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Nidhi Company Registration

Nidhi company registration is a financial institution or a type of non-banking financial company (NBFC). Nidhi entity is mentioned in Section 406 of the Companies Act, 2013. It is formed to borrow and lend money to its members and inculcates the habit of saving among its members and works on the principle of mutual benefit.

Hence, making it simple and quick to establish the company. Nidhi entity isn’t required to receive the license from the Reserve bank of India (RBI). It is registered as a public company and should have ‘Nidhi Limited’ in the last words of its name.

Nidhi Company Registration Process

The following steps of the process are given for the formation of a Nidhi entity:

Step 1: Obtaining the Digital signature certificate and Director Identification Number (DIN)

The first step of the process is to apply for a digital signature certificate (DSC). The DSC facilitates the signatures in digital format. DIN is allotted by the MCA at the time of incorporation in Form SPICe+.

Step 2: Name Approval

The second step is to apply for name approval by submitting two names either in the RUN (Reserve unique name) or Part-A of the SPICe+ Form on the Ministry of corporate affairs (MCA) website. One can download the Nidhi company registration process pdf from google. The MCA will choose one name from the suggested names by the applicant. The name must be unique and not similar to an existing company. The name approved by the MCA is valid for 20 days.

Step 3: Drafting of MOA and AOA

After the name is approved, the directors must submit the Application for incorporation in Form SPICe+ INC-32 with the Memorandum of association and articles of association. The MOA must include the objects of the Nidhi entity.

Step 4: Application for Nidhi Company Incorporation

After drafting the e-MOA and e-AOA, the applicant is required to fill out the SPICe+ application on the official website of MCA. The Nidhi company registration application is divided into two parts i.e., Part-A for the name reservation and Part-B for Nidhi entity incorporation. The application is filled and signed by any one director of the company and submitted to the ROC with the prescribed documents attached with the same.

Step 5: Certificate of Incorporation

The Registrar will issue the Nidhi entity Incorporation after receiving and verifying all the details and documents furnished in it. Once the ROC is satisfied with the details submitted, he shall register Nidhi limited and issue a Certificate of Incorporation as conclusive proof. The ROC also allows the Company Identification Number (CIN) as a unique identity for the company.

Step 6: Obtain Nidhi Company Registration License

After the incorporation process is completed, a company must apply for obtaining the Nidhi entity license. A set of conditions related to the number of members, net funds, term deposits, etc. must be fulfilled as prescribed in the Companies Act, 2013. The application is to be filled in Form NDH-4 to the Central government within four months from the date of incorporation of the Nidhi Limited Company. After submitting all the documents, the government shall grant the Nidhi limited company license and notify in the official gazette.

Step 7: Applying for PAN and TAN and Opening a Bank Account

The directors must apply for a Permanent account number (PAN) and a Tax deduction account number (TAN). It is also required to open a bank account for the company.

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Nidhi Company Registration Documents

The following documents required for Nidhi company list of submissions with the SPICe+ form for the registration of the company is:

  • Declaration in the form prescribed by the members and directors
  • Address Proof of registered office (Conveyance or lease deed or rent agreement with rent receipts)
  • Copy of utility bills that are not older than two months
  • Certificate of incorporation
  • The interest of directors in other companies
  • Identity proof and residential address proof of the subscribers (Driving license or voter ID or Passport)
  • Photos of directors and subscribers
  • Director Identification Number of the directors
  • DSC of the directors and members
  • Certified copy of the Memorandum i.e., the constitution of the company
  • Certified copy of Articles from the company
  • Copies of PAN cards of directors and members
  • A No objection certificate (NOC) is signed by the landlord or the owner of the place where the business is registered.
  • The Nidhi registration is completely online. The registration is completed after the documents are submitted with the payment of prescribed fees.

Nidhi Company Registration Requirements

Certain requirements are necessary to be fulfilled by a company for getting registered as a Nidhi entity. The requirements are as follows:

  1. The company must be incorporated as a Public Limited Company under the Companies Act.
  2. The company shall have a minimum of seven members
  3. The company shall have a minimum of three directors
  4. Nidhi entity can accept deposits only from its members
  5. Nidhi entity is a corporate structure with the benefits of limited liability
  6. Nidhi entity can lend money to its members only
  7. It can also provide a locker facility to its members
  8. Nidhi company registration in Maharashtra is required to have a minimum of 200 members within one year
  9. It is best suited for lending and borrowing funds among members only.
  10. There is a minimum paid-up capital requirement of Rs. 5 lakhs.
  11. The company shall have net-owned funds worth Rs. 10 lakhs or more.
  12. The ratio of net owned funds to deposits shall not be more than 1:20
  13. No issuance of Preference shares
  14. Main objects of the Nidhi entity are to save finance for existing members.
  15. The name of the company must end with ‘Nidhi limited’.
  16. The Director Identification Number (DIN) of all the directors has to be provided. You can also download the Nidhi company business plan pdf from google.

Annual Compliances by Nidhi company registration

The following are mandatory annual compliance mentioned below:

  • Form NDH-1 –

    The form is filled for the return of statutory compliances. A Nidhi entity must file NDH-1 with prescribed fees in the stipulated period of 90 days from the end of the first financial year. The form must be certified by the Company secretary or chartered accountant in practice.

  • Form NDH-2 –

    The form is concerned with the extension of time. It is submitted to the regional director within 30 days from the end of the first financial year. The form is filled with prescribed fees under Nidhi rules, 2014. After the submission, the regional director will check the Nidhi company registration application and pass orders in not more than 30 days.

  • Form NDH-3 –

    The application for a half-yearly return is made in Form NDH-3. In the time limit of 30 days from the completion of half-year with the prescribed fees with the ROC.

