What do you mean by Nidhi Company Registration?
It's a type of NBFC which is called NIDHI and is also known as Mutual Benefit Finance Company. For people who want to start a finance business with low capital investment, Nidhi Company is the best option for such people.
It aims to withdraw the habit of savingsand utilizing the same in the best possible way. Borrowing and lending of funds is the core area of their operation. Such companiesare able todo transactions with its registered members only and within the permitted district of work, as per the rules.
This Company is registered with the Ministry of Corporate Affairs and Companies Act 2013 regulates it. Such companies get registered easily as compared to other NBFCs registration.
No minimum qualification of Directors is required in this NBFC and no approval from RBI is required for Incorporation Form and every Nidhi company has to end their name with â€œNidhi Ltd.â€Â which is mandatory.
Registration Process of Nidhi Company
KYC of all the directors and shareholders
Final incorporation (MOA & AOA)
PAN & TAN
Incorporation procedure includes submission of the prescribed items;
All Directors and Shareholder's KYC
Requirement of Minimum 7 Members and 3 Directors is mandatory. Directors and Members can be the same.
To initiate any company Digital signature (DSC) is a basic requirement and so in this case as self-attested forms are required to be submitted.
Approval of Name
Name of such company should be unique as it should not be similar to other company's name. Through Reserve Unique Name (RUN) facility, name can be reserved.
Final Incorporation (Memorandum of Association & Article Of Association)
Along with Nidhi company's Articles of Association and Memorandum of Association, Nidhi Company Registration applicationis submitted in SPICe Form once name is approved. Certificate of Incorporation is issued after the proper inspection done by the officer.
Permanent Account Number& Tax Deduction Account Number
Along withÂ Nidhi Company Registration, application of PAN and TAN can be done as it is included in the SPICe Form.
List of Documents Required
- Directors and shareholder's Identity Proof
- Directors Pan cards copy
- Directors and shareholder's Address Proof
- Directors and shareholder's Aadhaar Card.
- Registered office's Proof (Electricity/Water bill)
- Rent agreement Copy (If rented)
- All director'sPassport size photographs
- No Objection Certificate is required from the owner of the property
8 Key Points to Know Before You Start a Nidhi Company in India
Not much contribution is required to start a Nidhi Company which is less than 20,000/-
Function and Operations ofÂ Nidhi Company in India is regulated by the Companies Act 2013 &Nidhi Rules 2014 Regulates
Approval not required from Reserve Bank of India
The scope of Nidhi Company does not cover under the preview of RBI. To operate a loan business in India, it does not require approval or license from RBI.
Microfinance Activity are not performed
Vehicle finance business & microfinance business in India are the restricted area for Nidhi Company to operate.
Minimum requirement of members
Minimum 200 members should be added within 12 months.
Interest on Loan
Byusing the reducing balance method, you can charge upto 20%.
For initial 3 Years, District Level Operations are mandatory,After taking the approval from the Regulator Director, 3 offices can be set up within the district or outside the zone after that 3 years period.
Loan against Security
Credits against security can only be given by the Nidhi Company. Such securities include Gold, Property, and Fixed Deposits& LIC.
Requirements for Registration of Nidhi Company
Check list of requirements for registration a Nidhi Company.
Pre- Incorporation PeriodRequirement
- 7 Minimum number of shareholders
- 3 Minimum number of Directors
- Rs. 5 lakhs is the minimum capital requirement.
- Directors Identification Number (DIN) for Directors
Post- Incorporation Period Requirement
- At the end of the 1st year, the requirement of minimum number of shareholders is 200.
- Net owned fund must be more than Rs. 10 lakhs
- The ratio for net owned funds to deposit should be more than 1:20
- Unencumbered deposits should be more than 10 % of outstanding deposits
Advantages of Nidhi Company Registration
Nidhi company incorporationÂ is prominent among people who want to commence financial service business but do not have much capital to contribute. Reasons for the popularity of Nidhi companies are as follows:
Separate Legal Entity Concept
Promoters and shareholders have separate legal entity from its company. Properties are acquired on the name of the company and it also incur debts on its name.
Directors and manager's liability is limited as per The Companies Act 2013.
Life of the company is independent of the death of its shareholders as it has a perpetual existence.
Management of operation become easy
Changes in management according to the circumstances become easy as compared to other NBFCs.
Credibility in market
Nidhi Companies is regulated by the Ministry of Corporate affairs due to which it is more credible in comparison to other institutions which are controlled and managed by the state governments
Nidhi Rule 2014
Following activities are prohibited as per the rule 6 of the regulations mentioned in the Nidhi Company Rules 2014
- Carry on the chit fund businesses, leasing finance or acquisition of securities
- Issue of preference shares, debentures or any other debt instruments are restricted.
- Opening a current account with its members
- Acquiring another company by purchasing securities of that company.
- Carry on any other business except borrowing and lending to its members
- Accepting deposits from a person who is not its member
- Lending or taking the deposit from a corporate
- Nidhi company cannot enter into a partnership, for lending or borrowing activities
- Issuing advertisements for soliciting deposits
- Member's assets kept as a security cannot be pledged
- No commission or incentive is required to beÂ paid, for mobilizing deposits
5 Things to Know before Applying for Name Approval of the Nidhi Company
Lists of factors which must be keep in mind while selecting the name of the Nidhi Company.
- Easy& Concise- Easy to remember and pronounce
- Must be Unique and different-Not identical with any existing company
- Relevancy- The objects and brand value of the company must be fulfilled through its name.
- The suffix in the company name: At the end of the company name, the word â€˜Nidhi Limited or â€˜Mutual benefit Nidhi Limited must be mentioned
- Must not be Offensive: It must not disrespect any culture, religion or group of people
- Must not violate any laws-Must follow provisions of Emblems and Names (Prevention of Improper use) Act, 1950.
