Nidhi Company Registration in India
Introduction:
A Nidhi Company is a type of Non-Banking Financial Company (NBFC) recognized under Section 406 of the Companies Act, 2013 and governed by the Companies (Nidhi Companies) Rules, 2014. These companies promote the habit of saving and thrift among their members and operate for mutual benefit by accepting deposits and lending only to their members.
What is a Nidhi Company?
A Nidhi Company is incorporated to encourage savings among members and provide loans to them at reasonable interest rates. It functions similarly to a mutual benefit society and is subject to the rules in Chapter XXVI of the Companies Rules, 2014.
Applicability of Nidhi Rules, 2014:
- Companies declared as Nidhi or Mutual Benefit Societies under Section 620A(1) of the Companies Act, 1956.
- Companies functioning as Nidhi/MBS even if they’ve not applied for notification under Section 620A(1).
- Companies incorporated under Section 406 of the Companies Act, 2013 as Nidhi Companies.
Key Requirements for Nidhi Company Incorporation
- Public Company: Must be incorporated as a public limited company.
- Minimum Capital: ₹5,00,000 paid-up equity share capital.
- No Preference Shares: Not allowed to issue preference shares. Existing ones must be redeemed.
- Objective: Must focus on thrift and mutual benefit among members.
- Name Clause: Must include “Nidhi Limited” in its name.
Post-Incorporation Compliance
- Minimum Members: At least 200 members within one year.
- Net Owned Funds (NOF): Minimum ₹10,00,000 after one year.
- Fund Ratio: Deposits should not exceed 20 times the NOF (1:20 ratio).
- Term Deposits: Must maintain 10% of outstanding deposits as unencumbered term deposits.
- Loan Security: Loans can be given against:
- Gold, silver, or jewellery (max 1-year repayment).
- Immovable property (max 7-year repayment, up to 50% of the value).
- Fixed deposits, NSCs, government securities, and life insurance policies.
Documents Required for Nidhi Company Registration
- PAN Card: Mandatory for all directors/promoters.
- Address Proof: Aadhaar, passport, driver’s license, or utility bill (not older than 2 months).
- Photographs: Passport-size photos of directors/promoters.
- Rent Agreement: If the office is rented (along with NOC from the owner).
- Utility Bill: Latest electricity/telephone bill of the office.
- DIR-2 Form: Consent to act as director.
- Other Directorships: Details of existing directorships in other companies/LLPs.
Conclusion
Registering a Nidhi Company is ideal for those aiming to build a community-based savings and lending ecosystem. It is a cost-effective way to start a micro-finance institution limited to members. However, strict compliance with post-registration norms is essential. Seeking professional assistance can simplify the process and ensure hassle-free operation.