Nidhi Company Registration
Nidhi Company is governed by Section 406 of the Companies Act, 2013 and Company Nidhi Rules, 2014 which has a sole objective of cultivating the habit of thrift and savings amongst its members. Nidhi companies are allowed to take deposit from its members and lend to its members only. Therefore, the funds contributed for a Nidhi company are only from its members (shareholders) and used only among the shareholders of the Nidhi Company.
A Nidhi company falls under section 406 of the Companies Act, 2013, read with Nidhi Rules 2014 and Amendment Rules 2022. Its primary undertakings are lending and borrowing money among its members. Such companies fall under the non-banking financing sector. Like other types of companies, the Nidhi Company should also file tax and compliance forms annually. The Nidhi Company should satisfy all the rules and Regulations given under the Companies Act, 2013 and Nidhi Company Rules 2014 and Nidhi Company (Amendment) Rules 2022. If a Nidhi company fails to follow such required compliances, it will be made liable for such default with its officers, and the penalty will be levied.
Benefits of Nidhi Company
- It’s easy for Nidhi Company to get funding or borrow capital from or lend money to group members.
- No Minimum Share Capital Requirement Easy to Manage
- No External Involvement in Management
- Relaxation in Compliances
- Easy Transfer of Ownership
- Low Rates of Interest
- Secured Investments
- Clear Objectives for easy donations and loans
- Exemptions and Privileges under Companies Act, 2013
- Least intervention of R.B.I
Nidhi Company is treated as a Public Limited Company. In order to prevent any legal actions, a Nidhi Company needs to follow the required compliances.
Pre-Registration Requirements for Nidhi Company
- Minimum 7 Members;
- Minimum 3 Directors;
- No Minimum Capital Requirement;
- No Preference Shares allowed to issue;
- The object of the company shall be receiving deposits from and lending to its members only for their mutual benefits.
Restrictions on Nidhi Company
A Nidhi Company shall NOT:
- Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by anybody 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 anybody corporate;
- Enter into any partnership arrangement in its borrowing or lending activities;
Process of Registration of Nidhi Company
- Name Approval in ‘RUN’ facility The Applicants are required to file name availability in RUN facility of MCA portal. Every Company proposed to be incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Now, one doesn’t require digital signature of applicant for name availability.
- Obtaining Digital Signature Certificate (DSC) The proposed Directors who may also be the Promoters/Applicants of Nidhi Company have to obtain Class 2 DSC.
File form SPICE-32 After the name approval, File form SPICe-32 with following attachments for incorporation of Nidhi Company.
- Memorandum of Association
- Articles of Association
- PAN Card of subscribers
- Id Proof of First Directors
- Address Proof of First Directors
- Address Proof of Registered Office (Rent Agreement/Sale Deed)
- Latest Utility Bill of Registered Office (Electricity/Telephone/Gas)
- NOC of Owner of Registered Office
- Consent and Declaration from first Director in form DIR-2
- Self Declaration from First Directors and Subscribers in form INC-9
Approval and Certificate of incorporation
It will take 15-20 days to get the incorporation certificate of Nidhi Company once all the documents have been filed and registration fee and stamp duty paid. Incorporation certification is a proof that all the formalities regarding the incorporation have been complied with.
Documents Checklist for Incorporation of Nidhi Company
Following Documents require from Members/Directors
- Copy of PAN Card Passport size photograph
- Copy of Aadhaar Card
- Bank Statement/Electricity Bill/Telephone
Bill Proof of Registered office
- Copy of Rent agreement of office premises executed on the name of Company. (If rented property)
- Copy of latest Electricity/Water/Gas/Telephone bill of registered office
- NOC from Landlord that he has no objection for using his premises as the registered office of Company.
Other Declarations and Affidavits from proposed 1st Directors of Nidhi Company in the prescribed Format