Nidhi Company Registration in India

Overview of Nidhi Company Registration

Nidhi Company is a kind of non-banking financial company. These companies are incorporated to lend and borrow funds to its members. It operates on the model of mutual benefit and create in its member's the habit of saving. Nidhi Company is simple to start since it is not necessary to obtain a license from the Reserve Bank of India (RBI). The last words of its name must include "Nidhi Limited" as it is incorporated as a public company.

As a result, a "Nidhi Company" has been granted a number of concessions with regard to yearly compliance and tax assessment. In India, Section 406 of the Companies Act, 2013 governs the formation, management, and control of Nidhi Companies.

What is the Nidhi Company?

Nidhi Companies has a special role to play in the financial market, mainly encouraging its members to save money. These businesses are special because they can only take deposits and provide loans to its members. "Nidhi" is a Hindi word that means "treasure."

Nidhi Companies belong to the Non-Banking Financial Companies (NBFCs) group. The Reserve Bank of India (RBI) has the power to give instructions on their deposit acceptance practices even if it does not directly regulate them.

Nidhi Companies are unique form of business as they only work with their members, who also happen to be stockholders. They are excluded from rules as well as other regulations of RBI that are applicable to regular NBFCs because of they do not have any direct connection with RBI. This makes Nidhi Company a special kind of financial institution in India that is able to take deposits and offer loans to a particular set of members while being a legally recognized organization.

Requirements for Registering a Nidhi Company in India

There are certain requirements that an organization must fulfill in order to get itself registered as a Nidhi Company:

• The company must be formed as a Public Limited Company in accordance with the Companies Act.
• The only objective of the Nidhi Company must be taking deposits and lending money to its members.
• The company should have a minimum of 7 persons as shareholders and 3 people as directors.
• The company's net funds should be at least Rs. 10 lakhs.
• An equity capital of at least Rs. 5 lakhs should be invested in the company.
• Net owned fund-to-deposit ratios must to be no more than 1:20.
• A Nidhi Company should have a minimum of two hundred members.
• It is required that the company name include "Nidhi Limited" at the end of its name.
• There must be a registered business address of the company.
• The company must have a memorandum of association stating the objectives of the company as taking deposits and lending loan to its members.

What are the Advantages of a Nidhi Registration?

Nidhi company offers various advantages to the company and its members. A few advantages are mentioned here:

Simple Incorporation

Nidhi Companies make it easy for anybody wishing to create such companies by offering a simple, hassle-free creation process with few prerequisites.

Independent Legal Body

Nidhi Company is registered under the Companies Act, 2013 which makes it a separate entity. Due of this, a Nidhi company can take on debt, own property, and exercise wide legal authority. Directors or members of a Nidhi business are not accountable to the company's creditors.

Non-Compliance with RBI

Nidhi Companies are free to establish their own operating norms and regulations as they are not constrained by the Reserve Bank of India's (RBI) directives.

Limited Liability

Directors' and shareholders' liability is restricted under the Companies Act of 2013. In the event that the firm suffers any losses or issues, the personal assets of the directors and shareholders are secure.

Lower Risk

Because loans, borrowings, and deposits are handled by Nidhi Company members, there is less financial risk and a greater sense of security across the community.

Encourage Savings

Nidhi Companies plays a vital role in inculcating the habit of savings among its members.

Simple Operations

The several financial processes used by the Nidhi Company are easy to comprehend. All you need to do is choose the right loan or borrow by reading the requirements. Furthermore, there isn't a strict guideline and the government is relaxing its rules on minimum equity share quantities, lending rates, and other matters.

What documents are required for Registration of Nidhi Company?

For incorporating a Nidhi company anywhere in India, the following documents will be required:

• Proof of registered address of the company (rent or lease agreement, ownership documents)
• No Objection documents signed by the owner of the property
• Address proof of the members
• Identity Proof
• Passport sized photographs of the members
• Copies of the members' PAN cards
• The company's Memorandum of Association (MoA)
• Digital Signature (DSC)
• The directors' Director Identification Number (DIN)
• The company's articles of association (AoA)

What is the procedure for incorporation of Nidhi Registration?

