Nidhi Company
Let' study in detail about the Nidhi Company. A Nidhi company is a form of a non-banking finance company in India, as described by section 406 of the Companies Act, 2013. Borrowing and lending money amongst members is their main business. It is a public company that should have "Nidhi Limited" as the last words in its name.
What is Nidhi Company?
As per the Companies Act, 2013, Nidhi Company features a sole objective of cultivating the habit of thrift and savings amongst its members. In Nidhi Company, it is allowed to take a deposit from its members and lend it to its members only. Hence, the funds contributed to a Nidhi company are only from its members and used only by the shareholders of the Nidhi Company.Nidhi Company is a classification of NBFCs and RBI and is empowered to issue directions to them in matters concerning their deposit acceptance activities. However, in recognition of the very fact that this Nidhi company deals with their shareholder-members only, RBI has exempted the notified Nidhi from the core provisions of the RBI Act and other directions applicable to NBFCs. Therefore, it is an ideal entity to take a deposit from and lend to a specific group of people.
What are the facts to remember about Nidhi Companies?
- In order to establish the Nidhi company in India, no permission from the RBI is necessary. As a result, it may be implemented with minimal effort. Nidhi Companies are listed on the stock exchange.
- "Nidhi Limited" must be added at the end of the name of such entities.
- The undertakings of Nidhi Companies are quite similar to those of NBFCs because they are regulated by the Reserve Bank of India.
- Nidhi Company's primary goal is to conduct all loan and borrowing activities in-house, with no involvement from outside parties.
- The Nidhi Rules of 2014 allow Nidhis to provide lockers for rent to its members. At no point throughout the fiscal year, rental income should exceed 20% of the company's total revenue.
What is the process for registering a Nidhi Company?
The procedure for obtaining an incorporation certificate for Nidhi Company is outlined in the following:- Obtain DSC from MCA-approved agencies
The first step is to get a Digital Signature Certificate (DSC) from one of the MCA-approved agencies. For providing such a service, the aforementioned agencies charge normal costs and need minimum documents. DSC is mostly used to electronically authenticate documents. It is by far the safest and most legitimate method of signing e-forms and other documents.- Fill out the Spice+ form and submit it for approval
Spice+ is a form that can be found on the MCA site that allows the applicant to incorporate their business with fewer paperwork and compliance. Spice+ is a web-based programme that is divided into two parts: Part A and Part B.Part A is a basic registration form for the proposed business name. The portal consults its database after receiving the suggested business names to evaluate their legal feasibility. After receiving name approval, the applicant can go on to PART B processes.
- Upload the connected forms i.e. the MOA and AOA, AGILE PRO, INC-9
- Obtain the SRN and pay the required fees.
The site will produce the Service Request Number as soon as the forms are uploaded (SRN). The next step is to pay the fees that have been requested, which may be done using a payment channel. The payment receipt will be created when the fee has been submitted.What are the benefits of a Nidhi Company?
- Comply with the minimum legal requirements
- Removes the possibility of a third-party intervention
- Exemption from a number of RBI regulations
- Limits the company's and serving members' responsibility
What are the Disadvantages of Nidhi Company?
Restriction to raise fundsAs Nidhi Company is limited to its members only so they can’t accept deposits from outsiders. Due to this, it has limited fund raising power. RBI vigilance
Nidhi Company does not have any strict compliances, but their activities are governed by the RBI especially their deposit acceptance operations. Rules and Regulations
As the Central Government issues rules and regulations with regards to the Nidhi company so they are not totally exempted from the regulatory framework of Government.
Required Documents
| Acceptable Document | Document Type | Additional Details |
|---|---|---|
| Signed Declaration (s) from Promoters | . | . |
| Identity Proof of each Promoter | . | . |
| Scanned Photographs of Promoters | . | . |
| NOC from the owner of premises | . | . |
| Utility Bill as proof must be Latest | . | . |
| Proof of Registered Office | . | . |
| PAN Card of Each Promoter | . | . |
| Address Proof of Promoter | . | . |
FAQs
You Ask, We Answer
Following provisions are applicable to Nidhi Companies. 1. As they are incorporated into the nature of Public Company so rules and regulations of Companies Act, 2013 are applicable. 2. RBI provisions related to Interest rate payable on deposit are applicable to Nidhi Companies. But the core provisions of RBI aren’t applicable to Nidhi Companies as RBI has exempted the Nidhi Companies. 3. Nidhi Rules, 2014.
Following are the documents required for Nidhi Company Registration: 1. Digital Signature Certificate of all the Directors. 2. Directors Identification of all the Directors. 3. Copy of a PAN Card. 4. Copy of Identity Proof (i.e. Voters ID Card, Driving License, Aadhar Card). 5. 2 Passport size photograph. 6. Registered Office Address Proof (Electricity Bill, Telephone Bill). 7. If the registered address is a rented premise then rent agreement with rent receipt.
The Nidhi Company uses the funds in lending to shareholders as per Nidhi Rules. It lends such money in the form of small loan for business and finance.
A Nidhi Company is a Company which carries on the business of accepting deposits and lending the same on demand. It is similar to NBFC but the basic difference between the two is that Nidhi Companies accept deposits only from its members. The main objective of these companies is to work for the mutual benefit of its members. These companies aren’t entitled to hold on the business of Hire Purchase Financing, Insurance, Chit Funds, and Acquisition of securities or Issue of any Debt Instruments.
The exclusive advantage which is offered by Nidhi Companies are: 1. It is a single office institution governed exclusively by its members with no involvement of the third party. 2. Provide loans at minimal interest rates and minimum documentation. 3. Secured investments are guaranteed by such companies.
As to incorporate a Nidhi Company it is to be registered as a Public Limited Company. So, to incorporate a Nidhi Company it is necessary to fulfill following criteria: 1. It should have at least 3 Directors. 2. It should have at least 7 Members. 3. The main objective to be written in the MOA should be to cultivate the habit of thrift and savings among its members. And it can accept deposits and lend money only to its members and shall work for the advantages of its members.
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