Step by Step Process for Nidhi Company Registration in India

Nidhi Company is one of the categories of Non-Banking Financial Company (NBFC) which does not require any Reserve Bank of India (RBI) license. Nidhi Company works through its members. It can accept deposits and lends loans to its members only.

Nidhi is the safest and the cheapest way of raising funds from the General public (just by registering them as members).

The alternatives of Nidhi (like Non-Banking Financial Companies (NBFC’s) will need a capital of at least two crores) that are very costly. Through, very business-friendly, Nidhi Company registration is yet to be common between the business communities.

A Nidhi shall not: –

• Carry on the business of 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 or in any form.
• Open any current account with its members.
• Acquire other companies by way of control, share purchase, the composition of the Board of Directors, etc.
• Carry on any business other than borrowing or lending in its own name.
• Accept deposit or lend to any person other than its members.
• Pledge any of the assets lodged by its members as security.
• Issue or cause to be issued any advertisement in any form for soliciting deposits.
• Enter into any partnership arrangement in its borrowing or lending activities.
• Accept deposits more than 20 times of its Net Owned Funds as per the last audited balance sheet.
• Declare dividend more than 25%, if wants to declare more than 25% than seek prior approval from Regional Director & transfer amount equal to such higher amount in General Reserves.
• Appoint Auditor for more than 1 term of consecutive 5 years & Audit Firm for more than 2 terms of Consecutive 5 Years. However, Such an Auditor/Auditor Firm may be reappointed after completion of 2 years from completion of his/its term.
• Appoint Director for a term of more than 10 consecutive years but eligible for re-appointment after completion of 2 years from ceasing to be the director.

Name Approval in ‘RUN’ facility

• The Applicants are required to file name availability in a RUN facility of the MCA portal. Every Company proposed to be incorporated as a “Nidhi” shall have the last words ‘Nidhi Limited’ as part of its name. Now, one doesn’t require the digital signature of the applicant for name availability.

Obtaining Digital Signature Certificate (DSC)

• The proposed Directors who may also be the Promoters/Applicants of Nidhi Company have to obtain Class 2 DSC.

File form SPICe32 

After the name approval, File form SPICe 32 with the following attachments for the incorporation of Nidhi Company.

• Memorandum of Association
• Articles of Association
• PAN Card of subscribers
• Id Proof of First Directors
• Address Proof of First Directors
• Address Proof of Registered Office (Rent Agreement/Sale Deed)
• Latest Utility Bill of Registered Office (Electricity/Telephone/Gas)
• NOC of Owner of Registered Office
• Consent and Declaration from the first Director in form DIR-2
• Self Declaration from First Directors and Subscribers in form INC-9

Approval and Certificate of incorporation

• It will take 15-20 days to get the incorporation certificate of Nidhi Company once all the documents have been filed and registration fee and stamp duty paid. Incorporation certification is proof that all the formalities regarding the incorporation have been complied with.

A Nidhi is shall meet with following requirements after its incorporation: –

• Within one year of its incorporation Nidhi Company shall have not less than 200 Members, Net Owned Funds of not less than Rupees 10 Lakhs & shall have Un-encumbered Term Deposit of not less than 10% of its Outstanding Deposits.
• The ratio of Net Owned Funds to its Deposits shall not be more than 2:1.
• Nidhi Company shall file Form NDH-1(Return of Statutory Compliances), certified by CA/CS/CMA within 90 days of closure of First Financial Year.
• If not meeting with the above requirements within one year of its incorporation then Nidhi Company shall seek an extension from RD in Form NDH-2 within 30 days of closure of First Financial Year. RD shall grant such orders as may deem fit within 30 days of receipt of Application for an extension.
• If non-compliance of Point No. 1 & 2 extends beyond the second Financial Year, Nidhi shall not accept any further deposits from the commencement of the second Financial Year till it complies with the provisions.
• Nidhi Company shall file Form NDH-3 (Half Yearly Return), certified by CA/CS/CMA within 30 days of the conclusion of each half year.
• Every Director of the Nidhi shall be its member also.