Nidhi Company Registration in India

Before, we even start explaining what a Nidhi company is; we need to understand – why it is required in India. India predominantly has always been a Savings economy, where Savings was always given a priority in our daily Economic matters. Savings is cultural phenomena in our Country and not just an Economical Phenomena. The Habit is inculcated amongst various members of the Society to Save. Kids have Piggy Banks, and Indian Women are World over known for the Savings and in helping the household during difficult times. India is also known for its co-operative culture, where various members of a Trade / Society / Location / Culture / come together to form a Co-operative society to help each other and to collectively ensure development of each member of the community. Co-operation is not in any way new to India, it has existed since time immemorial and has historical significance in the country.

Nidhi Company Origin

Nidhi company was born out of the combination of the culture of Savings and Co-operation in India. In simpler terms – Nidhi Company helps its members save and prosper. The objective of a Nidhi Company in India is to drive its members to Save and inculcate the principle of helping each other through Co-operation, thus Nidhi Company also lends money to its own Members when they need money during difficult time. Members in Nidhi Company are mostly tightly knitted and know each other well, the idea of Co-operation and Savings drives the Nidhi Company, and it’s Objectives. 

Reasons for the formation of a Nidhi Company

  1. Co-operation – Drive cooperation within the members of the Company. 
  2. Benefit to Member – Of the People, By the People and For the people, this symbolises the basic tenet of the Nidhi Company. Remember the money is circulated within the Members and Profits earned are also distributed to members. 
  3. Savings – Encourage the members to Save 
  4. Managed Risks – As the members for the Nidhi Company govern the company themselves, they manage the risks well. Also there are limitations imposed by the regulatory authorities, to further ensure management of the risks of the Nidhi Companies. 
  5. Compliances – Compared to forming an NBFC, Nidhi companies are easier to form and easier to manage also 
  6. Focus – As Nidhi companies are made for small group of people belonging to some Homogeneous class, it maintains focus on the activities it undertakes. 

Registration of Nidhi Company in India

With advent of Online systems and Government’s focus on making Indian Compliance and regulatory structure more user friendly – formation of a Nidhi Company has been made simpler by the Government. Here is step by step process on how to form a Nidhi Company in India.

Steps to form a Nidhi Company in India

Step 1

One has to start by forming a Limited Company in India, remember the following are basic requirements for Forming a Limited Company in India 

  • 3 Directors 
  • 7 Shareholders 

Step 2 

Forming the Memorandum of Understanding (MOU) and Articles of Association (AOA) with the right clauses. Remember the basic idea behind formation of a Nidhi Company is Co-operation and benefit amongst members and to encourage Savings. As such these must be mentioned in the Company formation document at the right places. For more idea on how to draft your MOA and AOA, please Click Here to connect to one of our Experts.  

 Step 3 

Once the formation of the Limited Company with proper detailing to its Objects are completed, the task to registration of its members starts and the governance also puts conditions to ensure risks are properly managed and controlled within the Company. As such the Nidhi Company needs to meet the following within 365 days of its formation 

  • Have more than 199 members 
  • Have Funds (Net Owned) of more than Rs 10 lakhs. Net owned here shall refer to 

            Share Capital 

Add:   Reserves and Surplus

Less:   Accumulated Losses 

Less:   Intangible Assets  

(This should be as per the latest Audited Balance Sheet) 

Step 4 

If the Nidhi Company can meet the above criteria, it needs to File a certified (From a Practising Chartered Accountant or Company Secretary) NDH – 1 Form with Registrar of Companies in India. The requisite fees as prescribed by the government from time to time needs to be deposited along with the form. If the Nidhi company cannot meet the requirements, then it can apply for an extension by filing form NDH – 2.  Even after its second financial year. If the Nidhi Company is unable to meet its requirements, then it can operate only with certain restrictions. 

Limitations of a Nidhi Company in India

Remember that Nidhi company is formed with certain specific agenda and objective in mind, and thus it needs to operate within the purview of those objectives only. Some of the limitations are enumerated below for your convenience: 

  • Carry on Business of Manufacturing or Trading or Providing services (it can though provide locker services to its members only) 
  • Carry on Business of Financial Services like Hire Purchase, Insurance or Brokerage etc 
  • Take money from or loan money to anybody outside its own members and also not to any other corporate bodies 
  • Issue any advertisement for soliciting deposits. Private advertisement within members is allowed. 
  • Issue Debentures, NCDs or even Preference shares or any other type of Debt instrument 

To ensure compliance with all Nidhi Company regulations, please Click here to subscribe for our Annual Compliance Package 

Documents required to register a Nidhi Company 

Enlisted below is the list of documents required for reistration of  a Nidhi Company

Documents required for Indian Director 

  1. DIN Number
  2. Passport size photograph 
  3. PAN Card 
  4. List of interest in other Company(ies), LLP(s), Partnership(s), Sole Proprietorship(s) giving Name of entity, registration No., Designation, etc.
  5. Proof Of Identity (any one) (Name that matches with PAN)
    1. Voter's Identity Card or
    2. Passport or
    3. Driving Licence
  6. Residential Proof (any one)(Name that matches with PAN)
    • Bank statement or
    1. Electricity Bill or
    2. Telephone Bill or
    3. Mobile Bill

Requirement for NRIs and Foreign Directors are different, please connect to us for details 

Documents required for Member 

Compulsory:

  1. PAN Card 
  2. Aadhaar Card
  3. Passport photo

Documents required for Registered Office 

Compulsory - any one

  1. Rent agreement
  2. Lease Agreement
  3. Ownership deed

And one shall also need an NOC from the Landlord 

Any one utility bill in name of owner (not older than 2 months). To confirm the identity of the Landlord, one of the following shall be required and which should not be more than 2 months old. 

  1. Electricity Bill
  2. Telephone Bill
  3. Water Bill
  4. Municipal Charges bill

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