Checklist for Nidhi Company Registration
What is Nidhi Company?
Nidhi Company is governed by Section 406 of the Companies Act, 2013 and Company Nidhi Rules, 2014 which has a sole objective of cultivating the habit of thrift and savings amongst its members. Nidhi companies are allowed to take deposit from its members and lend to its members only. Therefore, the funds contributed for a Nidhi company are only from its members (shareholders) and used only among the shareholders of the Nidhi Company.
Nidhi Company is a class of NBFCs and RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these Nidhis deal with their shareholder-members only, RBI has exempted the notified Nidhis from the core provisions of the RBI Act and other directions applicable to NBFCs. Therefore, Nidhi Company Registration is an ideal entity to take deposit from and lend to a specific group of people
What you should know before Nidhi Company Registration Process?
1. Nidhi Company is made with the aim of cultivating the habit of savings amongst the member, receiving deposits from and lending to its members only for their mutual benefit.
2. Companies which are performing the Nidhi Business known by different names such as Permanent Funds, Mutual Benefit Funds, Mutual Benefit Company, etc.
3. As Nidhi falls under one class of NBFC, RBI is empowered to issue commands in subject related to deposit acceptance activities. However, RBI has exempted Nidhi’s from the core provisions of RBI Act and directions applied on NBFC registration. Nidhi Company Registration is one of the categories of Non-Banking Financial Company (NBFC) that does not require any Reserve Bank license
Requirements for a Nidhi Company Registration:
Within a period of 1 year of the starting of the rules, the company must ensure that it has the following –
1. Minimum number of members should be 200
2. The ratio of net owned funds to deposit should not be more than 1:20
3. Net owned funds should be Rs. 10,00,000/- or more.
4. Burden less term deposit of not less than 10% of the outstanding deposits as specified in Rule 14.
Also, read: Rules Regarding Nidhi Company Setup in India
General Restrictions on Nidhi Company:
No Nidhi shall carry on –
1. The business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities by anybody corporate.
2. Issue preference shares, debentures, or any debt instrument by any name or in any form whatsoever.
3. Open any current account with member.
4. Acquire another company by purchase of securities or Control the composition of the Board of Directors of any other company in any manner whatsoever. Carry on any business other than the business of borrowing or lending in its own name;
5. Accept Deposits from or lend to any person, other than its members;
6. Pledge any of the assets lodged by its members as security;
7. Take Deposits from or lend money to anybody corporate;
8. Enter into any Partnership Arrangement in its borrowing or lending activities;
9. Issue or cause to be issued any advertisement in any form for soliciting deposit;
10. Pay any brokerage or incentive for mobilizing deposits from members or for deployment of funds or the granting loans.
11. Enter into any arrangement for the change of its management, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over Nidhi.
