Nidhi Company Registration

 

Nidhi Company Registration in India

A Nidhi Company is a type of non-banking financial institution recognized under Section 406 of the Companies Act, 2013. Primarily aimed at encouraging savings and thrift among its members, a Nidhi Company allows members to lend and borrow money between themselves, catering to mutual benefits within the community. The process of Nidhi Company Registration in India is governed by the Ministry of Corporate Affairs (MCA), and it’s an attractive option for individuals looking to form a company with minimal capital and regulations. One of the significant advantages of forming a Nidhi company is that it doesn’t require a Reserve Bank of India (RBI) license, unlike other NBFCs (Non-Banking Financial Companies).
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Benefits of Nidhi Company Registration:

  • - Easy Formation: Registering a Nidhi Company is straightforward and involves a minimal amount of formalities compared to other financial entities.
  • - No External Involvement: Since Nidhi Companies primarily cater to their members, there’s no interference from external financial organizations or authorities like RBI.
  • - Limited Risk: Being a mutual benefit society, the risk of non-repayment is low as the transactions are only among members.
  • - Encouragement of Savings: One of the primary objectives of a Nidhi Company is to promote the habit of savings among its members.
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Eligibility for Nidhi Company Registration:

  • - Members: A minimum of 200 members is required within the first year of incorporation.
  • - Capital: The company must have at least Rs. 5 lakh in capital at the time of registration.
  • - Directors: A minimum of three directors are required to register a Nidhi Company.
  • - Unencumbered Deposits: The ratio of Net Owned Funds to Deposits must not be more than 1:20.

Documents Required for Nidhi Company Registration:

  • - Identity Proof: PAN Card, Aadhar Card, or Passport of directors and shareholders.
  • - Address Proof: Bank statements, electricity bills, or telephone bills that are not older than 2 months.
  • - Proof of Registered Office: Rent agreement or ownership documents and a no-objection certificate (NOC) from the owner of the property.
  • - Photographs: Passport-sized photographs of the directors and shareholders.
Nidhi-Compnay-Registration

Nidhi Registration Process:

1. Obtain Digital Signature Certificate (DSC): The first step is to obtain a DSC for all the directors and shareholders, as it is required for filing forms online.

2. Director Identification Number (DIN): Apply for DIN of directors if they don't already have one. It is mandatory for all directors.

3. Name Reservation: The company’s name must be approved through the RUN (Reserve Unique Name) form, which ensures that the desired name is unique and not already in use.

4. Filing of Incorporation Forms: After name approval, fill out the incorporation form (SPICe+), which includes the Memorandum of Association (MoA) and Articles of Association (AoA), along with relevant documents.

5. Issuance of Certificate of Incorporation: Once all documents are approved, the MCA will issue the Certificate of Incorporation, which officially registers the Nidhi Company.

6. Apply for PAN and TAN: After registration, apply for the company’s PAN and TAN numbers.

7. Commencement of Business: Once the company is incorporated, it must comply with post-registration requirements such as opening a bank account and depositing the minimum capital.

Advantages:

  • - Self-regulated: Nidhi companies operate with less regulatory burden, as they are internally managed by members.
  • - Low Capital Requirements: With a minimum paid-up equity share capital requirement of Rs. 5 lakhs, starting a Nidhi Company is relatively cost-effective.
  • - No RBI Regulations: Nidhi Companies are not required to obtain RBI approval, simplifying compliance.
  • - Encourages Savings: By fostering a habit of savings among members, Nidhi companies contribute to financial security.

Disadvantages:

  • - Restricted Activities: Nidhi companies can only deal with their members and cannot engage in the business of chit funds, leasing finance, or insurance.
  • - Geographical Limitation: Operations are typically confined to a specific district or state.
  • - Slow Growth: As Nidhi Companies are community-based and cater only to their members, the scope for rapid growth is limited.
  • - Limited Sources of Funding: Nidhi Companies can only accept deposits from and provide loans to their members, limiting their funding pool.

Why Choose Legal Dev for Nidhi Company Registration?

Nidhi Company Registration offers a unique opportunity for individuals seeking to create a financial institution focused on mutual benefit within a community. With minimal capital requirements, no need for RBI approval, and a simple registration process, Nidhi Companies present a viable solution for those interested in promoting savings and providing easy access to credit among their members. The key benefits, such as low regulatory compliance and member-driven operations, make it an attractive choice for small-scale finance activities.

However, it’s essential to weigh these benefits against the limitations. Nidhi Companies are restricted in their activities, catering only to their members, and their geographical reach is often confined. Despite these drawbacks, for those looking for a streamlined, community-focused financial entity, Nidhi Company Registration in India remains a favorable option. It combines simplicity, low cost, and community benefit, making it a good fit for small, localized financial operations.

Let's Clear All The Doubts !

A: The minimum capital requirement is Rs. 5 lakhs, which must be raised by the members.

A: The process usually takes 15-20 working days, depending on the approval time from the MCA.

A: No, a Nidhi Company can only operate within India and typically within the state or district where it is registered.

A: The fees depend on various factors like professional charges and government fees. Typically, the cost can range from Rs. 20,000 to Rs. 40,000.

A: Yes, Nidhi Company Registration Online is possible through the MCA’s website and involves digital processes such as DSC and DIN application, name reservation, and incorporation filing.

A: Yes, the interest rates on loans offered by a Nidhi Company are regulated. It cannot charge an interest rate higher than 7.5% above the rate charged by the Nationalized Banks

A: The Ministry of Corporate Affairs (MCA) monitors the operations of Nidhi Companies to ensure compliance with the Nidhi Rules, 2014. Although not directly governed by RBI, Nidhi Companies must adhere to the guidelines set by MCA.