Nidhi Company Registration- Online Registration, Fees and Documents

Nidhi company Registration is crucial for forming a Nidhi company in India that is outlined under the Section 406 of the Companies Act 2012 and Nidhi Amendment Rules 2022. The Word “Nidhi” Means “Saving” that reflects the primary objective to encourage the practice of saving and offering loans for the collective benefit of the members. Nidhi Companies take deposits and provide loans, regulated by the ministry Corporate Affairs, RBI, Central government rules.
Unlike other NBFCs, Nidhi Companies have a unique bond with its members which allows it to operate as an independent financial institution catering solely to its member base. For Nidhi Company Registration in India, read further to find out about Nidhi Company Prerequisites, eligibility, benefits, documents required, procedure, time involved, and fees required for Nidhi Company Registration.

Nidhi Company Registration Benefits

• Easy & Simple Process of Incorporation: Nidhi companies, operating under the Nidhi rules, operate without requiring approval from the Reserve Bank of India. Thus, the process of incorporation could be easily completed in a few steps through the MCA portal.
• No intrusion by Outsider: Nidhi is a business entity with limited scope, allowing members to form, control, and manage it for mutual benefit. There cannot be instances where people other than its members could intervene to raise issues or halt the business operations.
• No risk of loan repayment default: Nidhi companies foster mutual benefit among members by instilling credit and thrift habits. They accept deposits and lend loans at lower interest rates, reducing loan defaults and making them a safe option for members.
• Perpetual Succession: A Nidhi company maintains its legal status as a separate entity, unlike a sole proprietorship firm, and remains active until its business operations are legally dissolved by a court. The legal status of a Nidhi company cannot be impacted by the exit of a member due to reasons such as retirement, death, insolvency, etc.
• Flexibility in Functioning: Since RBI has limited overseeing powers with respect to Nidhi Companies, the provisions under Nidhi Rules, 2014 have been relaxed in terms of its functioning unlike banks and financial institutions which are subject to stricter RBI regulations.
• Lower rate of credit: Due to the exemption provided by RBI to Nidhi banks, it has the flexibility to offer loans at lower rates of interest than those levied by banks or financial institutions, which is an attractive attribute of the Nidhi Companies.
• Minimum Capital Requirement: The Ministry of Corporate Affairs has relaxed the Nidhi rules, requiring a minimum capital contribution of Rs. 10L for a proposed Nidhi company, which must be invested within two months of incorporation, compared to the net owned funds ratio required for NBFCs.

Eligibility and Requirements for Nidhi Company Registration

Some basic requirements given below that should be fulfilled for Nidhi Company Registration:

• Minimum Shareholders or Members: A Nidhi company cannot be incorporated with less than seven initial members.
• Minimum Directors: Not less than three directors should be available for Nidhi Company Registration.
• Minimum Capital: To start the process of Nidhi Company Registration in India, there shall be a capital of Rs. 10L.
• Equity Share Capital: Nidhi company shall only have Equity Share Capital and shall not issue preference shares to its members.
• Primary Objective: The primary aim of a Nidhi company is to promote the practice of savings and thrift for the collective good of the members.
• Loan Security: The loans offered by the Nidhi company shall be only secured in nature.
• Company Name: All the official publications and documents shall contain the affix Nidhi Limited.

Restricted Activities for a Nidhi Company

Rule 6 of Nidhi Rules 2014 prescribes certain activities restricted by a Nidhi Company in India:

• Partnering or collaborating with outsiders to run lending or borrowing business;
• Either acceptance of deposits or offering loans to people other than Nidhi members;
• Sale of assets to members and keeping them as collateral for loans;
• Engaging in business activities of chit fund, lotteries, leasing finance, or hire purchase finance;
• Either acceptance of funds or offering loans to people other than its members (individuals or a body corporate);
• Investing funds or acquiring securities from any other body corporate;
• Issuing preference shares or any debt instruments including debentures, bonds, etc., or any instrument of similar nature;
• Opening a current account to its members;
• Entering into any corporate arrangements or concessions unless it's approved by the General Meeting by means of a special resolution and granted by the Regional Director.
• Undertake business activities other than lending or borrowing under its name.
• Engaging in promotions for acceptance of deposits from the public in any manner.
• Payment of brokerage or incentives for the issue of loans, entering into any arrangement of funds to mobilise funds from the members.

Nidhi Company Registration Documents Required

The Complete Document list for Nidhi Company Registration is as mentioned below:

Nidhi Company Registration Online Process

The stepwise process of Nidhi Company Registration is as follows:

Step 1: Decide a Name for the proposed company as per the objectives

Individuals or Legal entities wishing to undertake Nidhi Company Registration could begin the process by picking at least two names for the proposed Nidhi Company as per its objective of encouraging the habit of saving and thrift along with the affix Nidhi Ltd. to facilitate Nidhi Company registration.

