Nidhi Company is a company registered under Companies Act and notified as a Nidhi company by Central Government under Section 406 of Companies Act, 2013. It is a type of non-banking finance company a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members. It functions by receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.
Nidhi Company is a type of Non-Banking Financial company (NBFC) registered under Companies Act and notified as a Nidhi company by Central Government under Section 406 of Companies Act, 2013. This form of Company is opted for the sole purpose of receiving deposits and lending between their members only, for their mutual benefit.
Although Nidhi Company is a NBFC however Reserve Bank of India vide Exemption Notification No. DNBS.(PD).CC.No. 12 /02.01/99-2000 has exempted Nidhi Companies to comply with the regulations of NBFC. The notification can be read in detail on: https://rbi.org.in/Scripts/NotificationUser.aspx?Id=2712&Mode=0#:~:text=12%2F02.01.%2F99%2D,control%2Fmanagement%20of%20the%20company )
Therefore, one who wants to enter into Microfinance Banking business without complying the provisions of NBFC as specified by RBI one can incorporate Nidhi Company. However, there are other provisions which are applicable on Nidhi Company as provided in The Companies Act, 213 and Nidhi Rules, 2014.
In order to incorporate A Nidhi Company, one has to follow the procedure given by The Ministry of Corporate Affairs in accordance with The Companies Act, 2013.
Get consent of all the subscribers to become member and Director of the company who are willing to incorporate the company. The person who are becoming the Director of the company (if Individual) shall be Member of the company.
Name of a Nidhi Company shall end with “Nidhi Limited’. For e.g. ABC Nidhi Limited. Check the name Availability for the proposed company. Rule 8 and 8A of The Companies (Incorporation) Rules, 2014 shall be abided while checking the name of the company. You will need professional expertise to check the name as there are several complexities while doing the same.
The Digital Signature Certificates (DSC) of all the subscribers and Directors of the proposed Company shall be applied and necessary verification should be done by the applicant.
Set of documents need to be prepared which will be filed with the Registrar of Company, Central Registry Centre.
Incorporation Forms such as SPICe PLUS, eMOA, eAOA, etc. will be filed with Ministry of Corporate Affairs. In the MOA the only object should be of cultivating the habit of thrift and saving amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit,
If all the documents filed are complete and correct in all respect then the Ministry shall approve the company and the Certificate of Incorporation along with other documents will be issued. PAN and TAN will be simultaneously generated at the time of Incorporation.
Some of the important points to be kept in mind regarding Nidhi Company:
Once incorporated, a Nidhi company is required to fulfill the following requirements within 1 year of its registrations:
If Nidhi Company satisfies all above conditions, it should file NDH-1 along with prescribed fees within 90 days from the end of the first financial year after incorporation. The form must be duly certified by practicing CA/ CS/ CWA.
Extension of another financial year can be availed upon submission of NDH-2 to the Regional Director within 30 days from the end of the first financial year.
If even after the second financial year, it doesn’t fulfill the requirements, it can’t accept deposits till it complies with the provisions, and also penalty will be imposed.