What is a Nidhi Company?
Nidhi Company is an NBFC (Non-Banking Financial Company). A Nidhi Company is a non-banking financial entity registered under the Companies Act 2013 with the predominant objective of cultivating the habit of thrift and savings amongst its members, deposits from, and lending to, its members only, for their mutual benefit.
A Nidhi company is a company that is recognised under section 406 of the Companies Act, 2013 read with Nidhi Rules 2014 and is managed, as per the RBI’s guidelines. However, since these Nidh is deal with their shareholder-members only, RBI has exempted them from the core provisions of the RBI Act and other directions applicable to NBFCs.
Objective of Nidhi Company:
A Nidhi company is incorporated with the object of-
- Cultivating the habit of thrift and
- Savings amongst its members,
- Receiving deposits from, and
- Lending to, its members only, for their mutual benefit, and Which complies with rules of Chapter XXVI of Companies Rules, 2014.
Nidhi Company Requirements:
- Required Minimum 3 Directors and 7 Shareholders
- Can Accept Deposits only from its members
- Body Corporate and Benefit of Limited Liability
- Can Land Money to its Members only
- Can Provide Locker Facility to its members
- Required to have Minimum 200 members within one Year
- Best suited for Small lending and deposit Business
- Minimum Capital Rs. 5 Lakh at the time of Incorporation and Thereafter required to have Rs. 10 Lakh.
- Shall have the words ‘Nidhi Limited’ as part of its name
- No preference shares shall be issued
- The net owned funds and the deposits shall be in a ratio not exceeding 1: 20
- Unencumbered term deposits should be not less than 10 % of the outstanding deposits
Restrictions on Nidhi Companies
As per Rule 6 of Nidhi rules 2014, a Nidhi Company cannot perform the following activities:
- Conduct the business of chit fund, leasing finance, and hire purchase. It cannot acquire securities issued by a body corporate
- Issue preference shares, debentures, or any debt instrument by any name or in any form whatsoever
- Open any current account with its members
- Make any acquisitions or arrangements or concessions until the same is adopted in the General Meeting by a special resolution and is approved by the Regional Director
- Perform any business other than borrowing/ lending in its own name
- Lend to or accept funds from anyone other than its members
- Lend to or accept funds from body corporate
- Enter into any partnership arrangement in their borrowing or lending operation
- Act of publicity for seeking any deposits in any form
- Pledge any of its assets lodged by its members as security
- Pay any brokerage or incentive for granting loans or deployment of funds or mobilise deposits from its members
Documents for Registration:
- MOA – Memorandum of Association
- AOA – Article of Association
- DIN of directors
- Property documents / rent agreement / lease agreement
- NOC of owner / landlord PAN of members
- Address proof of members
- Identity proof
Compliances to be made by Nidhi Companies
- NDH – 1 – Return of Statutory Compliance: Within 90 days from the closure of the first financial year and where applicable form the second financial year.
- NDH – 2 – Application for Extension of time: Within 30 days from the closure of the financial year.
- NDH -3 Half Yearly return: Within 30 days from the conclusion of each half year.
- NDH -4 : For New Nidhi Company– Within 60 days after the expiry of 1 year from the date of its incorporation. For existing Nidhi Company– Within a period of 1 year from its date of incorporation OR within 6 months from the date of commencement of Nidhi Rules 2019, whichever is later.
- AOC – 4: Filing of Financial Statements within 30 days from the date of the Company’s Annual General Meeting
- MGT -7: Annual return along with a list of company members within 60 days of the Annual General Meeting
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Note: This Post was last updated on January 17, 2023
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