Nidhi Company

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Nidhi Companies in India are created for cultivating the habit of thrift and savings amongst its members. Nidhi companies are allowed to borrow from its members and lend to its members. Therefore, the funds contributed to a Nidhi company are only from its members (shareholders). Hence, Nidhi companies are mainly used to cultivate a habit of savings amongst a group of people.

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Incorporating a Company as Nidhi Company

Nidhi Companies are registered Limited Companies involved in taking deposits and lending to its members. The activities of a Nidhi Company does fall under the purview of Reserve Bank of India, as it is similar to a NBFC. However, as Nidhi Companies ONLY deal with its shareholder-members money, RBI has exempted Nidhi Companies from the core provisions of the RBI and other regulations applicable to a NBFC.

The following are some of the restrictions a Nidhi Company is subject to under Nidhi Rules, 2014. As per Rule 6 of Nidhi Rules, 2014, a Nidhi Company shall NOT:

  • Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;
  • Issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;
  • Open any current account with its members;
  • Acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;
  • carry on any business other than the business of borrowing or lending in its own name: Provided that Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.
  • Accept deposits from or lend to any person, other than its members;
  • Pledge any of the assets lodged by its members as security;
  • Take deposits from or lend money to any body corporate;
  • Enter into any partnership arrangement in its borrowing or lending activities;
  • Issue or cause to be issued any advertisement in any form for soliciting deposit: Provided that private circulation of the details of fixed deposit Schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.
    • Pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.

To start a Nidhi Company in India, the first step is to incorporate a Limited Company, under the Companies Act, 2013. Hence, a minimum of three Directors and seven shareholders will be required to start the Limited Company incorporation process. During incorporation of the Nidhi company, care must be taken to ensure that the object of the Limited Company mentioned in the Memorandum of Association is that of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.

Post incorporation of the Limited Company, within a period of one year from the commencement, the Nidhi Company must meet all of the following criteria:

  • Not have less than two hundred members (shareholders);
  • Have Net Owned Funds (NOF) of ten lakh rupees or more;
  • Have unencumbered term deposits of not less than ten per cent of the outstanding deposits; and
  • Have a ratio of Net Owned Funds to deposits of not more than 1:20.

“Net Owned Funds” means 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.

In the case at the end one year from commencement the Nidhi Company is not able to meet the above requirement, the Company may within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 for extension of time.

If even after the second financial year the Nidhi Company is not able to meet the requirements for a Nidhi Company, then the Nidhi Company shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions for operating as a Nidhi Company and be liable for penal consequences.

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Documents Required

Pan Card

PAN Card of shareholders and Directors. Foreign nationals must provide a valid passport.

Identity Proof

Aadhar card | Voter ID | Passport | Driving License of Shareholders and Directors.

Address Proof

Latest Telephone Bill | Electricity Bill | Bank Statement | Gas/Water Bill of Shareholders and Directors

Photograph

Latest Passport size Color photograph of Shareholders and Directors.

Registered office Proof

Latest Electricity Bill | Telephone Bill/Water/Gas Bill of the registered office address

NOC from owner

No Objection Certificate to be obtained from the owner(s) of registered office

Rent Agreement

If Property is taken on Rent, then rent agreement required. Agreement must be notarized.

For NRI

All the documents must be apostilled(if applicable) and notarized.

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Frequently asked questions

A minimum of 3 directors and 7 shareholders are required to register a Nidhi company in India.

The Director needs to be over 18 years of age and must be a natural person.

An address in India where the registered office of the Company will be situated is required. The premises can be a commercial / industrial / residential where communication from the MCA will be received.

No, you will not have to be present at our office or appear at any office for the registration of a Nidhi Company. All the documents can be scanned and sent through email to our office. Some documents will also have to be couriered to our office.

A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Nidhi Company.

Identity proof and address proof is mandatory for all the proposed Directors of the Nidhi Company. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof.