight into the laws as well as current industry atmosphere. we ensure to solve all your queries and execute all the order with full dedication and focus.

The primary object of Nidhi company is to carry on the business of accepting deposits from and lending money to its members. It should aim to cultivate the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members.

A Nidhi Company can only lend a secured loan that too only to its members. The principle of mutual benefit behind the working of Nidhi company has been to pool the savings from its members and lend only to its members. It can never have dealings with non-members

Nidhi companies are not expected to involve themselves in the business of Chit Fund, hire purchase, insurance or in any other activity including investments in shares or debentures.

A Nidhi company is to be incorporated under the Companies Act, 2013 and shall attain the status of a public company.

A Nidhi company shall have a minimum paid-up share capital of Rs. Five lacs

Every Nidhi company shall, within a period of one year from the commencement of its business, ensure that it has not less than two hundred members.

The Directors shall be members of Nidhi Company. Thus, it is compulsory for the director of Nidhi Company to hold shares.

A director of Nidhi Company shall hold office for a term of up to 10 consecutive years. He is eligible for re-appointment only after the expiry of 2 years from the date of cessation of his term.

A Nidhi company is registered as a public company and needs to hold “Nidhi Limited” as the last words in its name.

A Nidhi company cannot declare dividend exceeding 25 per cent of its profits or such higher amount as may be specifically approved by the Regional Director for the reasons to be recorded in writing.

A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Funds (NOF) as per its last audited financial statements.

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