“What is a Nidhi Company?” And “How to Register a Nidhi Company?”

In this blog, there is detailed information on “What is a Nidhi Company?”, the Nidhi Company Registration Process, Documents required for Nidhi Company Registration Online, and other related information on Nidhi Company.

Introduction

A Nidhi Company is a type of non-banking finance entity recognized under Section 406 of the Companies Act, 2013. Its main activity is borrowing and lending money among their members. Benefit funds, permanent funds, and Mutual Benefit Funds companies are all terms used to describe them. In India, the MCA (Ministry of Corporate Affairs) regulates these businesses and retains the authority to issue directions regarding deposit acceptance activities. The main goal of these organizations is to instill in their employees a sense of frugality and savings.

What is a Nidhi Company?

A Nidhi Company is a non-banking financial institution. It was created with the purpose of borrowing and lending money to its members. It instills the habit of saving in its members and operates on a mutual benefit premise. Nidhi Company does not require a license from the RBI (Reserve Bank of India), making it simple to establish. It is a public business that should have “Nidhi Limited” as the last word in its name.

Advantages of Nidhi Company Registration

• Helps to save money

It urges all of its members to save money and lead economical lives. After all, a Nidhi company is a mutual benefit society in which members can give or borrow money and accept financial assistance from one another.

• The process is less complicated

Dealing with banks or in an informal situation is far more complicated than borrowing and lending to known people, where the procedure is predetermined. When members of a Nidhi Company need money, they can unlock the potential of their money and benefit from cheaper interest rates.

• Borrow money at a minimum rate

As a member, you can borrow money at a low-interest rate compared to what banks charge. This can be a significant benefit in times of need because various members of the mutual benefit society are likely to require funds at different periods, Also as stated earlier the process of borrowing money is speedier as compared to the banks and other third parties.

Features of Nidhi Company Registration in India 

• The RBI has no jurisdiction over the “Nidhi Company.” As a result, it does not require an RBI license to establish a loan business.
• The number of members must reach 200 within 12 months of registration.
• It is possible to charge a maximum interest rate of 20% p.a. (calculated using the declining balance technique).
• The maximum rate of interest on a savings deposit account cannot be more than 2% higher than the rate offered by Nationalized Banks.
• Nidhi Company accepts FD, RD, and savings accounts and pays a current interest rate of 12.5 percent.
• The highest rate of interest that can be offered on Fixed and Recurring Deposits is set by RBI as the maximum rate of interest that may be offered by NBFCs on deposits. The maximum interest rate for NBFCs also applies to Nidhi firms.

Points to keep in mind while forming a Nidhi Company

• The minimum requirement of a shareholder is 7 for Nidhi Company.
• The minimum director requirement is 3 for a Nidhi Company Incorporation.
• In Nidhi company Preference shares will not be issued.
• The Nidhi Company must have at least 200 members or shareholders before the end of the first year.
• The company’s goal is to instill the habit of saving among its members by “accepting deposits” from and “lending to” them solely for their mutual benefit.

Documents required for Nidhi Company 

• Photograph of all the Directors and Members
• PAN Card of all the Directors and Members
• ID Proof of all the Directors and Members (Driving License/Passport/Voter ID)
• Electricity Bill or any other utility bill for the address proof of the Registered Office
• DIN and DSC of the directors
• MOA and AOA of the company

Note: In India, a company must have a registered office. Bank statements and utility bills should be no more than two months old. A utility bill, Rent Agreement or Sale Deed, and a No Objection Letter (NOC) from the landlord granting permission to use the office as a company’s registered office must also be presented.

Nidhi Company Registration Process

• Needs to apply for DSC and DIN for starting a Nidhi company procedure. It is issued by the MCA (Ministry of Corporate Affairs). If a director is already have a DIN and DSC then this process is not needed.
• Now you must choose three distinct names for your Nidhi Company and submit them to the MCA. Only one of these three names will be accepted by the MCA for your company. The proposed names must be distinct from those of other firms that have already been registered. In accordance with Rule 8 of the Company Act. The approved name will only be good for 20 days.
• Need to file all the required documents and form SPICe forms, along with that MOA and AOA needs to be filled for registering Nidhi company in India. While making incorporate certificate it is essential to mention the main objective of incorporating Nidhi company as a charity.
• Finally, you must apply for both a TAN and PAN. Within 7 working days, the PAN and TAN are normally received. After that, you must open a bank account by sending the Certificate of Incorporation, the Memorandum of Association (MOA), the Article of Association (AOA), and the PAN to the bank.

FAQs on Nidhi Company in India

1. What are the requirements of a Nidhi Company Incorporation?  

A Nidhi company is registered as a Public Limited Company. Hence, the requirements for incorporation of a Nidhi company covered a minimum of three Directors and Seven Shareholders. However, the MOA of a Nidhi company must state that the primary objective of the proposed company is to nurture and promote a habit of thriftiness and savings among its members, and accept deposits from or lend loans only to its members, for the mutual benefits of them.

2. Is it possible for a Nidhi corporation to lend to a non-Nidhi

No, a Nidhi corporation cannot borrow money from a non-Nidhi company. It cannot lend to a non-member who is not a member in the same way.

3. Is it necessary for me to be present in-person to form a Nidhi Company?

No, you do not need to appear in person at our office or at any other office to register a Nidhi Company.

4. What are the forms we need to file for the Nidhi Company Registration Procedure?

Two forms that need to be filed for Nidhi Company registration is Form  INC 9, and Form DIR 2. All the directors need to file as per the declaration in rule 5 & 6 of Nidhi company rules, 2014.