Nidhi Company

Overview

A Nidhi Company is a type of Non-Banking Financial Company (NBFC) in India, established with the primary objective of encouraging savings among its members and providing them with financial support. Unlike other NBFCs, Nidhi Companies are specifically designed to cultivate a habit of thrift and savings among a group of people. These companies can accept deposits from and lend to their members only, making them a mutual benefit society that operates within a close-knit community. 

Nidhi Companies are regulated by the Ministry of Corporate Affairs (MCA) and are subject to fewer stringent regulations compared to other financial institutions, which makes them an attractive option for those looking to start a financial business with limited capital. At Legal Corner, we streamline the entire process of registering a Nidhi Company, ensuring compliance with all legal requirements so you can focus on serving your members effectively.

Eligibility

• Minimum Members:
  A Nidhi Company must start with at least 7 members and have at least 200 members within a year of its incorporation. This ensures a broad member base for financial operations.
• Directors Requirement:
  The company must have a minimum of 3 directors, all of whom must be Indian residents. This ensures proper governance and compliance with Indian regulations.
• Capital Requirement:
  A minimum paid-up equity share capital of ₹5 lakhs is required to start a Nidhi Company. Additionally, the ratio of net owned funds to deposits should not exceed 1:20.
• No External Borrowing:
  A Nidhi Company cannot accept deposits or lend money to anyone other than its members. This restriction ensures that the company remains a mutual benefit society.
• Unique Name:
  The company’s name must include “Nidhi Limited,” indicating its status as a Nidhi Company. The name should also comply with the naming guidelines under the Companies Act, 2013.

Benefits

• Encourages Savings:
  Nidhi Companies promote the habit of saving among their members, creating a stable financial base for the community and providing a secure environment for savings.
• Simplified Lending:
  Nidhi Companies can lend to their members at competitive interest rates, making credit easily accessible to those within the community.
• Regulatory Relaxations:
  Nidhi Companies are subject to fewer regulatory requirements compared to other NBFCs, reducing the burden of compliance and making it easier to manage.
• No External Interference:
  As Nidhi Companies operate solely among their members, there is no external interference, ensuring smooth operations and decision-making within the community.
• Limited Liability:
  The liability of the members is limited to the amount of their capital contribution, protecting personal assets from business liabilities.

Procedure

• Obtain Digital Signature Certificate (DSC):
  The first step is to obtain a DSC for all directors, allowing them to sign electronic documents securely and in compliance with legal standards.
• Apply for Director Identification Number (DIN):
  Each director must apply for a DIN, which is mandatory for their legal recognition as directors of the company.
• Name Reservation:
  File an application to reserve a unique name for the Nidhi Company, ensuring it includes “Nidhi Limited” and complies with the naming guidelines under the Companies Act, 2013.
• Draft the Memorandum of Association (MOA) and Articles of Association (AOA):
  Prepare the MOA and AOA, which outline the company’s objectives, governance structure, and operational guidelines, and file them with the Registrar of Companies (ROC).
• File Incorporation Forms:
  Submit Form INC-32 (SPICe) along with the MOA, AOA, and other necessary documents to the ROC for approval, declaring the company’s intention to operate as a Nidhi Company.
• Obtain Certificate of Incorporation:
  Once approved, the ROC will issue the Certificate of Incorporation, officially recognizing the company as a Nidhi Company.
• Commence Operations:
  After incorporation, the company must reach at least 200 members within its first year, file relevant returns, and adhere to Nidhi Rules, 2014, ensuring ongoing compliance.
• Ongoing Compliance:
  The company must file annual returns, maintain proper financial records, and comply with all statutory obligations under the Companies Act, 2013, and Nidhi Rules, 2014.

Why Legal Corner

• In-Depth Expertise:
  Our team has extensive experience in registering and managing Nidhi Companies, ensuring that your company is set up correctly and operates smoothly within legal parameters.
• Hassle-Free Registration:
  We handle the entire registration process, from obtaining necessary approvals to filing documents, allowing you to focus on building your community’s financial stability.
• Tailored Solutions:
  We offer customized services that cater to your specific needs, ensuring that your Nidhi Company is structured for long-term success and growth.
• Transparent and Affordable:
  We provide clear, competitive pricing with no hidden fees, making our services accessible to businesses of all sizes while maintaining high standards of quality.
• Ongoing Support:
  Beyond registration, Legal Corner offers continuous support for compliance, regulatory filings, and other legal needs, helping your Nidhi Company thrive and serve its members effectively.

FAQ