Nidhi Company
Sonam Geda & Company
What is Nidhi Company (Mutual Benefit Company)
The name "Nidhi" in Nidhi Company means "treasure" and it originates from the Hindi vocabulary. Nidhi companies are allowed to borrow from its members and lend to its members exclusively means it deals with their member – shareholders only and hence, such companies are also referred to as Mutual Benefit Societies because they work for the mutual benefit and welfare of all members. Therefore, Nidhi Company is an ideal legal entity to take a deposit from and lend to a specific group of people.
RBI has exempted Nidhi Companies from the main provisions of the RBI and other regulations applicable to a NBFC. But RBI has powers to issue directives for them related to their deposit acceptance activities.
Features of Nidhi Company
- The deposits under Nidhis do not earn much interest as compared to deposits in the organized banking sector.
- The interest charged at the loans under a Nidhi Company is quite reasonable. The purposes these are sought are, generally, manufacturing/renovation of houses or child’s education, etc. The loans are provided against security only.
- It can take legal action if a member fails to repay any sum of money.
- The objective of the company shall be cultivating the habit of saving by receiving deposits from and lending to its members only for their mutual benefits.
Restrictions on Nidhi Company
The Nidhi Company is prohibited to do the following activities as an NBFC because it involve external factors and public, taking risks, etc. but it has sole purpose of taking up non-banking financial activities for it’s own members only:
- Issue or cause to be issued any advertisement in any form for soliciting deposit, Provided that private circulation of the details of fixed deposit Schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.
- Carry on the business of chit fund, hire purchase finance, leasing finance, Lotteries, insurance or acquisition of securities issued by any body corporate;
- Sell, pledge or mortgage any assets lodged by its members as security,
- Acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or 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 such Nidhi;
- Getting into a partnership for carrying out lending and borrowing activities,
- Taking deposits or lending funds to someone other than its shareholders & members,
- Issue preference shares, debentures or any other debt instruments,
- Open a current account with its members (though it is allowed to open a Savings Account),
- Lend to or take a deposit from a body corporate,
- Pay commission, fee or incentive for mobilizing deposits,
- Carry on any other business than borrowing and lending to its members, Provided that Nidhis can provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.
- To open a second office as a subsidiary branch in district until it attains a profit in consecutive three years.
- Pay any brokerage for granting a loan to its members.
- To charge any member a service charge for acquiring membership to the Company.
Deposits & Loans under Nidhi Company
Deposits under Nidhi Company
- There are 3 types of deposit Nidhis can accept. These are Savings, Fixed Deposit (FD), Recurring Deposit.
- Nidhi can pay a maximum interest of up to 12.5% on FD & RD and 6% on a savings account.
- Nidhi can deposit up to 20 times the funds invested.
Loans from Nidhi Company
- 3 types of securities can be accepted for loans on offer by Nidhi Companies. Loans can be provided against Gold, Property, Others (LIC, FD, etc.).
- Nidhi cannot engage in the business of microfinance but can lend at up to 20% interest against security.
Documents Required for Nidhi Company
- PAN CARD and Aadhar card is mandatorily Required
- Passport size Photograph for each Director/ Shareholder.
- ID PROOF that to self attested ( VOTER ID, DRIVING LICENSE, PASSPORT -anyone)
- Address Proof: Self attested Latest Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement with latest entries(any one)
- Registered office Address proof :
• 1st Taken on Rent by Company- Property Tax receipt in the name of Lender/Electricity bill not older than 2 month + Rent Agreement(After Name Approval with the proposed name of Company) + Rent Receipt of latest month.
• 2nd Owned by any of the Directors- Property Tax receipt/Electricity bill not older than 2 month in the name of owner. - Email and contact details of each director
Minimum Requirement for Nidhi Company
- A Nidhi Company is formed with an objective to promote the habit of saving money among its members and works on the principle of mutual benefits
- To start with first incorporate a public limited company which should have “Nidhi Limited” as the last word of its name.
- It starts with 7 members as a public limited company, however, to obtain a Nidhi Company Status it needs at least 200 members within a year from date of incorporation and a separate application is filed before the ROC for grant of Nidhi Company Status .
- There is no upper limit for the maximum no. of the shareholder.
- There shall be at least 3 directors in the company. One of the directors must be Resident of India i.e. in India not less than 182 in the previous calendar year.
- It starts with the capital of Rs.500000/- as the requirement of Public limited company and subsequently the minimum paid-up equity capital required for Nidhi Company Status is Rs. 10,00,000 help by at least 200 members within a one year from the date of incorporation.
