Nidhi Company Registration
- No Hidden Charges
- Lowest Price Guarantee
- Quick and Hassle-Free Process Free Expert
- Assistance for Lifetime
Get Expert Consultation
Overview of Nidhi Company Registration
A Nidhi company refers to those entities in the non-banking finance sector that are recognised under Section 406 of the Companies Act 2013. These Nidhi Companies operating as NBFC in India are also governed by the Nidhi Rules, 2014. The primary business is borrowing and lending funds. To have Nidhi Company registration, a minimum of seven members are required. They are regarded as Benefit funds, permanent funds, Mutual benefits and Mutual Benefit Funds companies.
The (MCA) Ministry of Corporate Affairs governs the Nidhi companies in India and it also reserves the right to issue any directions related to deposit acceptance activities. The main objective of these companies is to reserve funds amongst its serving members. Unlike other NBFCs, Nidhi Companies are limited in their operations restricted to borrowing and lending activities among their individual members only. They cannot accept deposits from the general public or engage in other financial activities. Although exempted from RBI registration, Nidhi Companies must adhere to specific regulations provided by the Ministry of Corporate Affairs (MCA) in India.
Important Eligibility for Nidhi Company Registration
The consent of the RBI is not required to incorporate a Nidhi company in India. Therefore, its incorporation is very easy.
- Nidhi Companies are registered as Public Companies.
- They must affix “Nidhi Limited” at the company name’s end.
- Nidhi Companies’ undertakings are somewhat similar to NBFCs, and so they fall under the ambit and rules of the RBI.
- Nidhi Company’s main objective is in-house lending and borrowing activities without any third-party intervention.
- Nidhi Rules of 2014 permits renting locker facilities to its members. The rental income must not surpass 20% of the Company’s overall income during one the financial year.
Conditions for Incorporation of Nidhi Companies in India
The Governing Authority have the following Conditions for Incorporation of Nidhi Company in India:
- A minimum of seven (7) members are needed to start a Nidhi company
- There must 3 members who should be the designated directors
- A minimum equity share capital is to be Rs. 10 lakhs
- Within a year of Nidhi registration the Net Owned Funds (NOF) must increase to ₹20 lakhs
- Must have the company status under Company Act, 2013
- Mandatory inclusion of the Company’s object in the MOA that reflects its intention and savings among the members.
- Unencumbered term deposits must make up at least 10% of the total amount of the company’s existing deposits.
- 1 to 20% is the suggested Net Owned Funds (NOF) to deposit ratio. It includes equity share capital and free reserves. It excludes accumulated losses and intangible assets.
- At least 10% of the total deposits must be held in the fixed deposit account of a nationalized bank.
Benefits of Nidhi Company Registration in India
Affordable Borrowing
Nidhi company allows individuals to borrow money at a lower rate as compared to banks. These provide a significant advantage during times of financial need, as different members may require funds at various points in time.
Promotes Saving
Nidhi companies encourage all the members to save money and cultivate a frugal lifestyle. By fostering a mutual benefit society, Nidhi registration enables members to lend or borrow money and receive financial assistance among them.
Simplified Process
Nidhi company has a much simpler process as compared to the banks or unauthorized lenders. Due to the well-organized incorporation processes, members of a Nidhi company can optimize the potential of their financial resources and have access to lower interest rates when they require cash for their own requirements.
Minimum requirements
The Nidhi company registration has very few requirements for its formation. Some of important things to be kept in mind before the formation are listed below:
- Minimum of 7 members is required.
- Among these 3 are appointed as directors of Nidhi company.
- Simple documentation process
- Easy-to-do registration
- Even being a different type of NBFCs, the Nidhi company registration process is comparatively easy
No Compliance with RBI
Nidhi companies are not mandated to comply with the RBI regulations. The non-compliance gives the company freedom to inculcate better and different rules for its functioning. Complying with RBI’s rules would have made it difficult for the Nidhi companies to formulate their own rules and regulations, it is a major point which differentiates them from other NBFCs.
Less Risk
Since all lending and depositing transactions are performed by members of the company, this lowers the financial risk taken by the company. In the Nidhi companies, only its members are involved with the financial transactions, making it safe and easy to track the depositing or borrowing funds from the company.
Economical Registration
Nidhi company registration is easy on the directors’ pockets. The registration cost is very less for Nidhi companies than other NBFCs. Also the formation of Nidhi companies is much more simpler than other types of NBFCs. It acts as a major benefit for the directors for saving money on registration. Hence it makes it possible for directors to invest money in various business-related activities. It will also help the Nidhi companies to get business loans when required for growth of the company.
Certainty on Savings
The objective of Nidhi companies is to promote the culture of savings. Nidhi companies also ensure that they will never jeopardize the savings of their members’ savings wherever it is invested. Savings are important to be inculcated in the individuals of all age groups of the society.
Net-owned Funding system
Nidhi companies follow the net-owned funding system. Net-owned funding refers to any transaction where an owner invests a particular amount in the business to raise funds for the same. However, in Nidhi companies the ratio of net-owned funding is 1:20. This makes Nidhi companies cost effective for owners to invest in the new business ventures and grow the company with more capital and diversify in the business.
Required Documents for Nidhi Company Registration
The list of Documents required for a Nidhi Company registration in India are as follows:
- Directors Identification Number, i.e., DIN and Digital Signature i.e. DSC
- Passport sized Photographs of the proposed directors and members
- Memorandum of Association of the company (MoA)
- Articles of Association of the company (AoA)
- Registered place of business proof such as lease or rent agreement
- No Objection Certificate (NOC) provided by the landlord
- Ownership proof of place of business in case the premises are owned
- PAN number: This is necessary for filing the financial transactions made by the company. A PAN card is also necessary for the taxation process of the company. PAN number of the proposed directors and members
- Address Proof: Bank Statement, Residence Card, Driving License, or any other Government issued identity proof having the address
- Residential Proof: Telephone Bill, Mobile Bill, Electricity Bill and Bank Statement
- Passport: Passports are only for companies whose directors are foreign nationals. Passport is not a mandatory document for Indian directors of Nidhi companies
- Registered Office Proof: Registered office proof for Nidhi company registration as to take government supported schemes and loans