A Nidhi Company is a type of Non-Banking Financial Company (NBFC) recognized under Section 406 of the Companies Act, 2013. It primarily operates with the goal of promoting the habit of thrift and savings among its members. Nidhi companies are restricted to taking deposits and lending only to their members, making them a mutual benefit society. The process of registering a Nidhi company involves specific steps and compliance with regulations. This guide outlines the key aspects of Nidhi Company Registration.

What is a Nidhi Company?

A Nidhi company is a type of NBFC that promotes savings and mutual benefit among its members. The word 'Nidhi' means treasure, which aligns with the core principle of the company — to accumulate savings for the mutual benefit of its members. The primary activities of a Nidhi company include accepting deposits from and lending money to its members.

Key features of a Nidhi company:

• Members only: A Nidhi company functions solely for its members.
• Encourages savings: The company aims to cultivate a culture of savings among its members.
• Limited operations: Nidhi companies are prohibited from engaging in activities like leasing, insurance, or acquiring securities of other companies.

Key Benefits of a Nidhi Company

1. Encouragement of Savings: Nidhi companies foster savings habits among their members by offering a structured system for deposits and loans.
2. Simple Registration Process: The registration of a Nidhi company is straightforward and requires minimal capital investment.
3. Minimal External Regulation: Nidhi companies are not regulated by the Reserve Bank of India (RBI) but are subject to the Companies Act, 2013.
4. Lower Financial Risk: Since the company operates on a mutual benefit basis, the risk of bad debts is minimized, as loans are granted only to members.

Eligibility Criteria for Nidhi Company Registration

Before applying for Nidhi company registration, it’s essential to meet the following criteria:

1. Minimum Members: A Nidhi company must have at least 200 members within one year of incorporation.
2. Minimum Capital Requirement: The company must start with a minimum paid-up equity capital of ₹10 lakhs.
3. No External Involvement: Nidhi companies cannot accept deposits or lend money to non-members.
4. No Preference Shares: The company can only issue equity shares. No preference shares are allowed.
5. Restrictions on Commercial Activities: The company cannot undertake leasing, insurance, chit funds, or securities trading.

Step-by-Step Process for Nidhi Company Registration

1. Choose a Unique Name for the Company: The first step is to choose a name that complies with the rules laid down by the Ministry of Corporate Affairs (MCA). The name should not be similar to any existing company and must include 'Nidhi Limited.'

2. Apply for Digital Signature Certificate (DSC): All directors and shareholders must apply for a DSC. This is required for signing electronic documents during registration.

3. Obtain Director Identification Number (DIN): All directors must apply for a DIN, a unique identification number issued by the MCA.

4. File Incorporation Documents: The company must file the incorporation documents with the MCA, including:

   • Memorandum of Association (MOA)
   • Articles of Association (AOA)
   • List of directors
   • Details of the company’s registered office
   • Proof of address and identity of members and directors

5. Submission of Form INC-32: Form INC-32, known as SPICe (Simplified Proforma for Incorporating a Company Electronically), must be filed for company registration. This form integrates multiple services including name reservation, DIN allocation, and incorporation.

6. PAN and TAN Application: Once the incorporation form is approved, the company will receive a Certificate of Incorporation along with the company’s PAN (Permanent Account Number) and TAN (Tax Deduction Account Number).

7. Obtain Nidhi Company Status: After incorporation, the company must file for Nidhi status within 12 months of registration. The status is granted once the company meets the required criteria of membership and net owned funds.

Post-Incorporation Compliance for Nidhi Companies

1. Membership Requirement: As stated earlier, a Nidhi company must have a minimum of 200 members within one year of incorporation.
2. Net Owned Funds: The company must maintain net owned funds (NOF) of ₹10 lakhs or more. The ratio of NOF to deposits should not exceed 1:20.
3. Filing Returns: Nidhi companies are required to file annual returns and balance sheets with the MCA.
4. Audit: A Nidhi company must have its accounts audited annually by a qualified Chartered Accountant.
5. Deposit Restrictions: Nidhi companies can only accept fixed deposits, recurring deposits, and savings deposits from members.

Conclusion

Registering a Nidhi company is a relatively simple process that allows members to mutually benefit from savings and loan services. The mutual benefit framework encourages financial discipline among members, fostering a sense of collective growth. While the registration process is straightforward, adhering to the post-incorporation compliance norms is essential for smooth operations.

With the right guidance and adherence to regulations, starting a Nidhi company can be an excellent opportunity for individuals looking to promote savings habits and provide financial assistance to a specific community of members.