Nidhi Company 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 and Companies (Nidhi Companies) Rules, 2014. It shall be a public company. Every Company incorporated as a "Nidhi" shall have the last words 'Nidhi Limited' as part of its name. No Nidhi shall issue preference shares. It is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit. Unlike NBFCs and Banking Companies a Nidhi company does not require a license from the Reserve Bank of India (RBI) to operate. A Nidhi Company works through its members. Nidhi is Public Limited Company formulated with the primary object to carry on the business of accepting deposits and lending money to member-borrowers only against jewels, mortgage of immovable property and fixed deposit receipts. Nidhis are not permitted to engage themselves in the business of Chit Fund, hire purchase, insurance or in any other business including investments in shares or debentures. Thus, Nidhis do their business only with Members. Such Members are only individuals.
The Process of registering Nidhi Company, necessary documents, legal requirements and statutory compliances are explained below:
- No external involvement in management
- Easy to fund capital or borrowings from or lend money to group members
- Can Manage easily
- 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
Minimum number of members is 7 and 3 Members should be Directors of the
Company. Spouse and Relatives can be directors or members.
Minimum Share Capital is Rs. 5 lakh. It cannot raise preference share
Receiving deposits from and lending to its members only for their mutual benefits only.
The nominal value of shares
Nominal Value of Shares should not be less than Rs. 10 per Share.
Minimum shares to each holder
Minimum of 10 equity shares or shares equivalent to Rs. 100 to each deposit holder.
1. Get Digital Signature Certificate (DSC) Registered for Directors
2. Get Director Identification Number (DIN) for all directors / shareholders
3. Apply for name approval from Registrar of Companies
4. File Memorandum, Articles of Association, INC-9, INC 10, DIR 2 with ROC
5. File Company Incorporation with SPICE Form 32
6. Issue of Certificate of Incorporation by the Registrar of Companies.
7. Apply for Income Tax Permanent Account (PAN)
8. Apply for Tax Deduction Account Number (TAN)
9. Open Bank Account
From Directors and Shareholders
- PAN card copies of the members
- Photographs of the members and Directors
- Digital Signature Certificate (DSC)
- ID and Address Proof of all directors
- Director Identification Number (DIN) of the directors
For Registered office
- Proof of the registered place of business "OR"
- Ownership documents/ rent or lease agreement
- No Objection Certificate signed by the owner of the property
Documents to be prepared by Professionals
- Memorandum of Association (MoA) of the company
- Articles of Association (AoA) of the company
- MCA form Attestation
Within One Year:
- Minimum number of members should be 200
- Net Owned Fund should be Rs. 10 Lakh
- Unencumbered term deposit should be 10% or higher of outstanding deposits
- Net Owned funds to deposit ration should be < or = 1:20
- Nidhi Companies cannot accept deposits exceeding 20 times of its net owned funds.
- Fixed deposits minimum period is 6 months and a maximum period of 60 months.
- Recurring deposit minimum period 12 months and a maximum period of 60 months.
Interest on Loan
- Maximum interest on Fixed Deposit should not exceed 7.50%
- Calculation of interest is on reducing Balance method
Prohibited Activities under Nidhi Rules 2014
- Chit funds, hire-purchase finance, leasing finance, insurance, or securities business.
- Accept deposits from or lend money to, any other person except their members.
- Cannot advertise themselves to ask for any deposits.
- Cannot admit a body corporate, trust, or minor as a member.
- preference shares, debentures or any other debt instrument by any name
- Cannot open any current account with its members
- Cannot engage in business other than business of borrowing or lending in their name.
Restriction in opening branches of Nidhi Companies
- It Cannot open branches unless it earned Profit After Tax continuously for 3 years
- Nidhi Company cannot open branch outsider state in which it is registered
- Nidhi Company cannot open more than 3 branches in a District
- It cannot open branches unless Financial statement and Annual Return filed with ROC
Mandatory statutory Compliances of Nidhi Companies
|Form||Return Type||Time of Filing|
|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|
Penalty for Non Compliance of Rules
- Penalty on the company and every defaulting officer of the company up to Rs. 5000
- Continuing contravention, further fine which is extendable up to Rs. 500 for each day