Overview – NIDHI limited company registration

NIDHI limited company belongs to the Non-financial banking business structure. Such a type of company deals with deposits and lending within its members and works only for the mutual benefits of its shareholders. NIDHI means ‘treasure’ these types of companies are registered for cultivating the habit of thrift.

Nidhi ltd companies are registered under section 406 of the Companies Act 2013. This class of NBFC is regulated by the ministry of corporate affairs and monitored by RBI. However, Nidhi companies are exempted from the provisions of the RBI Act as there is no involvement of public funds. But other directions are applicable.

If you are planning to commence a finance institution without much capital a Nidhi limited company is the best option. Know all about the documents required process involved in Nidhi limited company registration and register your Nidhi company with Taxpotter.

What is a Nidhi limited company?

NIDHI is the full form for the National Initiative for Developing and Harnessing. It is registered as a public limited company and has ‘Nidhi limited’ as the last word of the name. This is a non-financial banking structure (NBFC) created to cultivate the habits of thrift and savings among its members and lending to its members for their mutual benefits

Checklist for Nidhi limited company

• Nidhi company should have a minimum of 7 shareholders and 3 directors.
• Apart from its core members, the company should have a minimum of 200 shareholders within 12 months of commencement.
• Any company willing to register as a Nidhi limited company must have a minimum paid-up equity share capital of at least 5 lakhs.
• The company should not indulge in accepting and lending money to the general public.
• The ratio of net owned funds and deposits cannot be more than 1:20. A ratio more than that is not accepted
• Unencumbered term deposits must be at least 10% of the outstanding deposit
• A Nidhi company cannot issue shares or debentures or any other debt instruments by any name or in any form.
• The name of a Nidhi company should be short, simple, and meaningful.

Restrictions on Nidhi limited company

Nidhi companies are restricted from the following activities

1. Cannot deal with chit funds, leasing finances, insurance, and security businesses
2. Opening of a current account with its members
3. Nidhi company may open branches only after it has earned net profits continuously for three consecutive years.
4. Acquisitions of stocks, securities, and debentures issued by share market
5. Cannot engage in the business of loans or advances as an NBFC
6. A Nidhi company has no right to accept deposits from the general public.
7. Pay any brokerage for mobilizing deposits from its members. But the company can employ people with a fixed monthly salary.

Documents required for registration of Nidhi limited company

• Photographs of the members and directors of the company
• Address proof of all the members and directors
• Identity proof (PAN card Aadhaar Card, or Voter ID)
• Digital signature certificate of the company
• Digital identification number for the directors.
• NOC from the landlord if the office place is rented/ leased
• Ownership documents if the office place is owned
• Certified copy of Memorandum of Association (MOA) and Article of Association (AOA) of the company.

Benefits of Nidhi limited company

Ease of formation : Starting a Nidhi ltd company is very simple and easy as compared to other types of businesses.

Limited liability : According to the Companies Act, the members and directors enjoy limited liability features. That means if any losses occur or the company goes through financial trauma the creditor banks and government cannot seize the personal assets of the members

Perpetual succession : In case of death or departure of any members will not affect the company as it has perpetual existence. The company will continue until it is dissolved legally.

Ease of management : The activities of a Nidhi company are controlled by the board of management. The board of management can be changed easily by filing a form with the ROC.

Borrowing at a cheaper rate : Being a member of a company one can borrow money at lower rates as compared to the banks.

Fewer complications : It is less complicated than the banks to borrow and lend money to known persons.

Fewer guidelines : The Nidhi companies have to follow fewer guidelines imposed by RBI.

Mandatory compliances for Nidhi limited company

NDH-1 : In this form, A Nidhi limited company has to give the list of its members within 90 days of the end of every financial year.

NDH-2 : in this form, the company can make a request to MCA for an extension, in case it has been failed to add 200 members in its first financial year.

NDH-3 : besides the above-mentioned forms the company has to file half-yearly returns in this form

Annual returns with ROC : Nidhi ltd company must file an annual return with the MCA through the form MGT-7.

Profit, loss and balance statement : A Nidhi ltd company has to submit the financial statements and other documents in AOC-4 from

Income tax returns : Like other companies, a Nidhi company must file annual returns in the following financial year.

Nidhi limited company registration process

Even though the registration process of Nidhi Company is quite simple, you must take help from professionals.

Forms to be filled

INC 9 – it is filed by all the subscribers of MOA

DIR 2 – it is filed by all the directors and signed by all the subscribers, as per the Nidhi rules

Step 1 - Appling DIN and DSC for all the directors of the company

Step 2 - Selecting a unique name and get approval from MCA

Step 3 - Drafting and filing of MOA and AOA to the registrar of companies along with subscription statement

Step 4 - Getting the certificate of incorporation. It contains the identification number of the company

Step 5 - Applying for PAN, TAN for the company

Step 6 - Opening a bank account by submitting the MOA, AOA, PAN, and incorporation certificate of the company.