Nidhi Company Registration in India: Procedure, Documents, Eligibility,

Updated on : None - None 17 min read.

What is Nidhi Company?

A Nidhi company is a type of non-banking financial company (NBFC) registered under the Companies Act, 2013 in India. It is also known as a mutual benefit society that primarily engages in accepting deposits from its members and providing loans to them at a reasonable rate of interest. The main objective of a Nidhi company is to promote thrift and savings among its members.

A Nidhi company is restricted to carrying out business activities only among its members. It cannot accept deposits from the public at large and can only accept deposits from its members. The minimum number of members required to start a Nidhi company is 200. The members of a Nidhi company are also its shareholders, and the company operates on a mutual-aid basis, where the profits are shared among members.

Nidhi companies are regulated by the Ministry of Corporate Affairs and the Reserve Bank of India. They are also required to comply with various regulatory requirements, including the periodic filing of returns, maintenance of minimum net-owned funds, and adhering to strict norms for loan disbursal.

Why was Nidhi Company formed/Benefits?

Nidhi companies were formed to promote savings and thrift among its members and to provide financial services to them at a reasonable rate of interest. The main benefits of forming a Nidhi company are:

Easy Availability of Funds: Nidhi companies allow their members to access loans and other financial services easily, without the need for extensive documentation and lengthy loan processing procedures.
Safe Investment Option: Nidhi companies provide a safe investment option for members as the deposits are protected by the government and regulated by the Reserve Bank of India.
Reasonable Interest Rates: The interest rates offered by Nidhi companies are reasonable, making them an attractive option for depositors and borrowers.
Promotes Financial Literacy: Nidhi companies promote financial literacy among their members by educating them about the importance of savings and financial planning.
Mutual Aid: The profits generated by a Nidhi company are shared among its members, promoting the idea of mutual aid and a sense of community.

Activities are Prohibited in Nidhi Company

Nidhi companies are regulated by the Reserve Bank of India (RBI) and are governed by the Nidhi Rules, 2014. According to these rules, there are certain activities that are prohibited for a Nidhi company to engage in. Some of these activities are:

Acceptance of deposits from the public: Nidhi companies cannot accept deposits from the public and are restricted to accepting deposits only from its members.
Investment in shares and securities: Nidhi companies cannot invest in shares and securities, except for their own shares.
Lending to Non-Members: Nidhi companies are not allowed to lend money to non-members, as their primary objective is to provide financial services to their members only.
Carrying out Non-Financial Business: Nidhi companies cannot engage in any non-financial business activities, as their main purpose is to provide financial services to their members.
Lending to directors, partners, and employees: Nidhi companies are prohibited from lending money to its directors, partners, and employees, as this creates a conflict of interest.
Creation of charges on assets: Nidhi companies are not allowed to create charges on their assets, as this reduces the security of its members' deposits.

What are the minimum requirements that are to be fulfilled for registration as a Nidhi Company?

Minimum Number of Members: The minimum number of members required to register a Nidhi Company is 200.
Minimum Capital Requirements: The minimum capital requirement to register a Nidhi Company is INR 5 Lakhs.
Directors: A minimum of three directors are required to register a Nidhi Company.
Registered Office: The registered office of the Nidhi Company must be located in India.
Incorporation Certificate: A certificate of incorporation must be obtained from the Registrar of Companies (ROC) after the company has been registered.
PAN and TAN: The company must obtain a PAN (Permanent Account Number) and TAN (Tax Deduction and Collection Account Number) from the Income Tax Department.
RBI Approval: The Nidhi Company must obtain approval from the Reserve Bank of India (RBI) before it starts its operations.
Memorandum and Articles of Association: The Memorandum and Articles of Association must be in accordance with the Nidhi Rules, 2014.
Statutory Audits: The Nidhi Company must get its accounts audited annually by a Chartered Accountant.

Documents Required for Nidhi Company Registration

The following documents must be submitted in order to get a company registered as a Nidhi Company:

Ownership documents or a rent/lease agreement has to be provided as proof of address of the registered place of business
A No Objection Certificate (NOC) duly signed by the landlord or the owner of the place where the business is registered
Identity proofs
Address proofs of the members of the company
Photographs of the members of the company
Digital Signature Certificate (DSC) of the company
Copies of PAN cards of the members
Director Identification Numbers (DIN) of all the directors
Certified copy of the updated Memorandum of Association (MoA) of the company
Certified copy of the updated Articles of Association (AoA) of the company

Forms to be filed

There are two forms that are required to be filed.

INC 9: Each and every subscriber to the Memorandum of Association must submit the INC 9 form (MoA)
DIR 2: All of the company’s directors must complete and sign the DIR 2 form, as well as all of the subscribers.

The procedure of Nidhi Company Registration in India

The registration of a Nidhi company in India can be done in two ways:

Online Registration

The process of registering a Nidhi company online involves submitting the required documents and fees to the Ministry of Corporate Affairs (MCA) through the MCA21 portal. This is a digital platform that allows for the electronic submission of documents and fees for company registration. The online process is faster and more convenient compared to the traditional manual process.

The online registration process for a Nidhi company in India involves the following steps:

Obtain DINs and PANs for the proposed directors of the company.
Reserve a name for the company by submitting an application for name reservation to the Ministry of Corporate Affairs (MCA) through the MCA21 portal.
Prepare the incorporation documents, including the Memorandum of Association (MOA) and Articles of Association (AOA).
File the incorporation documents, along with the DINs and PANs of the directors, and proof of address of the directors, with the MCA through the MCA21 portal.
Receive the certificate of incorporation and PAN for the company from the MCA.
Open a bank account in the name of the company and provide the bank with the certificate of incorporation, MOA, AOA, PAN, and TAN (Tax Deduction and Collection Account Number).
Apply for a license from the Reserve Bank of India (RBI) to commence business operations.
Comply with the ongoing compliance requirements under the Companies Act, 2013, such as filing annual returns and holding annual general meetings.

It is important to note that the online registration process for a Nidhi company requires a digital signature, which can be obtained from a licensed Certifying Authority (CA).

Manual Registration

The manual process of registering a Nidhi company involves submitting the required documents and fees to the MCA in person or by post. This process is slower and requires more effort, but it may be necessary in certain cases, such as when the MCA21 portal is not available or when additional clarifications are required.

In conclusion, registering a Nidhi company in India requires a number of steps, including obtaining DINs and PANs, reserving a name, preparing incorporation documents, incorporating the company, obtaining a license, and filing annual returns. It is important to ensure that all necessary documents are in order and that the company complies with the latest laws and regulations. Seeking the help of a professional, such as a company secretary or a chartered accountant, can ensure a smoother and more successful registration process.

By Amit Pawar

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