Nidhi Company Registration in India

What is a Nidhi Company?

A Nidhi Company is a specialized type of non-banking financial company (NBFC) in India, designed to promote savings and financial discipline among its members. It operates by accepting deposits solely from its members and providing loans to them, thereby encouraging mutual financial growth and collective resource pooling.

The primary aim of a Nidhi Company is to foster a saving culture within a close-knit community of members, promoting thrift and providing a platform for collective financial benefits. Nidhi Companies are governed by the Companies Act, 2013, and adhere to specific guidelines established by the Ministry of Corporate Affairs (MCA). This regulatory framework ensures transparency, financial stability, and compliance with operational rules, thereby protecting the interests of all members.

What is the Process of Nidhi Company Registration?

1. Obtaining DSC and DIN: The initial step for all directors is to obtain the DSC (Digital Signature Certificate) and DIN (Director Identification Number) from MCA-certified agencies. These agencies require basic documentation and charge standard fees for their services. The DSC is used for securely signing e-forms and other documents electronically, thereby authenticating them.
2. Name Approval: It is necessary to propose three distinct names for your Nidhi Company. These names must be original and not similar to any existing company. The MCA will select one name from the proposed options, which will be valid for 20 days as per Company Act Rule 8.
3. Filling of SPICe+ Form: After receiving name approval, the details pertaining to the Nidhi Company registration must be filled out in the SPICe+ form, which is a simplified electronic incorporation process. This form includes:

   – Company details

   – Member and subscriber details

   – Application for DIN

   – Application for PAN and TAN

   – Declarations by directors and subscribers

   – Certification by professionals

4. Drafting Articles of Association and Memorandum of Association:  The Articles of Association and Memorandum of Association must be submitted to the Registrar of Companies (ROC) along with a statement of subscription. The primary objective of the Nidhi Company should be clearly articulated in both the MoA and AoA.
5. Obtaining CIN (Certificate of Incorporation): Typically, it takes approximately 15-25 days to establish a Nidhi Company and receive the registration certificate. This certificate authenticates the company and provides an identification number (CIN). At this stage, applications for PAN, a bank account, and TAN for the company must be submitted. Generally, it takes about a week to obtain the PAN and TAN, after which a bank account can be opened by providing documents such as the certificate of incorporation, MoA, and AoA to the bank.

What Documents Are Required for Nidhi Company Registration with Legal Kro?

The following documents are necessary for the registration of a Nidhi Company with Legal Kro:

– Passport-sized photographs

– No Objection Certificate (NOC) from the landlord/owner of the premises

– DSC of the directors

– DIN of the directors

– Memorandum of Association (MoA) of the company

– Articles of Association (AoA) of the company

– PAN card: Essential for filing financial transactions and taxation of the company

– Proof of address: Any government-issued identity proof with an address, such as a bank statement, driving license, or residence card

– Proof of residence: Any utility bill or bank statement showing name and address

– Passport: Mandatory only for foreign directors of Nidhi companies; Indian directors are not required to submit a passport

– Proof of registered office: Important for availing government schemes and loans for Nidhi Companies.

What Are the Benefits of Nidhi Company Registration?

Nidhi Company registration offers numerous benefits and encourages saving habits among its members. The following are the advantages of Nidhi registration:

1. Simplified Establishment: The registration process for a Nidhi Company is straightforward, involving minimal complexity. The essential requirements include having at least seven members, appointing three directors, and completing a streamlined documentation process.
2. Exemption from Reserve Bank of India Regulations: One significant advantage of a Nidhi Company is its exemption from RBI guidelines, allowing it to create its own rules and regulations, thereby providing greater flexibility and autonomy.
3. Reduced Financial Risk: In a Nidhi Company, all lending, borrowing, and deposit transactions occur exclusively among members. This closed-loop system significantly mitigates the risk of financial issues, offering a sense of security for its members.
4. Affordable Registration: The registration process for a Nidhi Company is cost-effective for directors, as it is relatively simpler compared to registering other types of Non-Banking Financial Companies (NBFCs). This economical registration not only benefits directors financially but also aids in acquiring business loans when necessary, fostering the company’s growth.
5. Focus on Savings: The core concept and objective of a Nidhi Company center around promoting savings among the Indian populace. By emphasizing the importance of savings, a Nidhi Company aims to cultivate a culture of financial stability and prosperity among its members.
6. Net-Owned Funding System:  A distinguishing feature of a Nidhi Company is its use of a net-owned funding system, where members directly invest funds into the business, thus raising capital. This approach renders the Nidhi Company a cost-effective venture for its owners, facilitating business growth and expansion.