Regulator of Nidhi Company
Nidhi Company is a Non-banking financial sector. NBFCs are registered under the Companies Act, 2013 and Reserve Bank of India regulates them, except Nidhi Company as it has a distinct regulation rule by the name of Nidhi Rules, 2014.
Under Section 406 of the Companies Act, 2013, Nidhi Companies are registered.
As Nidhi Company deals with its members and shareholders therefore exemption has been given to them by RBI from its core provisions. However, RBI provides directions on matters relating to deposit-taking activities of Nidhi Companies.
Nidhi Company Registration Fee?
A complete break-up of Nidhi Company Registration FeeÂ is all inclusive at Rs 17,999/. In 10 to 15 days,Registration processof Nidhi Company can be completed with the help of our team of expert professionals. Only you have to provide all the necessary documents along with registration fees.
6 Mandatory Compliance for Nidhi Company
List of members is required to be submitted within 90 days from the end of every financial year.
Where Nidhi Company is not able to add 200 members in a year, extension for the same can be requested from Ministry of Corporate Affairs.
A half yearly return has to file in Form NDH 3 along with the above form.
ROC Annual Returns
Form MGT-7 is filed for annual returns with Ministry of Corporate Affairs by Nidhi Companies.
Profit Loss and Balance sheet
Form AOC-4 is to be filed for the submission of financial statements and other related documents by Nidhi Company.
Income tax Returns
An annual return is to be filed by Nidhi Companyby 30th September of the following financial year.
Do You Have Any Questions?
Provision of Reserve Bank of India is not applicable to the Nidhi Companies as they are exempt from such provision. Neither the registration nor the regulation of Nidhi Company is done through RBI.
On various parameters both the companies are different. Capital Requirement of Nidhi Companies are minimum as compared to other NBFCs whose minimum requirement is Rs.2 Crore paid capital
Ministry of Corporate Affairs registers as well regulates Nidhi Companies. As per the provisions of Nidhi Rules, 2014, all the operations and performance of Nidhi companies are performed.
As Ministry of Corporate Affairs regulates the Nidhi Companies, in order to ensure smooth and transparent operations of Nidhi Company central government has introduced Nidhi Rules, 2014. These rules contain the governing principles for Nidhi company operations.
Deposits can be accepted only from the registered members.
Following requirements are to be fulfilledin order to become the member of the company:
- An individual can become the member of the company, no corporate body or trust can become a member.
- The member must not be minor as he must have attained the age of 18 years.
As soon as the registration of Nidhi Company gets completed, one can commence their business without the approval of Reserve Bank of India
Microfinance is small credit facility and is mostly regulated in urban and semi- urban areas. Additionally approval of Reserve Bank of India is required and such business is only conducted by any large NBFCs.
Following securities cannot be issued by Nidhi Companies
- Any other kind of Debt security
Amount of deposits, a Nidhi Company holds, according to that only it can sanction loans to its members. Following are specified limits:
|Deposit amount (INR)||Sanction Limit (INR)|
|Less than 2 Cr||2,00,000|
|More than 50 Cr||15,00,000|
No, Nidhi Company can operate in the state only in which it is registered.
Nidhi Company is required to meet certain following conditionswithin a year once its registration process gets completed
- Nidhi Company is required to registeritself with at least 200 members
- Minimum requirement of maintaining net owned funds is Rs. 10 Lakh
- Minimum requirement of maintaining net owned funds to deposit ratio is 1:20
- 10% must be unencumbered term deposits, out of all the outstanding deposits
Application for an extension of period with Regional Director in Form NDH-2 can be filed in case of failure to meet the post – incorporation requirements within the period of one year from the registration of Nidhi Companies.
The main objectives of the Nidhi Companies are to withdraw the saving habits of the public and utilize the same in the best effective way. So, Nidhi Companies are not allowed to accept deposits through promotions or by any kind of advertisements.
Remittances of any kind of brokerage or incentives cannot be done by Nidhi Companies for the promotion or mobilization of deposits.
Other organizations or institutions securities cannot be purchased by Nidhi Companies.
Authorization of opening a Current Account is not given to Nidhi Companies.
Nidhi Company cannot acquire another company through the purchase of its securities and moreover controllingits management or changing the composition of its management is not possible.
No, activity other than lending and borrowing cannot be carried on by the Nidhi Company.
A branchcan be opened whennet profit after tax consecutively for three straight years has been earned by Nidhi Companiesafter the successful registration of the Nidhi Company.
After fulfilling the condition as mentioned above Nidhi Company is eligible to open 3 branches in the same district in which the company is registered.
Permission from the Regional director is required for opening more than 3 branches weather inside or outside the district.
Only secured loans are issued by the Nidhi Company. It cannot issue unsecured loans.
Against following securities only, Nidhi Company can issue securities:
- Silver, Gold, other precious metal and jewelry and such other ornaments
- Other than Movable Property (Immovable Property).
- Government securities, national saving certificates (NSC), insurance policies, Fixed Deposit (FD) receipts etc.
Nidhi Company is not allowed to issue the Following type of loans cannot be issued by Nidhi Companies:
- Personal loans
- Asset/ Vehicle finance
We India Financialhave branch office across India. As a result, we provide PAN-India services. Moreover,there is total online procedure of registering Nidhi Company in India. Thus, we offer Nidhi company Registration services all over India irrespective of the fact where the location of your office you want to choose.
At India Financial, we have a group of talented professionals like CA, CS, lawyers and other experts who have the updated knowledge of laws and their provisions. We ensure to solve all the queries and problems and try to execute all the procedureof registration with full concentration and focus.