Let's start with a brief answer to "what is nidhi company" in the Indian context. Hugely popular in South India, the Nidhi Companies are also known as the Mutual Benefit Societies, Mutual Benefit Companies, or (Mutual) Benefit Funds in India. The exclusive feature of the nidhi company is that, this deals with deposits from and loans to its members (shareholders) only, and works for the mutual benefits of its members. Thus, the nidhi companies do fall under a certain category of the Non-Banking Financial Companies (NBFCs) the activities of which are governed and regulated as per the rules and regulations of the RBI Act, 1934. But, as the nidhi companies deal only with their respective members, certain exemptions are provided to these nidhi companies by the RBI, in respect of annual compliances and taxation. Today, the nidhi companies in India are formed, governed, and regulated by the Section 406 of the new Indian Companies Act of 2013, the Companies (Nidhi Companies) Rules of 2014, and the Chapter XXVI of the Companies Rules, 2014.
This page gives concise, exclusive, and very useful information regarding the formation of nidhi company anywhere in India, the requirements and procedure for registration, and our full-range of nidhi company registration services to interested people.
- These highly localized single office institutions having no external involvement, give loans to and accept deposits from members at pleasant rates, and with minimum documentation and formalities.
- These mutual benefit societies seek to build a habit of making savings and thriftiness among their respective members, and work for giving benefits to both the depositors and borrowers. People under the lower to middle financial statuses are to be benefited remarkably through the activities/services of these nidhi companies.
- The funds of a nidhi company are principally contributed to by its members. And, consequently, the deposits mobilized by the nidhi companies are much lesser than those handled by the institutions of the organized banking/financial sectors.
- The nidhi companies are not entitled to conduct activities/businesses related with chit funds, insurance, hire-purchase financing, leasing finance, or acquisition of securities offered by corporate bodies. These nidhis are also not empowered by the law to issue preference shares, debentures, or any other debt instruments in any forms.
- A nidhi company is not entitled by the law to accept deposits from or give loans to any other person or corporate body, other than its members/shareholders. Again, the nidhi companies are not legally authorized to enter into any partnership arrangements related with lending or borrowing. Providing any advertising or incentives for soliciting deposits or for facilitating loans, are also not allowed by the law.
- These accept term deposits from members for timely and secured returns.
- These foster secured and lucrative investments, owing to rigid and cozy membership structure.
- These provide easy and convenient loans to members against a variety of collateral, such as gold and silver jewelries, immovable properties, fixed deposit receipts, NSCs, and other Government securities and insurance policies. The repayment period is limited to one year and seven years, against jewelry and immovable property, respectively, as security. Loans are given at just reasonably low rates of interest.
Requirements for Nidhi Company RegistrationThe nidhi companies are registered in India as the Public Limited companies, and therefore, essentially require at least three directors and seven shareholders; the minimum paid-up share capital requirement of Rs 5 Lac, has been eliminated by the Companies (Amendment) Act of 2015. Other nidhi limited company registration requirements are the following:
- DINs and DSCs of the Directors
- Address of the Registered Office of the proposed Nidhi Company
- Pan Cards, ID Proofs, and Address Proofs of the Directors
- MOA and AOA of the company
- And, other documents deemed necessary.
- It must have at least 200 members/shareholders.
- It should have a minimum Net Owned Funds (NOF) of Rs ten lac or more.
- Its unencumbered term deposits must be at least 10% of the outstanding deposits.
- The deposits accepted by it should not exceed 20 times of its NOF
Nidhi Company Registration Process and Legal ServicesOur delhi-based internationally famous law firm extends the full-range of legal and advisory services for establishing nidhi companies in places all across India. These services include the following main tasks:
- Expert Support for Obtaining DINs, DSCs, PANs, etc.
- Reservation of the proposed company name (Form No. INC-1)
- Preparation of Appropriate MOA and AOA of the proposed Nidhi Company
- Making application for Incorporation of the company (Form No. INC-7)
- Filing Forms DIR-12 and INC-22
Noteworthy here also are the recommendations that, the words 'Nidhi Limited' must be a part of its proposed name, to differentiate it from a regular finance investment company; and, its MOA must clearly specify that the main objective of the proposed company is to benefit its all members/shareholders through the internal lending and borrowing activities, and cultivating a habit of thriftiness and savings in each of them.