  • Form NDH-4 –

    The government has introduced it under the Nidhi Amendment Rules, 2019. The companies can claim the Nidhi status after filing NDH-4. The due date for filling Form NDH-4 is within the time limit of sixty days after the year-end from the incorporation date for all the newly incorporated Nidhi entities.

Amendment to Nidhi Limited Company Rules

As per the amendment announced by the Central government to Nidhi rules, 2014 for Nidhi company registration in India to safeguard the interest of the public. The rules provide that public companies who desire to function as Nidhi’s must obtain a prior declaration from the Central government before accepting deposits.

  1. A public company formed as a Nidhi entity with a share capital of Rs. 10 lakhs; needs to receive a declaration as a Nidhi entity from the central government by applying in form NDH-1 with a minimum membership of 200 Net owned funds of Rs. 20 lakhs within 20 days of its incorporation.
  2. The promoters and directors of the company have to meet the criteria to fit and proper person as laid down in the rules
  3. If the central government doesn’t convey any decision within 45 days of the receipt of the application filed in Form NDH-4, approval would be deemed as granted.

Prohibited Activities in Nidhi Company Registration

The Nidhi entity is subject to several restrictions on its operations that are given below:

  • Chit funds activities are not acceptable to Nidhi entities
  • Hire-Purchase financing is not allowed for Nidhi entities
  • The Nidhi entities cannot engage in financial leasing
  • The Nidhi entities cannot engage in insurance leasing
  • The Nidhi entities cannot engage in securities transactions
  • The Nidhi entities are only permitted to take deposits from members
  • The Nidhi entities are only permitted to lend funds to members
  • The issue of preference shares, debentures, or any debt instrument by any name or in any form.
  • It cannot open any current account with its members.
  • It cannot make any acquisitions until the same is adopted in the general meeting by a special resolution and is approved by the regional director.
  • The Nidhi entity shall not issue any advertisement in any other form for tempting deposits.
  • The Nidhi entity shall not pledge any asset lodged by the members of the Nidhi as securities
  • It shall not pay any incentive or brokerage for funds deployment or for rendering loans.

Benefits of the Nidhi Company Registration

The following are various advantages of formation as given below:

1. Separate Legal Existence

Nidhi Limited has a legal entity separate from its promoters and shareholders. It can acquire property and debts in its name.

2. Easy to Incorporate

The incorporation process is quick and easy. It is the same as the registration of a public company with the MCA. The minimum amount of capital required as per Nidhi rules, 2014.

3. Limited Paid-Up Capital Requirements

The MCA has made it compulsory to have at least Rs. 10 lakhs to start a Nidhi entity.

4. Raising Funds is Simple

The main goal is to raise funds from the members. It is a form of NBFC. It is involved in activities like accepting deposits from the public. The Nidhi Company Registration online is also simple.

5. No RBI Regulations

The Nidhi Limited company is not required to get approval from the Reserve bank of India. There is no need for a license from RBI for running a loan business in India. There are Nidhi rules under the Companies Act, 2013.

6. Credibility in the Market

The Ministry of corporate affairs (MCA) manages Nidhi entities. Hence, they are more reliable as compared to different institutions in the same sector controlled by state governments.

7. Option for Savings and Mutual Benefits

A Nidhi entity is mainly formed to increase the savings of the members. These are called mutual benefit companies.

Nidhi company registration fees depend upon the state to state. Although, government fees are the same. The professional fees depend upon the services provided to the applicant.

Nidhi Company Process

Checking Name Availability

Documents Required

  • Driving license / Voter ID proof / Passport
  • Copies of PAN card
  • Photos
  • Declaration by members and directors

Address Proof of registered office

  • Rent agreement
  • No objection certificate
  • Copy of utility bills

Filing of Documents

Signing of Documents

  • The documents must be signed by all the directors and members
  • Application filed with the government in Form NDH-4 before commencing the business is signed by the directors and members

Filing of Documents

Obtaining DSC and DIN and Company Name

  • Apply for the Digital signature certificate of directors and members.
  • Apply for the Director identification number of all directors
  • Approval of company name with the application for name reservation in Reserve unique name.

Filing of Documents

Submit documents and Obtain Certification

  • The documents are submitted and a certificate of incorporation is issued by the ROC.
  • The Nidhi company limited license is granted by the central government after the incorporation.

Frequently Asked Questions

How many branches can a Nidhi company open?
Nidhi Limited is allowed to open branches only after the profits after the deduction of tax are available for the preceding three years. The branches cannot be opened outside the district without prior approval.
What are the types of loans which can be offered by a Nidhi company registration?
A Nidhi entity provides only secured loans to the members. Unsecured loans cannot be given.
Who can form a Nidhi company?
Any person who is above 18 years of age can become a member of the Nidhi entity. The person must have valid identity proof and address proof.
How long can a Nidhi company accept FD?
A Nidhi entity can accept deposits from members only and there is no upper limit given on a single deposit. The interest offered is up to 12.50% on FD per annum.
How can you get a Nidhi company registered?
A Nidhi entity in full form to be registered under the Companies Act, 2013 as a public company. For registration, one should apply for the DSC and DIN of a minimum of three directors.
Is Nidhi company registration legal in India?
Nidhi companies are provided under section 406 of the Companies Act, 2013. The main activity is to borrow and lend money among its members.
Can a Nidhi Limited Company provide funds to any individual seeking a loan?
No, as per the prescribed guidelines, a Nidhi entity can use the accumulated funds to lend in the form of loans only to the members of the company. Any other individual cannot apply for and get a loan from a Nidhi entity.

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Other Business Services

In addition to registration or incorporation, a business may require other registrations depending on the business activity undertaken. Talk to an Advisor to find out registrations your business may require post registration.

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