WHAT IS NIDHI COMPANY ?
A Nidhi company is a special kind of Non-Banking
Financial Company (NBFC). Its main job is to borrow and lend money, but only
among its members. The core idea is "mutual benefit," meaning
everything the company does is for its members' good.
These companies are set up under Section 406 of the
Companies Act, 2013. The Ministry of Corporate Affairs (MCA) oversees them
through the Nidhi Rules, 2014.
Is a Nidhi Company an NBFC?
Yes, a Nidhi Company is classified as a Non-Banking
Financial Company (NBFC). However, it differs from traditional NBFCs in several
ways.
FEATURES
OF NIDHI COMPANY
Benefits of Nidhi Company
Registration in India
- Simple
and Easy Formation: Compared to other financial entities, the process is
straightforward with less stringent regulations, making it easier for
community groups to start and operate.
- Limited
Liability Protection: Since it's a company registered under the Companies Act,
2013, a Nidhi company protects its members' and directors' assets. This
means their wealth is safe from the company's debts.
- Lower
Capital Requirement: The initial capital needed is significantly less than for
other NBFCs, making it more accessible for smaller groups.
- Easy
Access to Funds for Members: Members can easily get loans with less paperwork
and flexible terms. Loans are usually given against gold, property, or
deposits, making the process smooth under the mutual benefit model.
- Encourages
a Culture of Savings: By accepting deposits from members, Nidhi companies naturally
promote saving and smart money habits within their community. This helps
gather local savings for community projects.
- Perpetual
Succession: A
registered Nidhi company lasts forever. Its existence isn't affected if a
member or director dies, goes bankrupt, or leaves. The company continues
to operate as a legal entity.
- No
Third-Party Intervention: Nidhi companies only deal with their
members for deposits and loans. This means no outside parties are
involved, building trust and openness within the member group and leading
to stronger relationships.
- High
Degree of Credibility: MCA registration gives Nidhi Companies legal recognition and
boosts member confidence. However, since they aren’t regulated by the RBI
(unless they exceed limits), they lack the same credibility as RBI-licensed
NBFCs.
Setting up a Nidhi company offers several
advantages. It's a good choice for groups wanting to combine their money and
offer financial aid to their members.
Nidhi Company Registration Requirements
- Legal Structure: A Nidhi company must be registered as a Public Company under the Companies Act, 2013.
- Minimum Members and Directors:
- Minimum 7 Members: When you first set up the company, a Nidhi company must have at least 7 members.
- Minimum 3 Directors: The company must have at least 3 directors. All directors must also be members of the company, which strengthens the mutual benefit rule.
- Minimum Capital Requirement: The minimum paid-up capital is Rs. 5 lakhs at incorporation, which must be raised to Rs. 10 lakhs within 1 year as per Rule 5(1) of the Nidhi Rules, 2014.
- Company Name: The name of a Nidhi company must always end with "Nidhi Limited." For example, "ABC Nidhi Limited."
- Share Capital Structure: The company should issue equity shares, each with a face value of at least Rs. 10. This helps ensure many members can participate.
- Membership Eligibility: Only individuals can be members of a Nidhi company. Companies or trusts cannot be members, which keeps the focus on individual savings and loans.
- Registered Office: The company must have an official registered office in India. This will be the address for all official communications and government filings.
Before you start the Nidhi company registration procedure, it's important to know the key requirements.
Note: This is separate from the Net Owned Funds (NOF) requirement of ₹20 lakh, which must also be met within the first year.
DOCUMENTS
REQUIRED
FOR NIDHI COMPANY REGISTRATION PROCESS
The Best Nidhi Company
Registration Consultant in India requires following documents for the
incorporation:
1.PAN Card or Passport (Foreign Nationals &
NRIs)
2.Copy of Aadhar Card
3.Passport-sized Photograph
4.Email Ids & Mobile Number
5.Latest bank statement (2 months)/ telephone or
mobile bill/ electricity or gas bill
6. 2 Suggested Names of the Company
7.Latest Electricity Bill for Registered Office
of Company
Other Essential Incorporation
Documents
Besides personal and office documents, certain
legal forms and statements are also required.
