Nidhi Company Registration in India - Overview

The process of Nidhi Company Registration in India is simple and easy. Here are the steps of Nidhi company registration process is described below-

Step 1: Apply for DIN and DSC

First, the Directors of the Nidhi company are required to apply for DIN (Directors Identification Number) and DSC (Digital Signature Certificate). DIN is issued by the MCA and DSC is a digital signature used for all e-filings.

Step 2: Name Approval

Next, you need to choose and suggest 3 different and unique names to the MCA for your Company. Out of these 3 names, only one will be accepted by the MCA. The proposed names must be unique and must not resemble an existing name.

Step 3: MOA & AOA Drafting

MOA must mention the main objective of incorporating a Nidhi company and AOA lays down the guidelines the company will follow. The MOA and AOA are then to be filed to the ROC (Registrar of Companies) with the subscription statement.

Step 4: Issuance of Certificate of Incorporation (CIN)

It takes between 15-25 days to form a Nidhi company and receive the incorporation certificate. This certificate declares that the company has been formed and it also mentions the company identification number (CIN).

Step 5: PAN, TAN and Bank Account

The last step is to apply for PAN and TAN. PAN and TAN are usually received within 7 working days. Thereafter , you have to get a bank account opened by submitting the Certificate of Incorporation, MOA, AOA, and PAN to the bank.

Nidhi Companies play an important role in helping the middle and lower-middle classes by providing them with financial services with minimum documentation and formalities. For people with the low annual income, it is difficult to meet the minimum eligibility criteria of loans and access other financial services . With Nidhi Companies, it is now convenient for these low income groups to keep savings and benefit from the returns at fixed durations. Some of the advantages of Nidhi Company Registration are listed below:

• Easy Formation
  The registration process of a Nidhi Company is relatively easy and simple in comparison to other NBFCs. To form a Nidhi company, only seven persons are required out of which three will be appointed as Director. Moreover, the registration process requires minimal documentation and paperwork, which makes it easier to register a Nidhi Company.
• Minimal risk of non-payment of Loans
  Since Nidhi Companies accept deposits and offer loans to its members only, it reduces the risk of non-repayment of loans as compared to other businesses of the same nature.
• Limited RBI Regulations
  Even though Nidhi Company comes under the category of NBFC, the approval of RBI is not required to start its operations. Nidhi Companies have to incorporate themselves as a Public Company with the Ministry of Corporate Affairs (MCA). Financial activities of Nidhi Companies fall under the regulations of Nidhi Rules, 2014, and Companies Act, 2013. The regulatory compliances of Nidhi Rules are less strict.
• Low Capital Requirement
  The minimum requirement of capital is one of the vital advantages of Nidhi Company Registration. As per Nidhi rules 2014, the minimum capital required for registering a Nidhi Company is Rs 5 Lakh. And you have the opportunity to invest the capital within the two months after the registration.
• No external interference
  The overall activities of a Nidhi Company are concerned with and to their members only. No external party can deposit money; also they can’t intervene in management-related operations of the Company.
• Perpetual Succession
  Even after the death or retirement of any member of the Nidhi Company, its operations are not interrupted and will continue to operate irrespective of any such situation. Nidhi Companies follow a practice of perpetual succession which allows the Nidhi Company to continue its operations until it gets legally dissolved.

Following are some of the disadvantages of incorporating a Nidhi Company in India:

• 1. Since, Nidhi Companies don’t accept deposits from the outsiders other than its members, if the amount received by them from their members is less, it restricts the ability of the Company to lend money to its members. And if the lending capacity of a Nidhi Company is limited, the whole objective of the formation of the Nidhi Company goes in vain.
• 2. As per section 406 of the Companies Act 2013 and Nidhi rules 2014[1], A Nidhi Company has to ensure that by the end of 1st-year of incorporation, it holds minimum 200 members and the Net Owned funds should be Rs 10 lakh or more than 10 lakh rupees. It might be difficult for fulfilling this condition.
• 3. Unlike other financial institutions, Nidhi Companies are restricted from advertising their financial schemes. Nidhi Companies are allowed to advertise among its members only.
• 4. Nidhi Companies are restricted from running any other business other than lending and borrowing.
• 5. A Nidhi Company is not allowed to carry forward its deposit schemes any more than a period of 5 years.

Nidhi Company Registration documents are listed below-

• Passport Sized photographs of all the directors.
• Identity proof of all the designated directors and shareholders. (PAN card and Passport are valid).
• Address proof of all the directors and members (Ration Card, Aadhaar Card, Passport, Voter ID, and Utility Bill – electricity/water/mobile).
• Address Proof of the Company (not older than 2 months).
• Copy of the Property papers (if owned).
• NOC (No-Objection-Certificate) from the owner (if rented).

It takes about 20 to 30 days for Nidhi Company Registration and to receive the Certificate of incorporation. Timeline varies depending on the speed of application and approval of Government bodies.

Nidhi Company Registration cost ranges from Rs. 18,000 to Rs. 25,000 excluding GST.

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