Procedure for Incorporation of Nidhi Company
| Overview of Web forms | A new Web based Form named 'SPICe+' (pronounced as 'SPICe Plus') is an integrated Web based form offering multiple services like 'name reservation', incorporation, 'DIN allotment', mandatory issue of PAN, TAN, EPFO, ESIC, Profession Tax (Maharashtra), and 'Opening of Bank Account' & GST (Optional). |
|---|---|
| Name Reservation | Company has two option available either first reserve the name in Spice+ Part-A and then apply in Spice+ Part-B or directly apply name with incorporation form then challan will not be required. In case company reserves the name first then challan needs to be paid of Rs. 1000 and SRN will be generated. |
| Prerequisites for a Nidhi Company | • There shall be at least 7 members/shareholders in the public company. There is no upper limit for the maximum no. of the shareholder/member. • There shall be at least 3 directors in the company. One of the directors must be Resident of India i.e. in India not less than 182 in the previous calendar year. • The name of a Public Limited Company shall have suffix “Limited” at the end of the name. |
| Filling Part B of Spice+ | • All first subscribers of SPICe+ MOA (INC-33) must have DSC, if they are less than 7 then it will be signed in the form itself no annexure will be required & in case if more than 7 then separate attachment of MOA will be annexed without DSC. • Articles of Association is entrenched with brief description about the clause (Make sure the article number matches with form SPICe+ AOA (INC-34) )-Select the particular table which is applicable and make the appropriate changes and incorporate first directors name and in case subscribers are more than 7 then AOA will attached separately (as there are only 7 member so DSC slot available in the form) • Declaration by the subscribers and the first directors in INC – 9 shall be auto-generated in PDF format and submitted electronically. • The object clause should be relevant and company must be engaged in that business only. • There is no separate application to be filed for allotment for DIN .it will be allotted with the details filled in the form in the tab directors not having DIN. • After filling all the details stamp duty fees need to be paid which can be done through MCA or without MCA portal. • Application for PAN number and TAN number also will be processed with spice e Plus form by selecting respective area code, AO type, Range code & AO No. After completion of these form, it should be acknowledge by DSC of CS/CA/CWA. • Spice + AGILE PRO form is mandatory for all companies which includes following registration that is GST Registration which is optional, ESIC(Employee State Insurance Corporation) Employees' Provident Fund organization (EPFO) Registration (Mandatory) and Profession Tax Registration in case if company is of Maharashtra and Opening of Bank Account is compulsory. • After filling up Part B, we have to carry out a ‘pre-scrutiny’ check. Once the ‘pre-scrutiny; is successful, click on ‘submit’. A confirmation is displayed upon successful submission of the form. • After submission of these form, it should be acknowledge by DSC of CS/CA/CWA.A Service Request Number is generated for making a payment towards company incorporation. Once the payment is made successfully, the forms would be processed. • In case form is need to be resubmitted due to any error or omission, then form will be resubmitted in the same manner. |
| Certificate of Incorporation | After completion of process and successful approval of form, certificate of incorporation, Tan allotment letter, PAN card of Company and DIN of directors will be issued. Along with GST Registration certificate, ESIC and EPFO certificate, Professional tax registration (For Maharashtra), Opening Bank account. |
E-Forms to be Filed for Nidhi Company
- Spice+ (INC 32)
- Spice+ AOA (INC -34)
- Spice+ MOA (INC-33)
- Spice+ AGILE PRO (INC-35)
Government Fees for Nidhi Company
Spice form Fees
• In case of company having share capital
| Nominal Share Capital | Fee applicable |
| Up to 15,00,000 | N/A |
| More than 15,00,000 | Rupees 500 |
• In case of company not having share capital
| Number of members | Fee applicable |
| Up to 20 members | N/A |
| More than 20 members | Rupees 500 |
Stamp duty for MOA and AOA is Rs. 7550 (For Madhya Pradesh)
Pan and Tan Fees is Rs. 131
Name Reservation Fees: In case applied separately in Part A for Name Reservation than Rs 1000
Income Tax Under Nidhi Company
Following rates are applicable in case of a Nidhi Company
| Type of company | Rate of tax applicable | Surcharge | SHEC |
|---|---|---|---|
| Domestic company | 25% (less than 400 crores Turnover of PY2017-18) | 1Cr. to 10cr. -7% More than 10 cr.-12% |
4% |
| Domestic company opting deduction under special scheme | 15%(small scale industries with certain conditions) 22%(Companies who are currently using the 25% scheme can one time switch to this scheme ) |
Applicable surcharge rate Mandatory surcharge of 10% |
4% |
| Domestic company who does not categories in any special scheme | 30% | 1Cr.-10cr. -7% More than 10 cr.-12% |
4% |
Post Incorporation Compliance For Nidhi Company
Within a period of one year from the commencement, the Nidhi Company must comply all of the following criteria:
- Not have less than two hundred members (shareholders);
- Have Net Owned Funds (NOF) of ten lakh rupees or more;
- Have unencumbered term deposits of not less than ten per cent of the outstanding deposits; and
- Have a ratio of Net Owned Funds to deposits of not more than 1:20.
