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Nidhi Company

Procedure of Nidhi Company Registration: Fees, and Documents

Unknown to the subject of the Nidhi Company registration? Read this article to learn in-depth about Nidhi company.

What Is Nidhi Company?

A Nidhi Company is a non-banking financial company (NBFC). The word NIDHI stands for National Initiative for Developing and Harnessing Institutions. The purpose of a Nidhi Company is to borrow and lend money to its members, where the members themselves carry out all the transactions. The Nidhi Company registration is done under section 406 of the Companies Act, 2013 and managed under the RBI guidelines.

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Nidhi Company – Prohibition of Activities

There are some Nidhi Company rules that prohibit certain activities that the company can engage in:

  • Nidhi Companies can not perform business operations other than borrowing and lending.
  • Nidhi Companies can not deal with hire-purchase finance, insurance, security businesses, chit-funds, and leasing of finances.
  • Nidhi Companies can not issue any kinds of debentures and shares.
  • Nidhi Companies can not open a current account with its members.
  • Nidhi Companies can not take deposits from or lend to individuals other than their company members.
  • Nidhi Companies can not issue advertisements to attract depositors.
  • Nidhi Companies should not pay any incentives or brokerage for loan rendering or deployment of funds.

Benefits of Nidhi Company Registration

You can get a wealth of advantages for Registration of Nidhi Company. One of the most essential is money savings.

  • Net-owned funding system: The net owned fund ratio of Nidhi Companies is 1:20, which means that for every 1 rupee you deposit, you gain 20 rupees.
  • Liability is limited: The liabilities of a member depend upon the funds deposited by them. The liability is limited to the share the member has in the company.
  • Separate legal existence: Nidhi Company registration consequently forms a separate entity. It benefits from a separate legal existence and can deposit or acquire assets in its name.
  • Accessibility to funds: When in need of funds, the company members can borrow funds they previously deposited at lower interest rates. The Detail Information will be given for Process of Nidhi Company in India.

Minimum Requirements to Register as a Nidhi Company in India

To kickstart the procedure of registering as a Nidhi Company, the following requirements have to be met:

  • Under the Companies Act, the company must be incorporated as a Public Limited Company.
  • The company should have a minimum of:
    • 200 members
    • 7 shareholders
    • 3 directors
  • Equity capital of a minimum of Rs. 5 lakh is required.
  • Net Owned Funds worth Rs. 10 lakh or more are required.
  • The objective of the company should only be to borrow and lend among the members.
  • Unencumbered term deposits of 10% or more of the outstanding deposits should be present with the company.
  • The name of the company should end with ‘Nidhi Limited.’
  • Director Identifications Numbers (DIN) of all directors to be provided.

Documents for Nidhi Company Registration

To get a company registered as a Nidhi Company, the following documents are required:

  • Proof of address of the registered location of the business – Ownership documents or lease/rent agreement.
  • No Objection Certificate (NOC) signed by the landlord or owner.
  • Identity Proof
  • Address Proof of the Members
  • Photographs of the Members
  • PAN Card Copies of Members
  • Director Identification Numbers (DIN) of Directors
  • Digital Signature Certificate (DSC) of the Company
  • Certified Copy of the Memorandum of Association (MoA) of the Company
  • Certified Copy of Articles of Association (AoA) of the Company

Forms to Be Filled for Nidhi Company Registration

The following forms have to be filed for the registration process:

  • INC 9: All the subscribers of the Memorandum of Association (MoA) have to file this form.
  • DIR 2: The DIR 2 has to be filed by all the company directors, and the declaration of rules 5 & 6 of Nidhi rules 2014 – all the subscribers have to sign the form.

Process of Nidhi Company Registration

The procedure of registering a Nidhi Company goes about in the following manner:

  • Acquire DIN and DSC from MCA Certified Agents: The first step is to obtain the Digital Signature Certificate (DSC), and Directors’ Identification Number (DIN) for all the directors from the MCA certified agents.
  • Obtain Name Approval: 3 names for the Nidhi Company have to be given for suggestions to the MCA, from which one of the names will be approved by them. The name has to end with ‘Nidhi Limited’.
  • Application for Registration and Filing of the COI: After the approval of the name, the application is filed for registration by the directors to the Articles of Association and Memorandum of Association. The application has to have the Conflict of Interest (COI) filed in the forms INC-7, INC-22, and DIR-12.
  • Submit Member Details: Along with the application, the details of the members have to be submitted to the Nidhi board, ensuring that the count of 200 members is met during the application.

Factors to Consider Before Choosing a Name for Nidhi Company Registration

Here are a few factors that should be considered while choosing a name during Nidhi Company registration:

  • Meaning of the Name: The meaning of a name is a major consideration when choosing a distinctive name. Choosing a name with a meaning that is related to the company’s activity is preferable.
  • Length of the Name: The name should be short and impactful. Customers are more likely to remember simple names.
  • Legal Name: The company’s name should adhere to the Emblems and Names Act, 1950.
  • No Offensive Names: The company’s name should be as per laws and should not contain offensive words.
  • ‘British India’: The company’s name should not contain the phrase ‘British India’.

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