Nidhi Company

A Nidhi Company is a kind of Non-Banking Financial Company (NBFC). Nidhi Companies are formed to borrow and lend money to its members. It is dependent on the principle of mutual benefit and instills the habit of saving among its members.

Nidhi Companies do not need to register for a license from Reserve Bank of India (RBI). However, they have to be registered as a public company and their names should end with ‘Nidhi Limited’.

Prohibition Activities in Nidhi Company

The Nidhi Companies have to abide by certain prohibitions which are imposed on them in terms of their activities. These activities can be listed as follows:

Nidhi Companies cannot deal with chit funds.
Nidhi Companies cannot deal with hire-purchase finance.
Nidhi Companies cannot deal with leasing of finances.
Nidhi Companies cannot deal with insurance business.
Nidhi Companies cannot deal with securities business.
Nidhi Companies cannot accept deposits from any other person except members.
Nidhi Companies cannot lend funds to any other person except membersLorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo
.
Benefits of Registering as Nidhi Company
There are various Benefits which can be availed by registering as a Nidhi Company. These advantages can be summed up as follows:
- Legal existence:The registration of a company as a Nidhi Company makes it a separate entity. It enjoys separate legal existence as a registered Mutual Benefit Society. Being a separate entity from the members of the company, the company can acquire or dispose of assets in its own name.
- Limited liability:Depending on the amount invested or contributed by the members of the company, their liabilities will be limited. The members will be liable only for their share in the company. Personal liabilities of the members cannot be used to meet the company’s liabilities.
- Availability of funds:The members can borrow from the funds contributed by themselves at lower interest rates.

Minimum Requirements:

There are certain requirements which are to be fulfilled by a company in order to be registered as a Nidhi Company. The requirements may be summed up as follows:

The company must be incorporated as a Public Limited Company under the Companies Act.
The company should have a minimum of 7 shareholders.
The company should have a minimum of 3 directors.
The company should have a minimum of Rs.5 lakh of equity capital.
The company should have a minimum of 200 members.
The company should have Net Owned Funds worth Rs.10 lakh or more.
The name of the company should end with ‘Nidhi Limited’.
The objective of the company should be lending and borrowing of funds among the members only.
The company must have unencumbered term deposits of 10% or more of the outstanding deposits.
The company should have a Net Owned Funds to deposits ratio of 1:20 or less.

The Director Identification Number (DIN) of all the directors has to be provided

Documents Required for Nidhi Company Registration

The following documents must be submitted in order to get a company registered as a Nidhi Company:

Ownership documents or a rent/lease agreement has to be provided as a proof of address of the registered place of business along with Electricity Bill.
No Objection Certificate (NOC) duly signed by the landlord or the owner of the place where the business is registered
Identity proofs (Aadhaar Card / Driving Licence / Votor ID Card etc.)
Address proofs of the members of the company (Bank Statement / Electricity Bill etc.)
Photographs of the members of the company
Digital Signature Certificate (DSC) of the company
Copies of PAN cards of the members

Director Identification Numbers (DIN) of all the directors