- Declaration
from Directors: A
statement from the directors confirming they are not disqualified from
being directors under the Companies Act, 2013.
- Consent
to Act as Director: Each director needs to provide a DIR-2 form, showing they
agree to be a director of the company.
NIDHI
COMPANY REGISTRATION PROCEDURE
The Nidhi company registration online process involves several steps. Most of these steps are done through the MCA portal. Following these steps carefully helps ensure a smooth setup.
Step 1: Obtain a DSC and DIN
- Digital Signature Certificate (DSC): All proposed directors need to get a Class 3 DSC. This certificate is legally required for signing and filing documents electronically with the MCA. It ensures the documents are authentic and secure.
- Director Identification Number (DIN): Each director also needs a DIN. This unique ID number is given by the MCA to people who want to be company directors. You can apply for it along with the company incorporation application.
Step 2: Reserve the Company Name (SPICe+ Part A)
- First, you apply to check if your chosen Nidhi company name is available. You do this using the SPICe+ Part A form on the MCA portal, which is specifically for name reservations.
- You need to suggest at least two names, making sure they end with "Nidhi Limited." The name should be unique and not too similar to existing company names or trademarks to avoid rejection.
Step 3: Draft the MoA and AoA
Memorandum of Association (MoA):
- The MoA document shows the main goals of the company and explains what the Nidhi Company can and cannot do.
- It also states the business purpose, which is to accept deposits from and lend money to its members.
- The MoA must state that deposits and loans are limited to members, as per the Nidhi Rules.
Articles of Association (AoA):
- The AoA lays out the internal rules for running the company, and it includes the roles and responsibilities of directors and members.
- It also explains how meetings, voting, and other operations will be handled.
Step 4: File the Main Incorporation Form (SPICe+ Part B)
- DIN (Director Identification Number)
Step 5: Receive the Certificate of Incorporation (COI)
- After all submitted documents and forms are successfully checked, the Registrar of Companies (RoC) will issue the Certificate of Incorporation (COI).
- The COI proves your Nidhi company legally exists and includes your Corporate Identification Number (CIN), which is a unique ID for the company.
Nidhi Company Registration Fees
The cost of Nidhi company registration can change based on several things, including government fees, stamp duty, and professional fees. It's wise to consider all these parts when planning your budget.
Government Fees (MCA Fees)
These are the official fees paid to the Ministry of Corporate Affairs (MCA) for filing the company registration forms. The amount depends on the authorized capital of your Nidhi Company.
- For an authorized capital of Rs. 5 lakh (which is the minimum required):
- The MCA filing fees are usually between Rs. 4,000 and Rs. 6,000.
These charges are fixed by the government and cannot be changed.
Stamp Duty
Stamp duty is a tax from the state government applied to legal documents, including the MoA and AoA. The amount varies a lot from one state to another, making it a key part of the total cost.
Stamp duty is a major variable cost in the overall Nidhi company registration charges. The rates are different in each Indian state. Here are the details:
| State | Estimated Stamp Duty (Rs.) |
| Delhi | 6,000 - 8,000 |
| Maharashtra | 10,000 - 15,000 |
| Karnataka | 7,000 - 10,000 |
| Tamil Nadu | 5,000 - 8,000 |
| Uttar Pradesh | 6,000 - 9,000 |
| Gujarat | 5,000 - 8,000 |
| Rajasthan | 4,000 - 7,000 |
| West Bengal | 4,000 - 7,000 |
| Andhra Pradesh | 4,000 - 7,000 |
| Telangana | 4,000 - 7,000 |
| Madhya Pradesh | 3,000 - 6,000 |
| Bihar | 3,000 - 6,000 |
| Punjab | 3,000 - 6,000 |
| Haryana | 3,000 - 6,000 |
| Kerala | 3,000 - 6,000 |
| Odisha | 3,000 - 6,000 |
| Assam | 2,000 - 5,000 |
| Himachal Pradesh | 2,000 - 5,000 |
| Uttarakhand | 2,000 - 5,000 |
| Chhattisgarh | 2,000 - 5,000 |
| Jharkhand | 2,000 - 5,000 |
| Goa | 2,000 - 5,000 |
| Jammu & Kashmir | 2,000 - 5,000 |
| Union Territories | 2,000 - 5,000 |
Other and Professional Fees
- Digital Signature Certificate (DSC): Rs. 1,000 – Rs. 1,500 per director
- Consultant or legal professional fees: Rs. 5,000 – Rs. 15,000
- Miscellaneous costs: Rs. 500 – Rs. 1,000
- The experience of your Nidhi Company registration consultant.
