Nidhi Company

Nidhi Company Registration in India

A Nidhi Company is a type of non-banking financial company (NBFC) recognized under Section 406 of the Companies Act, 2013. Nidhi Companies are formed for the purpose of cultivating the habit of savings among their members and providing loans to them. They are essentially mutual benefit societies that operate on the principle of mutual cooperation.

Characteristics of Nidhi Companies

1. Membership-Based: Nidhi Companies primarily operate for the benefit of their members.
2. Limited Liability: The liability of members is limited to the extent of their shareholding.
3. No Outside Investments: Nidhi Companies cannot accept deposits from non-members or offer loans to non-members.
4. Self-Regulated: They are regulated by the Ministry of Corporate Affairs (MCA) and operate under the Companies Act.

Benefits of Nidhi Company Registration

1. Lower Cost of Borrowing: Nidhi Companies can offer loans to members at lower interest rates.
2. Limited Liability: Members enjoy limited liability protection.
3. Tax Benefits: Nidhi Companies can avail various tax benefits under the Income Tax Act.
4. Member Support: The model encourages savings and provides financial support to members.
5. Ease of Operation: Nidhi Companies have fewer compliance requirements compared to other NBFCs.

Documentation Requirements for Nidhi Company Registration

To register a Nidhi Company in India, the following documents are typically required:

1. Incorporation Application

• Description: Application in the prescribed form (Form INC-32) for incorporating a Nidhi Company.
• Details: Must include the proposed name, objectives, and details of the directors.
• Description: A document stating the company’s objectives and scope of activities.
• Content: Should clearly state the primary objective of promoting the habit of saving and accepting deposits from members.
• Description: Rules governing the internal management of the Nidhi Company.
• Content: Should reflect the mutual benefit nature of the company and its operations.
• Description: Verification documents for all proposed directors.
• Documents: Acceptable proofs include:
  • PAN card
  • Aadhaar card
  • Passport
  • Voter ID
  • Description: Proof of residential addresses of all proposed directors.
  • Documents: Acceptable documents include:
    • Utility bills (electricity, water, etc.)
    • Bank statement
    • Rent agreement or property deed
  • Description: Required for all proposed directors for filing the incorporation documents electronically.
  • Details: Obtain a DSC from a certifying authority.
  • Description: A unique identification number for each director.
  • Details: DIN can be obtained through the Ministry of Corporate Affairs (MCA) while filing the incorporation documents.
  • Description: Evidence of the registered office of the proposed company.
  • Documents: Acceptable proofs include:
    • Utility bills
    • Lease agreement or property deed.
  • Description: A list of at least seven members who will be part of the Nidhi Company.
  • Details: Should include names, addresses, and contact information.

2. Memorandum of Association (MOA)

3. Articles of Association (AOA)

4. Identity Proof of Directors

5. Address Proof of Directors

6. Digital Signature Certificate (DSC)

7. Director Identification Number (DIN)

8. Proof of Registered Office Address

9. List of Members

Steps for Nidhi Company Registration

1. Obtain DSC and DIN: Directors must obtain a Digital Signature Certificate and Director Identification Number.
2. Draft MOA and AOA: Prepare the Memorandum and Articles of Association according to Nidhi Company guidelines.
3. File Application: Submit the incorporation application along with the necessary documents to the Registrar of Companies (RoC).
4. Obtain Approval: Upon successful verification of the application, the RoC issues a certificate of incorporation.
5. Commencement of Business: After incorporation, the Nidhi Company can commence its operations after fulfilling initial compliance requirements.

Compliance Requirements for Nidhi Companies

Once registered, Nidhi Companies must comply with certain regulations, including:

1. Minimum Members: Must maintain a minimum of 200 members.
2. Net Owned Funds: Should maintain a minimum net owned funds of Rs 10 lakh.
3. Deposits: Must not accept deposits exceeding 20 times of its net owned funds.
4. Annual Returns: Must file annual returns with the Registrar.
5. Financial Statements: Preparation and submission of financial statements.

Nidhi Company registration in India provides an opportunity for individuals to form a mutual benefit society that encourages savings and provides loans to its members. The registration process involves several documentation and compliance requirements, which can be managed effectively with professional guidance. With the right approach, Nidhi Companies can play a vital role in promoting financial inclusion and supporting their members' economic well-being.