Step 2: Prepare the Necessary Documents

Preparation of necessary attachments including the Memorandum and Articles of Association for the Nidhi company as per its objectives, Affidavits required and address proof required for the registered address of the Nidhi Company and self-certified identity proof documents for the initial subscribers and directors of the proposed company.

Step 3: Generate Login Credentials on the MCA portal

Login to the dedicated portal of the Ministry of Corporate Affairs by logging on (https://www.mca.gov.in/mcafoportal/login.do) and complete sign in the process by feeding information such as contact details and email address, after which an OTP will be generated.

Step 4: Make an application for DSC

Now, log into the portal and make an application for obtaining a Digital Signature Certificate (DSC) issued by the Certifying authority after payment of certain fees essential to attach signatures to the incorporation form.

Step 5: Select SPICe+ to start filling out the application

Start by filling out Part A of the form for the purpose of name reservation by recommending at least two new names while adding words that specify its key objectives. Next, fill out Part B of the SPICe+ to complete other requirements for incorporation, such as:

• Incorporation of a Nidhi Company.
• Request for DIN allotment for up to three directors.
• Request for PAN and TAN registration
• Request for PF and ESI Registration.
• Applying a Bank account for the business.

Step 6: Approval of Nidhi Company Registration from ROC

Upon receipt of the application, the concerned ROC will review the contents of the application. If he is of the view that the application is genuine and complete in all respects, he may allow the registration of Nidhi company evidenced by a certificate of incorporation certificate bearing a unique identification number.

Step 7: Make an application for a Licence to Operate from the Central Government

After the receipt of the certificate of incorporation of the Nidhi company, the applicant shall be required to make an application for a licence to operate from the Central Government. On satisfaction of all the prerequisites, the Central Government may issue the licence to the Nidhi company subject to certain conditions to be complied with.

Nidhi Company Registration Post Compliances

It shall be mandatory for a Nidhi Company to mention the objective of encouraging the habit of savings for the mutual benefit of its members as their primary object in their MOA. Within one year of the incorporation of a Nidhi Company should have:

• Not fewer than 200 members and a net-owned funds of Rs.20L.
• The ratio of Net owned funds shall not go below 1:20.
• A minimum of 10% of the total outstanding deposits that are encumbered.

Limits on Acceptance of Deposits

• A Nidhi company must not accept deposits that exceed 20 times its Net Owned Assets calculated as per the latest audited financial statements.
• A Nidhi company shall accept the fixed deposits for a minimum period of 6 months and a maximum period of five years.
• Any recurrent deposits accepted by the Nidhi company shall be accepted for a period not less than a year and not higher than five years.
• If recurring deposits are with respect to mortgage loans, then the maximum period for the deposits shall correspond with the repayment period of such mortgage loans.
• The maximum sum of deposits for savings accounts accepted by a Nidhi company cannot exceed Rs. 1L at any point in time with the interest payments not exceedingly more than 2% payable by the nationalised banks for savings accounts.
• The interest payments made by a Nidhi company on fixed and recurring deposits shall not exceed the highest rate of interest permissible by RBI for NBFC for public deposits.

Limitation on Loans

Post incorporation of a Nidhi company, it shall not offer loans above the limits prescribed under the Companies Act:

Limits on Opening of Branches

As per the Nidhi Rules, a Nidhi company can start branches after earning a net profit for a continual period of three years post-tax deduction. Post meeting the condition for net profits, a Nidhi company opens up to three branches in a district. But before opening any branches, it is mandatory for a Nidhi company to submit a copy of financial statements and annual returns to the Registrar at a prescribed time.

Nidhi Company Registration Time Involved

Typically, it may take up to 30-45 days to complete the process of Nidhi company incorporation through MCA and then obtain a license to operate from the central government of India that allows a company its Nidhi status.

Nidhi Company Registration Fees

Nidhi company's online registration fee may vary depending upon a number of factors such as stamp duty applicability, the state in which registration is sought, and in case of any professional assistance taken by the applicant to either prepare the necessary documentation for submission or assistance for filling the application. Typically, it may take around Rs. 9000-20000 to register a Nidhi Company in India.

Conclusion

Hence, an incorporated Nidhi Company in India is a category of an NBFC whose primary aim is to encourage saving and cooperate with its members to support each other financially for the collective good. Although there is no need to obtain any authorization from RBI to commence its operations, a Nidhi company is regulated by the MCA as a public company with Nidhi Limited as its last name. The MCA portal has simplified the process of registration through the availability of a single comprehensive process for Nidhi Company registration in India. If you still have questions regarding Nidhi Company registration in India or require any assistance, connect with experts at BizFoc.

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At BizFoc, we have a unique team of experts with years of experience to find solutions for all your woes related to the Nidhi company registration under one roof. Our unique features include:

• Expert Team of Professionals to guide and assist you with end–to–end support from Registration to completion of legal processes.
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