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Overview of Nidhi Company Registration

A Nidhi Company is a type of Non-Banking Financial Company (NBFC) recognized under Section 406 of the Companies Act, 2013 and governed by the Nidhi Rules, 2014. These companies are created primarily to promote savings and provide loans among their members.

To register a Nidhi Company, a minimum of 7 members is required. They are also commonly known as Mutual Benefit Funds or Permanent Funds.

Key Highlights:

Governed by the Ministry of Corporate Affairs (MCA)
Not required to register with RBI, but must follow MCA guidelines
Can accept deposits and lend money only to its members
Restricted from conducting general NBFC activities or accepting public deposits

Key Eligibility Criteria for Nidhi Company Registration

Registering a Nidhi Company in India is straightforward as it does not require RBI approval. However, it must comply with specific norms under the Companies Act, 2013 and Nidhi Rules, 2014.

Basic Eligibility Requirements:

Must be incorporated as a Public Limited Company.
The company name must end with "Nidhi Limited".
Though not directly regulated by RBI, Nidhi Companies follow RBI-influenced guidelines under MCA.
Activities are limited to borrowing and lending among members only—no involvement of external parties.
Permitted to offer locker rental services to members, but rental income must not exceed 20% of total income in a financial year.

Conditions for Incorporating a Nidhi Company in India

To incorporate a Nidhi Company, the Ministry of Corporate Affairs (MCA) outlines the following essential conditions under the Companies Act, 2013 and Nidhi Rules, 2014:

Basic Requirements for Incorporation:

A minimum of 7 members, including 3 designated directors
Minimum equity share capital of ₹10 lakhs
Must be registered as a Public Company under the Companies Act, 2013
The company's objective in the Memorandum of Association (MoA) must clearly reflect its intention to promote thrift and savings among members

Post-Incorporation Compliance (Within 1 Year):

Net Owned Funds (NOF) must reach ₹20 lakhs
Maintain at least 10% of total deposits as unencumbered term deposits with a scheduled commercial bank
The NOF-to-deposit ratio should be maintained between 1:20
At least 10% of total deposits must be kept in fixed deposits with a nationalized bank

Benefits of Nidhi Company Registration in India

Registering a Nidhi Company offers several strategic advantages, especially for individuals looking to promote savings and provide affordable credit within a trusted member network. Here's a quick overview of the key benefits:

Affordable Credit Access

Nidhi Companies offer loans to members at lower interest rates than traditional banks, helping members meet financial needs easily and affordably.

Encourages Savings

Promotes a habit of saving and financial discipline among members by creating a secure platform for mutual benefit.

Simple & Cost-Effective Setup

Requires only 7 members (3 as directors)
Easy documentation and registration process
Lower formation costs compared to other NBFCs

No RBI Compliance Required

Nidhi Companies are exempt from RBI regulations, offering more flexibility in designing internal rules and operations.

Low Risk Model

All financial transactions (deposits and loans) are limited to members only, reducing exposure to external risks and enhancing trust and transparency.

Economical Operations

The low cost of registration and maintenance makes it an ideal model for small, community-driven financial ventures.

Member Savings Protection

Nidhi Companies are committed to safeguarding member contributions, ensuring stability and security in financial dealings.

Net-Owned Fund (NOF) Leverage

With a 1:20 NOF to deposit ratio, Nidhi Companies can mobilize more funds efficiently, making them cost-effective for expanding financial services and business growth.

Documents Required for Nidhi Company Registration

To register a Nidhi Company in India, the following documents are required for compliance with the Companies Act, 2013 and MCA guidelines:

1. For Directors & Members

Director Identification Number (DIN) and Digital Signature Certificate (DSC)
Passport-sized photographs of proposed directors and members
PAN Card of all directors and shareholders (mandatory for tax compliance)
Address Proof – Bank Statement, Aadhaar, Driving License, or any government-issued ID with address
Residential Proof – Latest telephone, mobile, electricity bill, or bank statement
Passport – Required only if the director is a foreign national

2. For Company Incorporation

Memorandum of Association (MoA)
Articles of Association (AoA)
Registered Office Address Proof –

○ Lease/rent agreement or property ownership document

○ No Objection Certificate (NOC) from the property owner

○ Supporting utility bill as address proof

Step-by-Step Procedure for Nidhi Company Registration in India

Registering a Nidhi Company involves a streamlined legal process governed by the Companies Act, 2013 and Nidhi Rules, 2014. Here's how CapEasy helps you navigate each step with ease:

Step 1: Obtain DSC & DIN

Apply for the Digital Signature Certificate (DSC) and Director Identification Number (DIN) for all proposed directors via the MCA portal. The DSC is used to securely sign electronic documents and forms.

