Nidhi Company
Nidhi means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with the rules made by the central Government for regulation of such class of companies.
Features of Nidhi Company
- It is allowed to transact business only with its members and with nobody else. Become a member shareholder of the Nidhi by subscribing to 10 equity shares or shares equivalent to Rs.100.
- They are incorporated as public companies with a minimum paid up equity share capital of Rs.10,00,000.
- Loans may be provided only to its members and should be fully secured.
- Nidhi can declare dividend not exceeding 25% and any higher amount shall be specifically approved by the Regional Director.
- A Nidhi shall not admit a body corporate or trust as a member.
- A minor shall not be admitted as a member of Nidhi.
- A member shall not transfer more than 50% of his shareholding during the subsistence of such loan or deposit, as the case may be
- A Nidhi may open branches, only if it has earned net profits after tax
continuously during the preceding 3 financial years. A Nidhi may open up to 3
branches within the district. - The Director shall be a member of the Nidhi. The Director of a Nidhi shall hold
office for a term up to 10 consecutive years on the Board of the Nidhi. - Â It has not less than 200 members; and it has Net Owned Funds of 20 lakh rupees or more.
Restriction or Prohibition on Nidhi Company
- No Nidhi Company shall Carry on business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any Body corporate.
- No Nidhi Company shall issue preference shares, debentures or any other debt instrument;
- No Nidhi Company shall Acquire another company by purchase of securities or control the composition of board of director of any other company
- No nidhi Company Carrying on any business other than business of borrowing or lending in its own name
- No Nidhi Company shall Pledge any of its assets lodged by its members as a security
- No Nidhi Company shall take deposits from or lend to any Body Corporate.
Documentation/Information Needed for Nidhi Company Registration
- Passport Size Photograph
- Noc from Owner of Premises along with Electricity Bill of proposed Registered office
- Aadhar Card and Pan Card of Proposed Directors
- Bank Statement or any other proof mentioned address of Proposed Directors
- Other Supporting Documents
Frequently Asked Questions
A Nidhi Company is a type of non-banking financial company (NBFC) that operates for the mutual benefit of its members, by encouraging savings and providing loans to them
Nidhi companies primarily engage in:
Accepting deposits from members.
Lending money to their members.
Promoting the habit of savings among members.
Nidhi companies are regulated by the Ministry of Corporate Affairs (MCA) and follow the rules laid out under the Companies Act, 2013, and the Nidhi Rules, 2014.
No, a Nidhi company can only accept deposits from its members and cannot solicit funds from the public at large.
A Nidhi company must have at least 7 members and 3 directors for incorporation.
A Nidhi company must have a minimum paid-up equity share capital of Rs. 10 lakh.
No, Nidhi companies can only lend money to their members and not to non-members.
The main objective is to encourage the habit of thrift (saving) and provide loans to its members at affordable rates.
Nidhi companies typically offer:
Personal Loans
Home Loans
Vehicle Loans
Emergency Loans (subject to regulations)
Nidhi companies cannot:
Accept deposits from non-members.
Engage in business outside of their mutual benefit activities.
Issue advertisements to solicit deposits.
Invest in stocks or trade.
Nidhi companies are different because they operate on a membership basis and only provide services to members. They are also more focused on savings and loans rather than external investment or profit-making from the public.
The process involves:
Obtaining Digital Signature Certificate (DSC).Â
Filing an application with the Registrar of Companies (RoC) for name approval.
Submitting Memorandum of Association (MOA) and Articles of Association (AOA).
Following the Nidhi Rules, 2014 after incorporation.
Yes, a Nidhi company can apply for conversion into another type of company, but this requires the approval of the Ministry of Corporate Affairs and following the due legal process.
Here is some benefits for Nidhi Company Joining:Â
Low-Interest Rates: Loans are often available at lower rates.
Profit Sharing: Profits are shared with members as dividends.
Security: It’s a government-regulated entity offering secure and mutual benefit financial services.
Proof of identity (Aadhaar, PAN card, etc.), Passport size photo of directors and members.
Proof of address of the registered office.
No, there is no specific upper limit on the number of members, but the company must have a minimum of 7 members to form the company.
The profit made by a Nidhi company is typically distributed among the members in the form of dividends, as per the company’s articles of association.
No, Nidhi companies are restricted from issuing shares to the public. They only issue shares to their members.
Nidhi companies must:
Submit annual financial statements.
Comply with the Nidhi Rules, 2014.
Follow the regulations set by the Ministry of Corporate Affairs (MCA) regarding capital and activities.
Nidhi companies operate under strict regulations, ensuring that the company remains financially stable and operates only for the benefit of its members. Their activities are monitored by the MCA, and any violations can result in penalties or dissolution.
Advantages of Nidhi Company
Low Cost Financial Services
Encouragement of Saving Culture
Profit Shared among Members
Regulated by Government
No External Investors
No need of External Funding
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Expert Guidance
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Efficient Process