"Net Owned Funds" means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet."
Returns to be filed for Nidhi Company
Return of statutory compliance: Form NDH-1 is to be filed within a period of 90 days from the end of the financial year in which the company was incorporated.
Application to regional director: In the case at the end one year from commencement the Nidhi Company is not able to meet the specified requirement, the Company may within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 for extension of time. This might also involve paying late fees for the extension of the said NDH-1 time limits.
* If even after the second financial year the Nidhi Company is not able to meet the requirements for a Nidhi Company, then the Nidhi Company shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions for operating as a Nidhi Company and be liable for penal consequences.
Half-yearly Returns: NDH-3 is to be filed with the registrar, along with the prescribed fees, within a period of 30 days from the end of the half-year in a particular fiscal period.
Benefits of Nidhi Company
- Encourages Savings: It encourages to save money by all its registered members and encourages a thrifty lifestyle as it has purpose to give mutual benefits wherein members can lend or borrow money and accept financial aid amongst them.
- Limited Liability Protection : A Nidhi Company enjoys limited liability for its members. This means that in the event of loss, the members of the Nidhi Company won’t have their personal assets harmed. And In case the company suffers from any loss and faces financial distress in the course of its business activity, the personal assets of any of the Directors or members are not at risk of being seized by banks, creditors, and government.
- Easy Registration Process: The registration of Nidhi Company is quite simple and transparent and easy as it does not required any license from RBI. It is incorporated only in form of public limited company.
- Easier Process for Funding : People of lower or middle income groups are usually unable to take loans from traditional banks because of their high eligibility criteria. A Nidhi Company provides Borrowing and lending to known persons, belonging to the same group, is much easier more convenient and quicker than dealing with banks.
- No External Involvement : : Nidhi Companies take funds from their members and further provides loans to their members only. All transactions are done within this group only. The investors/members themselves operates the operations of the company.
- Separate Entity: Nidhi Company is a separate legal entity that can acquire assets and incur debts in its own name. , it has its own existence and legal identity that from its owners.
- Capacity to Sue and be Sued: The Company in its own name can proceed legal Proceeding and even it can be initiated against company being its independent identity.
- Long term Existence: Nidhi Companies are not affected by the existence of their owners. It continues even after the inability or death of the owners and does not hinder the workings of the company.
- Nidhi company being so small still can take deposits from members which other companies which are private limited they cannot.
- Members of Nidhi company enjoy the rates of Mutual funds with reduced risk.
What is a Nidhi Company (Mutual Benefit Company)?
The name "Nidhi" in Nidhi Company means "treasure" and it originates from the Hindi vocabulary. Nidhi companies are allowed to borrow from its members and lend to its members exclusively means it deals with their member – shareholders only and hence, such companies are also referred to as Mutual Benefit Societies because they work for the mutual benefit and welfare of all members. Therefore, Nidhi Company is an ideal legal entity to take a deposit from and lend to a specific group of people.
RBI has exempted Nidhi Companies from the main provisions of the RBI and other regulations applicable to a NBFC. But RBI has powers to issue directives for them related to their deposit acceptance activities.
What are deposits and loans under Nidhi Company?
Deposits under Nidhi Company
- There are 3 types of deposit Nidhis can accept. These are Savings, Fixed Deposit (FD), Recurring Deposit.
- Nidhi can pay a maximum interest of up to 12.5% on FD & RD and 6% on a savings account.
- Nidhi can deposit up to 20 times the funds invested.
Loans from Nidhi Company
- 3 types of securities can be accepted for loans on offer by Nidhi Companies. Loans can be provided against Gold, Property, Others (LIC, FD, etc.).
- Nidhi cannot engage in the business of microfinance but can lend at up to 20% interest against security.
What are the steps for registration of Nidhi Company?
- STEP 1: Name search: We will check the availability of the company names suggested.
- STEP 2: Digital Signature Certificate: We will obtain digital signature certificate for all proposed directors.
- STEP 3: Reserve Unique Name: We will file RUN E-Form for name reservation.
- STEP 4: File SPICe Form: We will file company incorporation form SPICe with all required attachments.
- STEP 5: Certificate of Incorporation: After successful approval of form COI, PAN, DIN, TAN, GST are provided.
What is the minimum requirement for Nidhi company?
- A Nidhi Company is formed with an objective to promote the habit of saving money among its members and works on the principle of mutual benefit.
- To start with first incorporate a public limited company which should have “Nidhi Limited” as the last word of its name.