- The complexity of your documents and service package.
Rules and Restrictions for Nidhi Companies
What a Nidhi Company Can Do?
- Accept Deposits: A Nidhi company can accept deposits from its members. These can be savings deposits, recurring deposits, or fixed deposits, offering members flexible ways to save.
- Provide Secured Loans: They can give secured loans to their members. These loans are backed by things like gold, silver, property, or fixed deposit receipts held with the company. The loan amounts and terms must follow the limits in the Nidhi Rules, ensuring smart lending.
- Offer Locker Facilities: Nidhi companies are allowed to offer locker facilities to their members. This comes with specific conditions and limits on how many lockers they can provide, adding another benefit for members.
Nidhi companies follow specific rules and limits to ensure they stick to their goal of mutual benefit and don't get involved in unauthorized financial activities. These restrictions protect their members and keep the Nidhi model honest.
Nidhi companies have clear boundaries that help them serve their members effectively.
What a Nidhi Company Cannot Do?
- Cannot carry on businesses like chit funds, hire purchase finance, leasing finance, insurance, or buying shares from any other company. This makes them different from other financial institutions.
- Cannot issue preference shares, debentures, or any other debt instruments. They raise funds mainly through member deposits and can issue only equity shares with a face value.
- Cannot open current accounts for its members. Only savings, recurring, and fixed deposits are allowed.
- Cannot buy another company by purchasing shares or control of who is on the Board of Directors of any other company. This stops them from moving into unrelated businesses.
- Cannot do any business other than borrowing and lending money in its name. This strict focus maintains their mutual benefit goal.
- Cannot use any assets given by its members as security for other purposes.
- Cannot enter into any partnership for its borrowing or lending activities. All operations must be done directly by the Nidhi company itself.
- Nidhi Companies are not allowed to advertise for deposits and can accept deposits only from their existing members. However, as per Rule 7, they can display a simple notice board at their office with details like interest rates and terms.
- Cannot pay any commission or bonus for getting deposits from members, for using funds, or for giving loans. This prevents aggressive selling and ensures deposits come purely from members' savings.
To prevent misuse and keep their special status, Nidhi companies are not allowed to do certain things.
Nidhi Company Registration Certificate
- Your company’s legal name
- Corporate Identification Number (CIN)
- Registered office address
- To open a company bank account
- To apply for PAN, TAN, and GST registrations
- To enter into legal agreements
- To get licenses and government approvals
- To build trust with members and authorities
How to Download Your Nidhi Company Registration Certificate?- Visit the MCA website at mca.gov.in.
- Log in with your Business User ID and password.
- Go to MCA Services and select “Get Certified Copies” or “View Public Documents.”
- Search your company using the CIN or name.
- Pay the small fee, if required.
- Download your Certificate of Incorporation in PDF format.
- Save and print the certificate for your records.
Once your Nidhi Company is registered with the Ministry of Corporate Affairs (MCA), you will get a Certificate of Incorporation (COI). This official paper proves your company is legally formed under the Companies Act, 2013, and follows the Nidhi Rules, 2014.
The COI shows important details like:
You need this:
This certificate is proof that your company exists legally and can operate as a Nidhi Company.