Nidhi Company Registration

What is a Nidhi Company in India?

A Nidhi Company is a specialized type of Non-Banking Financial Company (NBFC) registered under Section 406 of the Companies Act, 2013. Its main purpose is to facilitate the lending of money among its primary members, promoting a culture of saving and investment within the company. Members deposit their savings, which are then used to provide loans or advances to other members, as well as to invest in government securities, stocks, debentures, and bonds. The Ministry of Corporate Affairs regulates Nidhi Companies, while the Reserve Bank of India (RBI) monitors their financial activities to ensure compliance and stability. Register your Nidhi Company with ease through E Accountax Manager's expert services, and empower your financial journey today!

Key Features of Nidhi Company in India

• Principal Business Focus: The primary business objective of Nidhi Companies is to encourage a habit of saving and thrift among their members. They offer various financial services, including loans against gold, fixed deposits, recurring deposits, and other investment options, tailored to meet the needs of their members.

• Unsecured Loans by Nidhi Company: A Nidhi Company is prohibited from providing unsecured loans to its members. Loans provided by a Nidhi Company are subject to certain rules and regulations as per Nidhi Rules, 2014. All loans must be secured by specified collateral such as gold, fixed property, fixed deposits, or government bonds.

• Maximum Rate of Interest on Loan: According to Rule 16 of Nidhi Rule 2014, a Nidhi Company cannot charge more than 7.5% above the highest interest rate it offers on its deposits.

• Maximum Rate of Interest on Deposit: The interest rate a Nidhi Company offers on its deposits cannot be higher than the maximum rate set by the Reserve Bank of India (RBI) for NBFCs, which is currently 12.5%. Therefore, Nidhi Companies can offer a maximum of 12.5% interest on their fixed deposits.

• Registration and Regulation: A Nidhi Company is registered under Section 406 of the Companies Act, 2013 and shall be a Public Company. It is regulated by the Ministry of Corporate Affairs (MCA) and monitored by the Reserve Bank of India (RBI).

• No RBI License Required: Nidhi Companies do not require a license from the RBI, making the registration process simpler. However, they must adhere to the guidelines issued by the RBI for NBFCs.

• No External Borrowings or Lending Permitted: Nidhi Companies rely solely on their members for capital infusion and do not accept deposits from the general public nor provide loans to non-members. This self-reliance eliminates the need for external borrowing and ensures financial stability within the organization.

• Requirement for Nidhi Company:

  • Incorporation Requirements:
  • Public Company: A Nidhi Company must be incorporated as a Public Company.
  • Minimum Share Capital: It must have a minimum paid-up equity share capital of ₹10,00,000.
  • No Preference Shares: Preference shares cannot be issued. If preference shares were issued before the commencement of this Act, they must be redeemed according to their terms.
  • Minimum Members: At least 7 members and 3 directors required.
  • Primary Objective: The company's main goal must be to cultivate the habit of thrift and savings among its members, accepting deposits and providing loans exclusively to its members for their mutual benefit.
  • Naming: The company name must include the words ‘Nidhi Limited’.
  • Post-Incorporation Requirements (within one year):
  • Minimum Members: The company must have at least 200 members.
  • Net Owned Funds: The net owned funds must be ₹20,00,000 or more. Net owned funds are calculated as the aggregate of paid-up equity share capital and free reserves minus accumulated losses and intangible assets from the last audited balance sheet.
  • Deposit Ratio: The ratio of net owned funds to deposits must not exceed 1:20.
  • Unencumbered Term Deposits: The company must maintain unencumbered term deposits of at least 10% of the outstanding deposits, as specified in Rule 14.

Steps to Register a Nidhi Company in India

• Obtain Digital Signature Certificate (DSC): All proposed directors and subscribers must obtain a DSC, which is required for e-filing forms on the Ministry of Corporate Affairs (MCA) portal.

• Name Reservation: Use the RUN (Reserve Unique Name) service on the MCA portal to reserve a unique name for the Nidhi Company. Ensure the name includes 'Nidhi Limited'.