Step 2: Name Selection

Choose a unique and relevant name ending with "Nidhi Limited." The name should comply with the Company (Incorporation) Rules and not resemble any existing entity or registered trademark.

Step 3: Name Reservation

Submit up to 3 preferred names through the RUN (Reserve Unique Name) service or Part A of the SPICe+ form to reserve the approved name with the Registrar of Companies (ROC).

Step 4: Filing for Incorporation

Once the name is approved, file the SPICe+ form (Part B) for Nidhi Company incorporation. Attach all required documents and have the form digitally signed by a director. Submit it to the ROC for verification.

Step 5: Certificate of Incorporation (COI)

If all submitted details and documents are verified successfully, the ROC issues the Certificate of Incorporation, which includes the Corporate Identification Number (CIN). This process typically takes 15–20 days.

Step 6: Apply for Nidhi Company Status

After incorporation, file Form NDH-4 within 4 months to apply for Nidhi Company status. You must meet key conditions (like having a minimum number of members and required Net Owned Funds).
Once approved, the government will grant Nidhi Company status and publish it in the official gazette.

Restricted Activities for Nidhi Companies

Nidhi Companies are established for the sole purpose of lending and borrowing within their own member base. As per the Nidhi Rules, 2014, they are prohibited from engaging in certain financial and business activities to maintain their mutual benefit structure. Here are the key restrictions:

Prohibited Activities for Nidhi Companies:

Engaging in chit funds, hire purchase, leasing, or acquiring securities of any company
Issuing debentures, preference shares, or any debt instruments under any name
Opening current accounts for members
Acquiring control or securities of another company, or influencing its board without proper approval
Entering into management arrangements without a special resolution and prior approval from the Regional Director
Performing any activity outside the stated object of the company
Accepting or lending deposits to non-members
Pledging members' assets as security
Accepting loans or deposits from corporate bodies or offering loans to them
Entering into any form of partnership for lending or borrowing purposes
Advertising to solicit public deposits
Offering incentives or commissions for mobilizing deposits, issuing loans, or deploying funds
Raising loans from banks or financial institutions to lend to members
Attempting to influence or acquire control over other companies through board restructuring or similar arrangements

Can a Nidhi Company Open Branches?

Yes, a Nidhi Company can open branches, but certain conditions must be met as per the latest amendments under the Nidhi Rules. Here's what you need to know:

Branch Opening Guidelines for Nidhi Companies:

A Nidhi Company may open up to 3 branches within the same district without special approval.
To open more than 3 branches or any branch outside the district, the company must:
- Apply in Form NDH-2
- Pay the prescribed fee under the Companies (Registration Offices and Fees) Rules, 2014
- Notify the Registrar within 30 days of opening the branch

Eligibility Conditions to Open Branches:

The company must have earned net profits (post-tax) for the last 3 consecutive financial years.
It must have filed its financial statements and annual returns with the Registrar.
No branch can be opened outside the state where the registered office is located unless special permission is obtained.
To open more than 3 branches, whether within or outside the district, prior approval from the Regional Director is mandatory.

Why Choose CapEasy for Nidhi Company Registration?

Registering a Nidhi Company requires precision, compliance, and timely execution- CapEasy delivers all three. With extensive experience and a dedicated team, we offer end-to-end support, from securing DINs and DSCs to filing documents and obtaining your Certificate of Incorporation. Our streamlined process ensures full compliance with MCA norms while keeping you informed at every step. With fast turnaround times and responsive support, CapEasy makes your Nidhi Company registration simple, efficient, and stress-free.

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