Nidhi Companies are registered Limited Companies involved in taking deposits and lending to their members. The activities of a Nidhi Company does fall under the purview of Reserve Bank of India, as it is similar to an NBFC. However, as Nidhi Companies ONLY deal with shareholder-members money, RBI has exempted Nidhi Companies from the core provisions of the RBI and other regulations applicable to an NBFC.
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Nidhi means a company which has been incorporated with the object of developing the habit of thrift and reserve funds amongst its members and also receiving deposits and lending to its members only for their mutual benefit. Nidhi companies existed even prior to the existence of companies Act 2013.
The following are some of the restrictions a Nidhi Company is subject to under Nidhi Rules, 2014. As per Rule 6 of Nidhi Rules, 2014, a Nidhi Company shall NOT:
1. carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate;
2. issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;
3. open any current account with its members;
4. acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;
5. carry on any business other than the business of borrowing or lending in its own name: Provided that Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.
6. accept deposits from or lend to any person, other than its members;
7. pledge any of the assets lodged by its members as security;
8. take deposits from or lend money to anybody corporate;
9. enter into any partnership arrangement in its borrowing or lending activities;
10. issue or cause to be issued any advertisement in any form for soliciting deposit: Provided that private circulation of the details of fixed deposit Schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.
11. Pay any brokerage or incentive for mobilising deposits from members or for the deployment of funds or for granting loans.
To start a Nidhi Company in India, the first step is to incorporate a Limited Company, under the Companies Act, 2013. Hence, it requires a minimum of three Directors and seven shareholders to start the Limited Company incorporation process. During incorporation of the Nidhi company, care must be taken to ensure that the object of the Limited Company mentioned in the Memorandum of Association is that of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit.
Post incorporation of the Limited Company, within a period of one year from the commencement, the Nidhi Company must meet all of the following criteria:
“Net Owned Funds” means the aggregate of paid-up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet.
If the Nidhi Company satisfies the above conditions required for operating as a Nidhi Company, the company shall within ninety days from the close of the first financial year after its incorporation and where applicable, the second financial year, file a return of statutory compliances in Form NDH-1 duly certified by a practising CA/CS/CWA along with the requisite fees.
In the case at the end one year from commencement the Nidhi Company is not able to meet the above requirement, the Company may within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 for extension of time.
If even after the second financial year the Nidhi Company is not able to meet the requirements for a Nidhi Company, then the Nidhi Company shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions for operating as a Nidhi Company and be liable for penal consequences.
As per notification from the Ministry of Corporate Affairs on 3rd February 2020, the amendment to existing rules was released where the stakeholders are advised to use the revised and latest forms by the Nidhi companies and they are:
faqs
A minimum of 3 directors and 7 shareholders are required to register a Nidhi company in India.
The Director needs to be over 18 years of age and must be a natural person.
An address in India where the registered office of the Company will be situated is required. The premises can be commercial/industrial/residential where communication from the MCA will be received.
No, you don’t have to be present at our office or appear at any office for the registration of a Nidhi Company.
A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature.
Identity proof and address proof are mandatory for all the proposed Directors of the Nidhi Company. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof.
LEGASERV CONSULTANT can incorporate a Nidhi Company for 20-30 days. The time taken for registration will depend on the submission of relevant documents by the client and the speed of Government Approvals. To ensure speedy registration, please choose a unique name for your Company and ensure you have all the required documents prior to starting the registration process.
Once a Nidhi Company is incorporated, it will be active and in existence as long as the annual compliances are met with regularly. A Nidhi Company must have a minimum of 200 shareholders and comply with other criteria within one year of incorporation. In case, annual compliances are not complied with, the Nidhi Company will be asked to refund the deposits.
Director Identification Number is a unique identification number assigned to all existing and proposed Directors of a Company. It is mandatory for all present or proposed Directors to have a Director Identification Number. Director Identification Number never expires and a person can have only one Director Identification Number.
Ministry of Corporate Affairs regulates Nidhi Company and is also accountable for Nidhi Company Registration.
No Nidhi Companies cannot issue debentures, preference shares, or any other kinds of debt securities.
No, Nidhi Company cannot perform its operations outside the boundaries of the state in which the registration has taken place.
No, Nidhi Company cannot issue unsecured loans. However, it can issue secured loans to its members.
