What Are The Benefits Of Registering Nidhi Company In India?

What is. Nidhi Company?

The feature that differentiates Nidhi Company from other companies/NBFCs etc. is that Nidhi deals with deposits from and loans to its members (shareholders) only, and works for the mutual benefits of its members. Accordingly, certain exemptions have been provided to these companies in respect of annual compliances and taxation.

Nidhi Companies in India are formed, governed, and regulated by Section 406 of the new Indian Companies Act of 2013, the Companies (Nidhi Companies) Rules of 2014, and the Chapter XXVI of the Companies Rules, 2014.

The objective of incorporating a Nidhi Company is to encourage savings as well as frugality amongst its members. To fulfill this objective of cultivating the habit of saving and thrift amongst its members. Nidhi companies are allowed to take a deposit from and lend to the members only. In other words, the funds contributed to a Nidhi company come only from its members (shareholders) and are to be used only by the shareholders of the Nidhi Company.
The name “Nidhi” in Nidhi Company means “treasure” and it originates from the Hindi vocabulary.

What are the advantages of incorporating a company into a Nidhi Company?

There are various advantages which can be availed by registering as a Nidhi Company. These advantages can be summed up as follows:

  • Legal existence: The registration of a company as a Nidhi Company makes it a separate entity. It enjoys separate legal existence as a registered Mutual Benefit Society. Being a separate entity from the members of the company, the company can acquire or dispose of assets in its own name.
  • Limited liability: Depending on the amount invested or contributed by the members of the company, their liabilities will be limited. The members will be liable only for their share in the company. Personal liabilities of the members cannot be used to meet the company’s liabilities.
  • Availability of funds: The members can borrow from the funds contributed by themselves at lower interest rates.

Procedure for Nidhi Company Registration

Though Nidhi Company Registration Process is simple, still, assistance from a professional is advised to complete the various complex forms, filing them and within time. Moreover, the government portals and language are a bit on the difficult side, too. 

Step 1: Applying for DIN and DSC
First, the Directors of the Nidhi company are to apply for DIN (Director’s Identification Number) and DSC (Digital Signature Certificate). DIN is issued by the MCA and DSC is a digital signature used for all e-filing processes. This step can be skipped for the Director who already has DIN and DSC.

Step 2: Name Approval
Now, you need to choose and suggest 3 different names to MCA for your Nidhi Company. Out of these 3 names, only one will be accepted for your Company by MCA. The proposed names must be unique and not matching to the names of other already registered companies. As per Rule 8 of the Company Act. The approved name will remain valid for 20 days only.

Step 3: MoA & AoA
Association) and AoA (Articles of Association). These must mention the main objective of incorporating a Nidhi company as a charity. The MoA and AoA are to be filed to the ROC (Registrar of Companies) with the subscription statement.

Step 4: Certificate of Incorporation (CIN)
It takes between 15-25 days to form a Nidhi company and get the incorporation certificate. This certificate declares that a company has been created and it mentions the company identification number (CIN) as well.

Step 5: PAN, TAN and Bank Account
Lastly, you need to apply for PAN and TAN. The PAN and TAN are usually received within 7 working days. Later, you have to get a bank account opened by submitting the Certificate of Incorporation, MoA, AoA, and PAN to the bank.