What Are the Conditions to Attain Nidhi Status?

To achieve Nidhi Status, a Nidhi Company must meet the following conditions within one year of incorporation:

• The company must have at least 200 members within one year of commencement.
• Additionally, the net-owned funds must be ₹10 lakh or more. Net owned funds are calculated as: Equity Share Capital + Free Reserves – Accumulated Losses – Intangible Assets.
• Unencumbered term deposits must constitute 10% or more of the outstanding deposits, and the ratio of net-owned funds to deposits should not exceed 1:20.

If the Nidhi Company meets these criteria, it must file Form NDH-1 along with the prescribed fees within 90 days of the end of the first financial year post-incorporation. This form must be certified by a practicing CA, CS, or CWA.

An extension for an additional financial year may be requested by submitting Form NDH-2 to the Regional Director within 30 days of the end of the first financial year.

If the Nidhi Company fails to meet the requirements after the second financial year, it will be prohibited from accepting deposits until it complies with the provisions. Moreover, penalties will be imposed for non-compliance.

What Activities Are Prohibited in a Nidhi Company?

A Nidhi Company is not permitted to engage in chit funds, lease finance, hire-purchase finance, insurance, or securities business. Furthermore, it cannot accept deposits or lend funds to any individual who is not a member of the company. In essence, it can only lend money or accept deposits from its members. A Nidhi Company is also prohibited from advertising itself or soliciting deposits.

What Are the Documents Required for Nidhi Company Registration?

The following documents are required to complete the Nidhi Company registration process:

• Proof of registered place of business
• Identity proofs
• No Objection Certificate
• Address proofs of members
• Photographs of members
• Copies of PAN cards of members
• Digital Signature Certificate (DSC)
• Director Identification Number (DIN)
• Memorandum of Association of the Company (MOA)
• Articles of Association of the company (AOA)

The Nidhi Company plays a significant role in promoting financial inclusion. Having gained an understanding of the Nidhi company registration process in India, including the necessary documentation and benefits, you are now prepared to proceed with your registration under the Nidhi company status. Should you require assistance with company registration or have any inquiries, please feel free to contact our experts.

Step-by-Step Process: Nidhi Company Registration with Legal Kro

Following the step-by-step guide of Legal Kro for a seamless process: 

Step 1: Consultation & Name Approval

We help you choose a unique name and apply with MCA for approval.

Step 2: Digital Signature & DIN

We generate DSC & DIN for all directors to file incorporation papers.

Step 3: Draft MOA, AOA, and Nidhi Rules

Legal Kro legal experts prepare company bylaws and file e-forms with ROC.

Step 4: Incorporation Certificate

Once approved, you get the Certificate of Incorporation (COI), PAN, TAN.

Step 5: Post-Incorporation Compliances

Legal Kro help with statutory books, bank account setup, and 1-year filings.

Time Required for Nidhi Company Registration

Also Read:- How to change name legally in India

Nidhi Company Registration Cost – Plans by Legal Kro

Why Choose Legal Kro?

Legal Kro is recognized as a reliable partner for entrepreneurs and businesses throughout India, providing a seamless and efficient company registration experience. With one of the industry’s fastest turnaround times, most registrations are completed within a mere 3 to 5 days. The entire process is conducted online and is paperless, ensuring convenience and ease. What distinguishes Legal Kro is its ability to offer GST registration, MSME certification, and Trade License services all in one place, thereby saving time and reducing coordination efforts. Each client is assigned a dedicated legal expert to assist them with both the initial legal setup and essential post-incorporation compliance. With nationwide coverage and the trust of over 20,000 founders, Legal Kro remains the preferred choice for entrepreneurs seeking dependable and comprehensive legal support.