What is Nidhi Company Registration?
Nidhi company registration is the process of incorporating a type of NBFC called Nidhi.This NBFC is also known as Mutual Benefit Finance Company. Starting a Nidhi company is one of the best options for people who want to commence a finance business with low capital investment.
A Nidhi company, also known as Nidhi Bank aims to cultivate the habit of savings and thrift amongst its members.Its main area of operation is borrowing and lending of funds.As per the rules,it can only make transactions with its registered members and within the permitted district of work.
The Nidhi Company is registered with the Ministry of Corporate Affairs and regulated by the Companies Act 2013. The registration process is comparatively easy in comparison to registration processes of other NBFCs.
In this NBFC, there are no eligibility criteria for a minimum qualification of Directors. Additionally, this category of NBFC does not require the approval of Reserve Bank of India for incorporation.It is mandatory that every Nidhi company has to end their name with “Nidhi Ltd.”
Nidhi Company Registration Process
KYC of all the Directors and Shareholders
Final Incorporation (MOA & AOA)
PAN & TAN
The Nidhi Company incorporation procedure includes submission of the prescribed items;
- KYC of all the Directors and Shareholders
Minimum 7 Members and 3 Directors required. Directors and Members can be the same.
- Digital Signature
Digital signature (DSC) is a basic requirement to initiate the Nidhi Company Registration procedure as all the forms are submitted should be self-attested
- Name Approval
The Proposed name of the Name of Nidhi company must be unique and it should not be similar. The name can be reserved through Reserve Unique Name (RUN) facility
- Final Incorporation (MOA &AOA )
Once the name is approved the Nidhi Company Registration application is submitted in SPICe Form along with Nidhi company’s Articles of Association and Memorandum of Association. After proper inspection of the application, COI is issued.
- PAN & TAN
PAN and TAN applications can be done along with Nidhi Company Registration as it is included in the SPICe Form.
Complete List of Documents Required for Nidhi Company Registration
- Identity proof of Directors and shareholders
- Copy of Directors Pan card
- Address proof of the directors and shareholders
- Aadhaar Card of Directors and shareholders
- Proof of registered office (Electricity/Water bill)
- Copy of rent agreement (If rented)
- Passport size photographs of the directors
- NOC from the owner of the property
8 Key Points to Know Before You Start a Nidhi Company in India
You can start Nidhi Company in less than Rs 20,000/-
Companies Act 2013 & Nidhi Rules 2014 Regulates the function and operations of Nidhi Company in India.
No Approval from RBI
Nidhi Company is outside the preview of Reserve Bank of India. It does not require a license from RBI to operate a loan business in India.
No Microfinance Activity
Nidhi Company is not allowed to perform vehicle finance business & microfinance business in India
Minimum 200 Members
Within 12 month’s minimum 200 members should be added
Interest on Loan
You can charge up to 20% p.a. by following the reducing balance method.
District level operations for initial 3 Years. After that 3 offices can be set up within the district or outside the zone after taking the approval from the Regulator Director.
Loan against Security
A Nidhi Company can only give credits against security. These securities include Gold, Property, and FD & LIC.
Requirements for Nidhi Company Registration
There is a check list of requirements that are essential for registration or operating of a Nidhi Company.
Requirement before the Incorporation Period
- Minimum number of shareholders- 7
- Minimum number of Directors -3
- The minimum capital requirement is of Rs. 5 lakhs
- DIN for Directors
Requirement after the Incorporation Period
- The minimum number of shareholders must be 200 at the end of the 1st year
- Net owned fund should be more than Rs. 10 lakhs
- The ratio for net owned funds to deposit should be more than 1:20
- Unencumbered deposits should be more than 10 % of outstanding deposits
Benefits of Nidhi Company Registration
Nidhi company incorporation is prevalent among people who want to start financial services but have the limitation of capital. There are many reasons for the popularity of Nidhi companies such as
Separate Legal Existence
It has a separate legal entity as from its promoters and shareholders. Nidhi Company can acquire property on its name and also incur debts.
The liability of directors and managers is limited as per The Companies Act 2013.
It has a perpetual existence; it is not affected by death or departure of any one or all of its shareholders.
Ease of Management
Executing changes in Nidhi Company is more comfortable in comparison to other NBFCs.
Credibility in market
The Ministry of Corporate affairs regulates Nidhi Companies. Hence, it is considered more credible as compared to other similar institutions controlled by state governments.
12 Things to Know About Nidhi Rule 2014
As per rule 6 of the regulations mentioned in the Nidhi company rules 2014, the following activities are prohibited:
- Carry on the business of chit fund, leasing finance or acquisition of securities
- To issue preference shares, debentures or any other debt instruments
- Open a current account with its members
- Acquire another company by purchasing securities of the company
- Carry on any other business other than borrowing and lending to its members
- Accept deposit from a person who is not its member
- Lend or take the deposit from a corporate
- Enter into a partnership for borrowing or lending activities
- Issue advertisements for soliciting deposits
- Pledge assets of its members kept as a security
- Pay commission or incentive for mobilizing deposits
5 Things to Know before Applying for Name Approval of the Nidhi company
The name of Nidhi Company must be selected keeping in mind the guidelines provided. Following is a list of factors which must be keep in mind while choosing a name.
- Concise & Easy- Easy to remember, Easy to pronounce
- Must be Unique-Not identical with any existing company
- Relevancy- Must be relevant to the objects and brand value
- The suffix – It must end with ‘Nidhi Limited’ or ‘Mutual benefit Nidhi Limited.’
- Must not be Offensive – Not be objectionable to any culture, religion or group of people
- Must not violate any laws-Must follow provisions of Emblems and Names (Prevention of Improper use) Act, 1950.
Who is the Regulator of Nidhi Company?
Nidhi Company belongs to Non-banking financial sector. NBFCs are registered under the Companies Act, 2013 and are regulated by Reserve Bank of India. However, Nidhi Company is an exception in this case. It has a separate regulating rule by the name of Nidhi Rules, 2014.
Nidhi Companies are registered as per Section 406 of the Companies Act, 2013.
RBI has exempted Nidhi Company Registration and operation from its core provisions because it deals with the members and shareholders. However, RBI retains its rights to issue directions for matters relating to deposit-taking activities of Nidhi Companies.
What is the Nidhi Company Registration Fee?
A complete break-up of Nidhi Company Registration Fee is all inclusive at Rs 17,999/. Nidhi Company Registration process can be completed in 10 to 15 days with the help of our team of industry expert professionals. All you have to do is to provide all the required documents and Nidhi Company Registration Fees.
6 Mandatory Compliance for Nidhi Company
The Nidhi Company is required to submit the list of members within 90 days from the end of every financial year.
The Company can request MCA for the extension in case Nidhi Company is not able to add 200 members in a year.
Along with the above form a half yearly return is also required to be filed in Form NDH 3.
ROC Annual Returns
It is mandatory for a Nidhi Company to file annual return with MCA through Form MGT-7.
Profit Loss and Balance sheet
The financial statements and other related documents are required to be submitted in Form AOC-4.
Income tax Returns
Nidhi Company is required to file annual returns by 30th September of the following financial year.