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Nidhi Company

Nidhi Company

Nidhi Company Registration

  • Ideal for deposits and loans
  • For dealing in finance
  • Simple & Secure Online Process
  • Dedicated Professional
  • Get Registration in 10-12 Days
  • Get Post Incorporation Assistance

Introduction of Nidhi Company

Nidhi Company means a Company engaged in receiving deposits and lending loans to its Members only for their mutual benefits. It is incorporated as a Public Limited Company and is different from National Banking Finance Company governed by the RBI Act and other Companies incorporated under Companies Act, 2013. The purpose behind incorporating a Nidhi Company is to develop a habit of saving and thrift among its Members.

It is not directly regulated by the RBI but is required to follow some of the directives that are issued by the RBI from time to time for acceptance of deposit. It is an ideal type of entity for a specific group of people intended to deposit or lend money.

Advantages of Nidhi Company Registration in India

Following are the advantages of Nidhi Company Registration in India:

  • No External Involvement in the Company’s Management;
  • Easy to lend money to or raise capital or borrowings from group members;
  • Easy to manage;
  • Low capital requirement;
  • Relaxation in the number of compliances;
  • Cost-efficient Registration;
  • Many privileges and exemptions are provided under the provisions of the Companies Act, 2013;
  • The Minimal involvement of RBI;
  • Secured investment with a lower rate of interest;
  • Low level of risk;
  • Better savings option;
  • Fulfilling the financial requirements of the lower and middle-income groups;
  • Easy access to public funds;
  • Limited liability.
  • Micro Finance

Nidhi Company lends money in the remote as well as rural areas of the country and which are on the off site locations.

Limited Liability
  • The liability of the Members is limited to the extent of Capital invested by them in the Company and therefore, they cannot be held personally liable for it also it is a legal entity which means it is different from its Members and Directors.
Less Complexity
  • Nidhi Company involves fewer complexions and can be incorporated with an amount of Rupees 10 Lakhs which is to be raised to 20 Lakhs within 120 days of incorporation and the loans from the Nidhi Company can be availed at cheaper rates than NBFC's.
Good option for savings
  • As the main objective of establishing Nidhi Company is to develop a habit of savings among the people for their mutual benefit as they can only lend and borrow money from their members only.
Better Credit Co-operative society
  • Nidhi Company has some similarities to the co -operative society and is suitable for the small financers. Once it gets registered it can avail the benefits of credit co-operative society.
Easy Access to Public Funds
  • Nidhi Company can take deposits from its members through various accounts like Saving Account, FD A/c, Rd A/c which is less complex than taking finance from banks and other Financial Institutions.

Minimum Requirements

  • Minimum three persons as Director and maximum fifteen
  • Minimum seven persons as Members
  • Minimum Capital requirement of Rs.10 Lakhs
  • Nidhi Company cannot issue Preference shares
  • Minimum one Director shall be Indian resident
  • Digital Signatures of Subscriber and Directors

Documents Required for Incorporation

  • PAN Card of the Member and Directors of the proposed Company. Passport in case of Foreign Nationals .
  • Identity Proof of the Member and Directors of the proposed Company; (Aadhar /Voter ID/Driving License/Passport)
  • Address Proof of the Members and Directors (Utility Bill/Telephone Bill/Mobile Bill/Bank Statement not older than two months)
  • Latest passport size photograph of Member and Directors

Business Address Proof

  • Owned Property : (Copy of Registry and Latest Govt. Electricity Bill or Water Bill)

Business Address Proof

  • Rented/leased: (Rent Agreement, NOC from the Owner, Latest Govt. Electricity Bill or Water Bill)

Post Registration Requirements

  • Minimum 200 Members should be there within 120 days of incorporation
  • Net Owned Funds should be 20 Lakh Rupees or more within 120 days of incorporation for New Companies and for existing Nidhi Companies, there is relaxation of 18 Months from the commencement of New Amendments Rule to maintain this limit.
  • Unencumbered deposits should be more than 10% of outstanding deposits.
  • The ratio for Net Owned Funds to Deposit should not be more than 1:20.

Loans & Deposits

Nidhi companies have an advantage over other type of finance vehicles that they can lend loans and accept deposits from general public (members) without the approval of RBI. It is important to know the basics before doing the same.

Loans

  • Can provide loan only to its members
  • Certain Monetary Limits have been defined for giving loans
  • Can only give secured loans against gold, silver, immovable property, FDs, NSC, other Govt Securities and Insurance Policies
  • It can charge interest rate 7.5% above the rate of interest offered on deposits on reducing balance method

Deposits

  • Can accept 20 times deposit of the Net Owned Funds (Example : If NOF is Rs. 10 lakhs, it can accept deposits amounting to Rs. 2 crores
  • Deposits can be accepted in the form of FD A/c, RD A/c, Savings A/c
  • Can pay interest on FD and RD up to 12.5% and 6% on Savings A/c.
  • Fixed Deposits Tenure : 6 months - 60 months Recurring Deposits Tenure : 12 months - 60 month

Compliances of Nidhi Company of Post Incorporation

NDH-1: NDH-1 is a one-time form to be filed by Nidhi Company incorporated before 19th April 2022, within 90 days of the closure of the first financial year or second where applicable.

