NIDHI COMPANY REGISTRATION
NIDHI COMPANY REGISTRATION
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What is Nidhi Company?
A Nidhi Company is a unique type of Non-Banking Financial Company (NBFC) in India, formed with the primary goal of cultivating the habit of savings among its members. These companies operate on mutual benefit principles, facilitating borrowing and lending solely among members. Nidhi Companies are relatively easy to set up since they do not require a license from the Reserve Bank of India (RBI) and are registered as public companies with "Nidhi Limited" in their name.
Objective
The main objective of a Nidhi company is to promote savings and thrift among its members. It functions by accepting deposits and providing loans exclusively to its members, ensuring mutual benefit.
Membership
Nidhi companies are exclusively member-based organizations. They do not accept deposits or lend money to non-members, maintaining a closed financial ecosystem.
No External Involvement
Unlike other NBFCs, Nidhi companies do not participate in external financial activities such as leasing, hire-purchase, insurance, or chit fund businesses.
Minimal Capital Requirement
To incorporate a Nidhi company, the minimum capital requirement is INR 10 lakh, making it accessible for small groups aiming to foster mutual financial growth.
Characteristics and Features of Nidhi Companies:
Mutual Benefit
Nidhi Companies advance the interests of their members by taking deposits and lending money. They operate on principles of mutual trust and group financial support.
Regulation
Under the Companies Act of 2013, Nidhi Companies are regulated by the Ministry of Corporate Affairs (MCA). They must comply with strict regulations on capital adequacy, lending limits, operational transparency, and regulatory reporting.
Limited Scope
Unlike banks and NBFCs (Non-Banking Financial Companies), Nidhi Companies have limited scope. They cannot engage in insurance, leasing, or hire-purchase financing. They are restricted to lending and borrowing only among their members.
Adding Members
Members of a Nidhi Company usually share a common interest, such as living in the same area or belonging to the same community. They participate in the company's governance and contribute to its capital.
Corporate Structure
Nidhi Companies typically have a simple corporate structure, with members electing a board of directors to manage the organization. This ensures democratic control and member accountability.
Financial Inclusion
Nidhi Companies play a crucial role in promoting financial inclusion in rural and semi-urban areas where traditional banking services may be scarce. They provide a platform for small savers to deposit funds and access credit for various personal and business needs.
Documents Required for Nidhi Company Registration in India
Essential documents needed before and after the registration of a Nidhi Company in India.
1. PAN Card / Aadhar Card
The PAN Card or Aadhar Card is essential for identity verification.
2. Contact details (Email Id & Mobile number)
Provide current contact details to facilitate communication.
3. Latest Bank Statement/Telephone or Electricity bill
A recent bank statement or utility bill for address verification.
4. Voter's ID/Passport/Driver's License
Any of these documents can be used for identity proof.
5. Passport-sized photograph of all directors and shareholders
Photographs of all key personnel for company records.
Nidhi Company Registration Procedure
Step 1: Applying for DIN and DSC
The directors must obtain a Digital Signature Certificate (DSC) and apply for a Director's Identification Number (DIN). DSC is required for all e-filing procedures.
Step 2: MoA & AoA
Clearly state the purpose of the Nidhi Company in the Memorandum of Association (MoA) and Articles of Association (AoA), then submit them to the Registrar of Companies (ROC).
Step 3: Name Approval Process
Submit three name suggestions to the MCA. One unique name will be approved, valid for 20 days.
Step 4: Application for Registration
After name approval, file an application for registration with the MoA and AoA attached.
Step 5: Certificate of Incorporation (CIN)
The Certificate of Incorporation, along with a unique Company Identification Number (CIN), is issued within 15-20 days.
Step 6: PAN, TAN, and Bank Account
Apply for PAN and TAN, open a bank account, and submit the necessary documents like MoA, AoA, and Certificate of Incorporation.
Requirements After Registration Nidhi Company
Membership Quota:
Your Nidhi Company must have 200 members or shareholders before the end of the first year.
Net Owned Funds (NOF):
Your company's NOF should exceed Rs. 10 lakhs.
NOF to Deposit Ratio:
More than a 1:10 should be the ratio of NOF to deposit.
Unencumbered Deposits:
Over 10% of total deposits must be made up of unencumbered deposits.
Frequently Asked Questions (FAQs)
What are the advantages of starting a Nidhi company?
Easy to form, promotes member savings, and has minimal compliance compared to banks.
How does a Nidhi company differ from other financial institutions?
It operates only among its members and cannot deal with the public.
What are the eligibility criteria to become a member of a Nidhi company?
Only individuals can join, and they must comply with the company's rules.
Are Nidhi companies allowed to provide loans to non-members?
No, loans and deposits are restricted to members only.
What are the restrictions on the operations of a Nidhi company?
Cannot advertise, issue debentures, or deal in chit funds or hire purchases.
Can a Nidhi company operate in multiple states?
No, it primarily operates within the state it is registered.
How can a Nidhi company be closed or dissolved?
By passing a resolution, clearing liabilities, and applying to the ROC.
What are the penalties for non-compliance by a Nidhi company?
Penalties include fines or cancellation of registration.
How to expand the branches of a Nidhi company?
Branches can be opened after 3 years with ROC approval.
What are the annual compliance requirements for a Nidhi company?
File NDH-1, NDH-2, NDH-3, AOC-4, and MGT-7 annually.