Nidhi Company Registration
Nidhi Company Registration including Incorporation kit and share certificates.
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.
Mutual Benefit
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.
Membership Criteria:
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.
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.
Nidhi Company Registration Procedure
In India, incorporating a Nidhi Company involves several important procedures, including taking legal action if a member defaults. Here is a detailed walkthrough of the registration procedure:
Step 1: Applying for DIN and DSC
The Nidhi Company's directors are required to obtain a Digital Signature Certificate (DSC) and apply for a Director's Identification Number (DIN). The Ministry of Corporate Affairs (MCA) is responsible for issuing DINs, and all e-filing procedures require DSC. Directors can skip this step if they already have a DIN and DSC.
Step 2: MoA & AoA
Clearly state the main reason for founding the Nidhi Company in the drafts of the Memorandum of Association (MoA) and Articles of Association (AoA). The Registrar of Companies (ROC) must receive these documents and a subscription statement.
Step 3: Name Approval Process
Provide the MCA with your top three suggestions for the Nidhi Company's name. One name will be selected by the MCA for approval. The name that is chosen must be original and not already in use. Approved applications are valid for 20 days.
Step 4: Application for Registration
Directors are required to file an application for registration following name approval. The Memorandum of Association (MoA) and Articles of Association (AoA) are submitted with this application.
Step 5: Certificate of Incorporation (CIN)
The Nidhi Company's Certificate of Incorporation is normally issued by the appropriate authority within 15 to 20 days. The company's distinct Company Identification Number (CIN) is also provided by this certificate.
Step 6: PAN, TAN, and Bank Account
Request a Tax Deduction and Collection Account Number (TAN) and Permanent Account Number (PAN). Next, open a bank account for the Nidhi Company and submit the PAN, MoA, AoA, and Certificate of Incorporation.
Frequently Asked Questions (FAQs)
What is a Nidhi company?
A Nidhi company is a type of non-banking financial company (NBFC) recognized under Section 406 of the Companies Act, 2013. It is primarily involved in accepting deposits and lending money to its members for mutual benefit.
What are the key features of a Nidhi company?
Key features include member-based operations, restrictions on carrying out external lending or accepting deposits from non-members, and mandatory adherence to Nidhi Rules, 2014.
Who regulates Nidhi companies?
Nidhi companies are regulated by the Ministry of Corporate Affairs (MCA) under the Companies Act, 2013, and the Nidhi Rules, 2014. They are exempt from RBI’s NBFC regulations but must follow specific MCA guidelines.
What is the minimum capital requirement for Nidhi company registration?
The minimum paid-up capital required for registering a Nidhi company is ₹10 lakhs. Additionally, the company must ensure compliance with net-owned fund (NOF) requirements.
What is the process for registering a Nidhi company?
The process involves applying for name approval, submitting incorporation documents to the MCA, obtaining a certificate of incorporation, and ensuring compliance with post-registration requirements, such as member and deposit targets.
What compliance requirements do Nidhi companies have?
Compliance requirements include submitting annual financial statements, maintaining a minimum of 200 members, achieving a 1:20 ratio of net-owned funds to deposits, and adhering to Nidhi Rules, 2014.
Can a Nidhi company accept deposits?
Yes, Nidhi companies can accept deposits from their members. However, they must follow the deposit limits and other conditions specified under the Nidhi Rules, 2014.