NDH- 3 form is filed within 30 days on half yearly basis and details of the members, deposits, loans are reported to department.

NDH-4 form has to be filed within 120 days from the date of incorporation for declaration of the status as Nidhi Company.

OTHERS FORMS

Nidhi has to file other forms like AOC-4, MGT-7, MGT-14 and other event based forms as per the applicability.

Comparison Between Nidhi Company and NBFC

S. No. Basis NBFC Nidhi Company
1. Act Governed by Indian Banking Regulation Act, 1934 Governed by Companies Act, 2013
2. Capital required More Capital is required Less Capital required then NBFC
3. Compliances Strict Norms and Regulations Less Strict Norms and Regulations
4. Restrictions There are no such restrictions applicable on NBFC like Nidhi Company Nidhi Company cannot do business of chit funds, hire purchase finance, lease finance, insurance or acquisition of securities issued by the Body Corporate.
5. Opening of Branch Can open branch at any time It has to continuously earn profit for a period three years for opening a branch.
6. Dealing Can deal with general public Can only deal with its Members

Compliances for Nidhi Company Registration

Form Compliance Due Date
Form NDH-1 (Return of Statutory Compliance) – These forms contain all the information regarding deposits, reserves, members, loans, etc., for full financial years. E-Form GNL-2 for the submission of the documents with the Registrar Within the 90 days from the closure of the Financial Year, along with fees.
Form NDH-2 This Form is for the extension of time and this Form is filed if: The Company fails to add at least 200 members within 120 days of incorporation. Failure to maintain the NOF to deposit ratio of 1:20. This Form must be filed with the Regional Director within 90 days from the closure of the financial year, along with the prescribed fees.
Form NDH-3 This Form is used for Half-yearly returns and it should be filed with the Registrar of Companies. This Form should be filed within 30 days from the conclusion of the half-year.
Form NDH-4 This Application is for the declaration as Nidhi Company For a New Nidhi Company: Within the duration of 60 days post expiration of 1 year from the date of incorporation. For Existing Nidhi Company: Within a time of 120 days from the commencement dates as per the Rules 2022.
NDH-5 This Form is the format of advertisement to be given while closing branch. A Nidhi Company in India shall not close any branch unless it: Publishes an advertisement in vernacular language in the place where it conducts business at least 30 days prior to such closure. A copy of such advertisement or notice informing such closure of the branch on the notice board of Nidhi for a period of at least 30 days from the date on which the ad was published under clauses (a) & (c) gives an intimation to the Registrar within 30 days of such closure.
AOC-4 Filing of Financial Statements Within 30 days from the date of the Company's AGM.
MGT-7 Annual return along with a list of all the members serving the Company Within 60 days of the AGM.
ITR-6 Income Tax Return By 30th September

Event-Based Compliances of a Nidhi Company

Following are some critical Event-Based Compliances of a Nidhi Company that should be followed when there is any change in the Nidhi Company's structure which are non-periodical:

  • Any change in the Company's name;
  • Removal of Director or Resignation/Appointment of a Director;
  • Transfer of Share;
  • Appointment of the KMP (Key Managerial Personnel);
  • Increased the authorised capital of the Company;
  • Removal of Auditor or Resignation/Appointment of an Auditor;
  • Any changes in the Company's objective;
  • Change in Registered Office Address;
  • Any other changes that are event-based.

New Nidhi (Amendment) Rules, 2022 – Major Changes

Following is the list of significant amendments made under the Nidhi (Amendment) Rules, 2022:

  • Meaning of a Branch: As per this Rule, a Branch means a place or location other than the registered office of Nidhi Company.
  • Deposit Raised by the Nidhi Company: No company shall raise the deposit or give a loan to any of its members if:
  • It doesn’t follow the new Nidhi Company Rules, 2022;
  • If the Central Government has refused the Application in Form NDH-4.
  • Declaration of Nidhi Company for any Public Company: Any public company that wants to register as a Nidhi Company shall apply through the NDH-4 Form within 120 days from the date of Nidhi Company Registration, after fulfilling the following conditions:
  • It has not less than 200 members;
  • It has NOFs of Rs. 20 lakhs or more.

Restrictions applicable to a Nidhi Company Registration

Nidhi Companies in India are not allowed to engage with the following undertakings:

  • Carrying a business of Chit funds, Insurance, Leasing finance, Advertise themselves to invite deposits, Hire-Purchase finances, Lotteries is strictly prohibited;
  • Sell, Mortgage or Pledge the assets kept with it as collateral security for a loan.
  • Getting into Partnerships in order to carry out lending and borrowing activities
  • Accepting deposits or lending funds to any other person than its shareholders
  • Issuance of preference shares, debentures or any other type of debt instruments
  • Open a current account together with its members (although it is permitted to open a Savings Account)
  • Lend to or accept a deposit from a corporate
  • Pay commission, incentive or fee for the mobilisation of deposits
  • Carry out any other business than lending or borrowing from its members
  • Hire a Purchase Financer