For registering a Nidhi Company in India, the following procedure must be followed:

Step 1: Collecting Documents

To register for Nidhi Company, you need to provide a few documents that we have discussed above. Before beginning the Nidhi company registration procedure, you must ensure that you have all necessary documents.

Step 2: Select a name

A Nidhi Limited Company's name must be unique and effectively communicate its brand and corporate goal. In addition, the Companies Act, the Company (Incorporation) Rules, the Trademark Act, and the Names and logos all provide a list of requirements that must be fulfilled when selecting a name for Nidhi Company. The Nidhi Company's name cannot be the same as, or confusingly similar to, the name of a business that already exists, an LLP, an application, or a registered trademark.

Step 3: Approval of Name

After selecting a unique name for the Nidhi company, you need to reserve it with the Registrar of Companies to prevent other businesses from using name without your consent. You can connect with our experts for name approval and reservation services, and we will verify that the names you have proposed are eligible before submitting an application to reserve it through either PART A of the SPICe+ application or RUN (Reserve Unique Name).

Step 4: Submitting an Incorporation Application

You can move on with incorporating a Nidhi Limited Company after approving its name. Fill out the online SPICe+ application on the MCA's official website in order to apply for the establishment of a Nidhi company. The application is split into two sections: Part A, which reserves the name, and Part B, which incorporates the Nidhi company. The application must be complete and signed by any one of the company's directors and sent to the ROC with the required set of supporting documentation.

Step 5: Grant of Certificate of Incorporation

After submitting the application and completing documents, the ROC on being satisfied will register the Nidhi Limited Company and provide with a Certificate of Incorporation. Furthermore, the Nidhi company is assigned a Corporate Identification Number by the ROC, which serves as its distinctive identification.

Step 6: Obtain the Nidhi Company license

After incorporation, a business must submit an application for obtaining a Nidhi Company license after meeting a number of requirements outlined in the Companies Act, 2013 regarding its membership, net assets, term deposits, etc. The government will give the Nidhi company a license and publish a notice in the official gazette if it is satisfied that the company has complied with all requirements.

Nidhi Company Registration Fees

A Nidhi Company follows special rules and the Companies Act of 2013. The total costs for registration, including fees for documents and other expenses, are about Rs. 25,000 to Rs. 30,000. These fees can vary depending on the state.

Why Choose PSR Compliance for Registration of Nidhi Company?

Your go to partner for streamlining the Nidhi Company registration procedure is PSR Compliance. We offer comprehensive support to ensure that your Nidhi Company registration is obtained quickly, legally, and with the help of our knowledgeable team. Our extensive services guarantee a hassle-free registration process, from applying for DIN and DSC to managing the documentation, name approval procedure, and even the post-registration procedures. Allow us to assist you with the complexities of registering a Nidhi Company so you can concentrate on encouraging members and focus on your business objectives.

Frequently asked questions

Q1. Is a Nidhi Company regulated by RBI?

The Nidhi Company is an NBFC which accepts deposits and lends money to its members. These companies are registered under the Companies Act, 2013 and regulated by the Reserve Bank of India.

Q2. What is the validity of Nidhi Company registration?

A Nidhi Company will remain active and in existence once it is formed as long as the yearly compliance requirements are consistently fulfilled. A Nidhi Company must meet additional requirements within a year of establishment and have at least 200 shareholders. The Nidhi Company would be required to return the deposits if the yearly compliances are not met.

Q3. Is it required for a Nidhi Company to appoint an auditor?

According to the Companies Act of 2013, the Nidhi Companies are required to appoint an auditor. It should be noted, that a Nidhi company is not permitted to designate or reappoint an audit firm as an auditor for more than two terms of five years each, nor may it designate or re-appoint a person as an auditor for more than one term of five years.

Q4. Who can start a Nidhi Company?

A Nidhi Company needs a minimum of seven people to begin operations and can be launched with an initial capital of Rs. 5 lakhs. Three directors are originally required for the establishment of a Nidhi company. A copy of their PAN card, proof of identity, and proof of address are required for each promoter or director applying for a Nidhi Company.

Q5. Is Nidhi Company a finance company?

A Nidhi company is a form of non-banking financial corporation recognized under section 406 of the Companies Act, 2013. Lending and borrowing money amongst members are their main activities.