• Prepare Incorporation Documents: Draft the Memorandum of Association (MOA) and Articles of Association (AOA) specifying the company’s objectives, which should include promoting thrift and savings among members.

• File Incorporation Form: File the SPICe+ (Simplified Proforma for Incorporating Company Electronically Plus) form along with the MOA, AOA, KYC of all directors, Consent to Act as Directors, and other required documents. Pay the prescribed government fees and stamp duty applicable for the incorporation of the company.

• Certificate of Incorporation: Upon approval of the incorporation application, the Registrar of Companies (ROC) will issue a Certificate of Incorporation, confirming that the company is registered along with PAN & TAN.

Required Documents to Register a Nidhi Company

• PAN Card of Proposed Directors and Shareholder
• Identity proof (Either Passport, Aadhaar card, Driving License, or Voter ID) of Proposed Directors and Shareholder
• Colored Passport size photo of Proposed Directors and Shareholder
• Residential Proof (Either Electricity Bill, Telephone Bill, or bank passbook) of Proposed Directors and Shareholder
• Proof of registered office (Either Rent/Lease agreement or NOC from owner along with electricity bill) of proposed company
• Declaration and Affidavit by Subscribers and Directors (Form INC-9)
• Consent to Act as Director (Form DIR-2)

Why Choose E-Accountax Manager for Registering a Nidhi Company?

• Expertise and Experience: E-Accountax Manager has a team of experts with extensive experience in company registration processes, including Nidhi Company registration. They are well-versed with the legal requirements and procedures, ensuring a smooth and hassle-free registration process.

• Personalized Assistance: E-Accountax Manager provides personalized assistance and guidance throughout the registration process. They understand the unique needs of each client and tailor their services accordingly, offering comprehensive support at every step.

• Efficiency and Timeliness: With E-Accountax Manager, you can expect efficient and timely completion of the registration process. Their streamlined approach and attention to detail ensure that all requirements are met within the specified timelines, allowing you to start your Nidhi Company operations promptly.

• Compliance and Documentation: They ensure that all necessary documentation and compliance requirements are fulfilled accurately. Their thorough understanding of legal and regulatory aspects minimizes the risk of errors and delays, providing peace of mind for clients.

Post Incorporation Compliances by Nidhi Company

• Hold First Board Meeting: Within 30 days of incorporation, the Nidhi Company must hold its first board meeting and approve various matters including the appointment of auditors and fixation of the company's financial year.

• Issue Share Certificates: The company must issue share certificates to all subscribers and members within two months of incorporation.

• File Annual Returns: The Nidhi Company must file annual returns with the Registrar of Companies within 60 days from the date of the annual general meeting (AGM). It must also file financial statements, including the balance sheet, profit and loss account, and auditor's report.

• Maintain Statutory Registers: The company must maintain various statutory registers, including the register of members, register of directors, and register of charges, as required under the Companies Act, 2013.

• Compliance with Nidhi Rules: The company must comply with Nidhi Rules, 2014, which includes maintaining a minimum net owned funds ratio, ensuring a maximum deposit-to-net owned funds ratio, and holding regular meetings of the board and members.

• Statutory Audit: A statutory audit must be conducted annually to ensure financial statements are accurate and compliant with the applicable accounting standards and regulations.

• Maintaining Reserve Fund: The company must maintain a reserve fund equivalent to 20% of its profits, which should be transferred annually before any dividend distribution.

Conclusion

Starting a Nidhi Company in India offers a valuable opportunity to promote a savings culture and provide financial services within a community. By understanding the key features, registration process, and post-incorporation compliance requirements, you can successfully navigate the regulatory framework and establish a compliant and effective Nidhi Company. Whether you’re focusing on promoting thrift and saving or ensuring legal adherence, E Accountax Manager’s expertise can guide you through every step of the process. Empower your financial journey today by leveraging our comprehensive support and services.