Nidhi Company Registration in India: Documents Required & Fees

What is Nidhi Company?

Nidhi Company is a type of NBFC (a non-banking finance company) registered under Section 406 of the Companies Act 2013. Its primary function is to accelerate lending money between the prime members of the company. By doing so, the members of the company are encouraged to save money and put them into the company. The company then gives loans or advances to its member (or shareholders) and buys government securities/stocks/debentures/ bonds with the deposits. The Ministry of Corporate Affairs controls this type of company, and the RBI keeps an eye on all its money matters.

What is the process of Nidhi Company Registration?

Steps to get Nidhi Company Registration:

Obtaining DSC and DIN:
Getting the DSC (Digital Signature Certificate) and DIN (Directors Identification Number) from the MCA-certified agencies is the first step for all directors. The agencies ask for basic documentation and charge standard fees for these services. DSC is used to sign the e-form and other documents electronically in a secure and legit way. It authenticates the document.

Name Approval:
You have to propose 3 distinct names for your Nidhi company. The names should be original and not resemble any existing company. MCA will select one name from the three options. The selected name will be valid for 20 days only as per the Company Act rule 8.

Drafting Articles of Association and Memorandum of Association:
You have to submit the articles of association and the memorandum of association to the Register of Companies (ROC) along with the statement of subscription. The main objective of the Nidhi company should be clearly stated in MoA and AoA.

Getting CIN (Certificate of Incorporation):
It usually takes around 15-25 days to form a Nidhi company and get the registration certificate. This certificate will authenticate your company, and you will also receive the identification number (CIN).
You are almost ready to start your Nidhi company. At this stage, you have to apply for PAN, Bank account, and TAN for your company. It normally takes around a week to get the PAN and TAN, and then you have to open a bank account by providing documents like the certificate of incorporation MoA and AoA to the bank.

What are to documents required for the Nidhi Company?

The following documents are required for the registration of a Nidhi company:

• Photographs of passport size
• NOC from the landlord/owner of the premises
• DSC of the directors
• DIN of the directors
• MoA of the company
• AoA of the company
• PAN card: It is essential for filing the financial transactions and taxation of the company
• Proof of address: Any government-issued identity proof with address such as bank statement, driving license, residence card, etc.
• Proof of residence: Any utility bill or bank statement with name and address
• Passport: It is mandatory only for foreign directors of Nidhi companies. Indian directors do not need to submit passport.
• Proof of registered office: It is important for availing government schemes and loans for Nidhi companies.

What are the benefits of Nidhi Company registration?

Simplified Establishment:
Creating a Nidhi Company is a straightforward process that involves minimal complexity. The key requirements for setting up a Nidhi Company are having at least seven members, appointing three directors, and completing a hassle-free documentation process.

Exemption from Reserve Bank of India Regulations:
One significant advantage of a Nidhi Company is that it is not required to comply with the guidelines set by the RBI (Reserve Bank of India). This allows the Nidhi Company to establish its own rules and regulations, granting it greater flexibility and autonomy.

Reduced Financial Risk:
In a Nidhi Company, all lending, borrowing, and depositing transactions are carried out exclusively among the members. This closed-loop system significantly reduces the risk of encountering financial issues within the Nidhi Company, providing a sense of security for its members.

Affordable Registration:
Registering a Nidhi Company is a cost-effective option for directors, as the process is relatively simpler compared to registering other types of Non-Banking Financial Companies (NBFCs). This economical registration not only benefits the directors financially but also facilitates the acquisition of business loans when necessary, promoting the growth of the company.

Focus on Savings:
The fundamental concept and objective of a Nidhi Company revolve around promoting saving habits among the Indian populace. By emphasizing the importance of savings, Nidhi Company aims to foster a culture of financial stability and prosperity among its members.

Net-Owned Funding System:
A distinguishing feature of a Nidhi Company is its utilization of the net-owned funding system. This approach involves members investing funds directly into the business, thus raising capital. By adopting this system, a Nidhi Company becomes a cost-effective venture for its owners, facilitating business growth and expansion.

What are the conditions to get Nidhi status?

To attain the coveted Nidhi Status, certain conditions must be met:

• A Nidhi company must not accept deposits from its members or lend money to them if:
  • it violates the Nidhi Company New Rules or their provisions,
  • the central government has denied its application in Form NDH -4,
• Any public company that wishes to be declared as a Nidhi company must submit Form NDH-4 within 120 days from the date of its formation.
• The Company must include a declaration that all of its directors and promotors are fit and proper persons along with Form NDH-4.
• The minimum paid-up share capital has increased from 5 lakhs to 10 lakhs.
• Nidhi Company that existed before the enforcement of Nidhi Company New Rules must comply with all the requirements within 18 months from the date of enforcement.
• The filing of Form NDH 1 within 90 days from the Company's incorporation is not required for the companies formed on or after the enforcement of Nidhi Company New Rules.
• The Net owned funds requirement for Nidhi company has changed from 10 lakhs to 20 lakhs.
• If a Nidhi company wants to open more than three branches outside the district or any branch outside the district, it must apply in Form NDH 2.