Nidhi Company Incorporation

What is concept of Nidhi Company?

Nidhis are also included in the definition of NBFCs which operate mainly in the unorganized money market. However, since 1997, NBFCs have been brought increasingly under the regulatory ambit of the Reserve Bank of India (RBI). Non-banking financial entities partially or wholly regulated by the RBI include:

NBFCs comprising equipment leasing (EL), hire purchase finance (HP), Loan Company (LC), investment Company (IC) and residuary non-banking (RNBC) companies; mutual benefit financial company (MBFC), i.e. nidhi company; Mutual benefit company (MBC),i.e. Potential Nidhi company & miscellaneous nonbanking company (MNBC), i.e. chit fund company.

Since Nidhis come under one class of NBFCs, RBI is empowered to issue directions. However since Nidhis deal with their shareholdermembers only, RBI has exempted the notified Nidhis from the core provisions of the RBI Act and other directions applicable to NBFCs.

Nidhi companies are exempt from Section 45 IA (Requirements of registrations & net owned funds), 45 IB (Maintenance of Liquid Assets) & 45 IC (Creation of Reserve Fund) of RBI Act – RBI circular No:DNBS.PD.CC. NO.101/03.02.04/2007-08 DATED 2.7.2007

Nidhi Companies are regulated by Ministry of Corporate Affairs (MCA). Even though Nidhis are regulated by the provisions of the Companies Act, they are exempted from certain provisions of the Act, as applicable to other companies, due to their limited operations within members.

What is Nidhi Company?

“Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, & lending to, its members only, for their mutual benefit, & which complies with and Which complies with rules of Chapter XXVI of Companies Rules, 2014.

What is Governing Provisions for Nidhi company?:

• Chapter XXVI
• Section 406 of Companies Act, 2013
• Nidhi Rules, 2014

What is applicability of Nidhi Rules, 2014?

• Every Company which had been declared as a Nidhi or Mutual Benefits under Section 620A (1) of Companies Act, 1956;
• Every company functioning on the lines of a Nidhi company or Mutual benefit society but has either not applied for or has applied for and is awaiting notification to be a Nidhi or Mutual Benefit Society under Section 620A (1) of Companies Act, 1956;
• Every company incorporated as a Nidhi pursuant to the provisions of Section 406 of the Companies Act, 2013.

Whai is Characteristics of Nidhi Company?

• They are mutual benefit societies, because their dealings are restricted only to the members; and membership is limited to individuals
• The principal source of funds is the contribution from the members.
• The loans are given to the members at relatively reasonable rates
• The deposits mobilized by Nidhi’s are not much when compared to the organized banking sector.
• RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhi’s deal with their shareholder‐ members only, RBI has exempted the notified Nidhi’s from the core provisions of the RBI Act.

What is Pre ‐ Requisites For Incorporation of Nidhi  Company ?

1. Shall have minimum paid up capital criteria of INR 5 lacs, and shall be a Public Limited Company.
2. No preference shares shall be issued.
3. Every Company incorporated Shall have the words ‘Nidhi Limited’ as part of its name
4. Object of the company shall be cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to its members only

What is post incorporation requisites for Nidhi Company ? 

Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has:

(a) Not less than Two hundred members;

(b) Net Owned Funds of Ten lakh rupees or more;

(c) Unencumbered term deposits of not less than 10% of the outstanding deposits as specified in Rule 14; AND

(d) Ratio of Net Owned Funds to deposits of not more than 1:20 i.e. For every one equity the nidhi can borrow twenty times.

What is Restrictions for Nidhi Company?

• Business as chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any body corporate
• Issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever
• Open any current account with its members
• Acquire another company by purchase of securities or control the composition of the Board of Directors UNLESS Special resolution and Regional Director approval is obtained
• May provide locker facilities on rent to its members‐rental income from such facilities not exceeding 20% of the gross income of the Nidhi at any point of time during a financial year
• Carry on any business other than the business of borrowing or lending in its own name

What is Membership Rules for Nidhi Company?

• A Nidhi shall not admit a body corporate or trust as a member.
• Every Nidhi shall ensure that its membership is not reduced to less than 200 members at any time.
• A minor shall not be admitted as a member of Nidhi.
• Deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

What is Rule for acceptance of deposits in Nidhi Company?

• A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Assets as per last audited financial statements
• Fixed deposits ‐ minimum period of 6 months & maximum period of 60 months AND Recurring deposits – minimum period of 12 months & maximum period of 60 months.
• In case of unforeseen commitments, temporary withdrawal may be permitted with the prior approval of the Regional Director for the purpose of repayment to depositors, subject to such conditions and time limit which may be specified by the Regional Director to ensure restoration of the prescribed limit of 10%.
• Recurring deposits relating to mortgage loans ‐ maximum period of recurring deposits shall correspond to the repayment period of such loans granted by Nidhi.
• Invest and maintain ‐ unencumbered term deposits ‐ scheduled commercial bank or post office deposits in its own name ‐ not be less than 10% of the deposits outstanding at the close of the business on the last working day of the second preceding month.
• Maximum balance in savings deposit account ‐ shall not exceed Rs.1,00,000/‐ and interest shall not exceed 2% above the rate of interest payable to savings bank account by nationalized banks.

What is loan amount provide by nidhi company?

The Nidhi can give loans only to its members. The loan to be given shall be subject to the following limits:

Total amount of deposits from members is less than Rs. 2 crores – 2,00,000

Total amount of deposits from members is more than Rs. 2 crores but less than 20 crores – 7,50,000

Total amount of deposits from members is more than Rs. 20 crores but less than 50 crores – 12,00,000

Total amount of deposits from members is more than Rs. 50 crores – 15,00,000

What is Interest rate on deposits in Nidhi Company?

• Rate of interest ‐ The rate of interest to be charged on any loan given by a Nidhi shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi.
• Nidhi shall charge the same rate of interest on the borrowers in respect of the same class of loans.
• Rates of interest of all classes of loans shall be prominently displayed on the notice board at the registered office and each branch office of Nidhi.

What is the Procedure to register a Nidhi Company?

Once a name for the company is decided, the following steps have to be taken by the Registration Bazar:

Step 1: Application file for DSC of Directors (Digital Signature Certificate)

Step 2: File Spice Part A for the name availability

Step 3: After name approval Registration Bazar will be prepare the various form for company Registration. And forms file to MCA.

Step 5: After approval of the company registration form Certificate of incorporation will be issued by MCA.

What are the documents required for registration of Nidhi Company?

To proceed for producer Company Registration, Registration Bazar need some documents-

1. Photo of directors.
2. PAN card of directors.
3. Any one ID proof for directors address

Aadhar Card

Voter ID

Passport

Driving License

1. Any one address proof for director’s address.

Bank statement having latest 30 days entry

Bank Passbook with entries page having latest 30 days entry

Electricity Bill in name of director and nominee

Airtel / Vodafone / Idea / MTNL / BSNL bill in name of director and nominee

1. Any one bill in anybody name for registered office address

Latest Electricity Bill

Latest Mobile Bill – Airtel / Vodafone / Idea / MTNL / BSNL bill

what are the Documents Provided by Registration Bazar after Nidhi Company Registration?

Followings documents provided by Registration bazaar after successful registration of Producer Company.

1. Certificate of incorporation
2. PAN Card of Company
3. TAN Card of Company
4. ESI Registration
5. PF Registration
6. Memorandum of Association of the company
7. Article Of Association of the company
8. Digital Signature Certificate of directors
9. Director Identification Number (DIN) of Directos

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