- It starts with 7 members as a public limited company, however, to obtain a Nidhi Company Status it needs at least 200 members within a year from date of incorporation and a separate application is filed before the ROC for grant of Nidhi Company Status .
- There is no upper limit for the maximum no. of the shareholder.
- There shall be at least 3 directors in the company. One of the directors must be Resident of India i.e. in India not less than 182 in the previous calendar year.
- It starts with the capital of Rs.500000/- as the requirement of Public limited company and subsequently the minimum paid-up equity capital required for Nidhi Company Status is Rs. 10,00,000 help by at least 200 members within a one year from the date of incorporation.
What are the documents required for registration of Nidhi Company?
- PAN card and address Aadhar card of directors and shareholders are mandatory.
- All the members need to be producer .
- ID Proof: Self attested Passport / Voter-ID / Driving License (any one)
- Address Proof: Self attested Latest Electricity Bill / Telephone Bill / Mobile Bill / Bank Statement with latest entries(any one)
- Passport size Photograph for each Director/ Shareholder.
- Email and contact details of each director
- Registered office Address proof :
1st Taken on Rent by Company- Property Tax receipt in the name of Lender/Electricity bill not older than 2 month + Rent Agreement(After Name Approval with the proposed name of Company) + Rent Receipt of latest month.
2nd Owned by any of the Directors- Property Tax receipt/Electricity bill not older than 2 month in the name of owner.
What is a Government fee for registration of Nidhi Company?
Spice form Fees
• In case of company having share capital
| Nominal Share Capital | Fee applicable |
| Up to 15,00,000 | N/A |
| More than 15,00,000 | Rupees 500 |
• In case of company not having share capital
| Number of members | Fee applicable |
| Up to 20 members | N/A |
| More than 20 members | Rupees 500 |
Stamp duty for MOA and AOA is Rs. 7550 (For Madhya Pradesh)
Pan and Tan Fees is Rs. 131
Name Reservation Fees: In case applied separately in Part A for Name Reservation than Rs 1000
What are mandatory post incorporation compliances for Nidhi Company?
Within a period of one year from the commencement, the Nidhi Company must comply all of the following criteria:
- Not have less than two hundred members (shareholders);
- Have Net Owned Funds (NOF) of ten lakh rupees or more;
- Have unencumbered term deposits of not less than ten per cent of the outstanding deposits; and
- Have a ratio of Net Owned Funds to deposits of not more than 1:20.
"Net Owned Funds" means the aggregate of paid up equity share capital and free reserves as reduced by accumulated losses and intangible assets appearing in the last audited balance sheet."
What is DSC (Digital Signature Certificate)?
A Digital Signature is the electronic signature duly issued by certifying authority that shows the authority of the person signing the same. It is an electronic equivalent of a written signature. Every user who required to sign an e-form for submission with MCA is required to obtain a Digital Signature Certificate.
What are the advantages of Nidhi Company?
- Encourages Savings: It encourages to save money by all its registered members and encourages a thrifty lifestyle as it has purpose to give mutual benefits wherein members can lend or borrow money and accept financial aid amongst them.
- Limited Liability Protection : A Nidhi Company enjoys limited liability for its members. This means that in the event of loss, the members of the Nidhi Company won’t have their personal assets harmed. And In case the company suffers from any loss and faces financial distress in the course of its business activity, the personal assets of any of the Directors or members are not at risk of being seized by banks, creditors, and government.
- Easy Registration Process: The registration of Nidhi Company is quite simple and transparent and easy as it does not required any license from RBI. It is incorporated only in form of public limited company.
- Easier Process for Funding : People of lower or middle income groups are usually unable to take loans from traditional banks because of their high eligibility criteria. A Nidhi Company provides Borrowing and lending to known persons, belonging to the same group, is much easier more convenient and quicker than dealing with banks.
- No External Involvement : : Nidhi Companies take funds from their members and further provides loans to their members only. All transactions are done within this group only. The investors/members themselves operates the operations of the company.
- Separate Entity: Nidhi Company is a separate legal entity that can acquire assets and incur debts in its own name. , it has its own existence and legal identity that from its owners.
- Capacity to Sue and be Sued: The Company in its own name can proceed legal Proceeding and even it can be initiated against company being its independent identity.
- Long term Existence: Nidhi Companies are not affected by the existence of their owners. It continues even after the inability or death of the owners and does not hinder the workings of the company.
- Nidhi company being so small still can take deposits from members which other companies which are private limited they cannot.
- Members of Nidhi company enjoy the rates of Mutual funds with reduced risk.
What is DIN (Director Identification Number)?
DIN means an Identification Number which the Central Government may allot to any individual, intending to be appointed as director or to any existing director of a company, for the purpose of his identification as such. It is an 8 digit unique identification number which has lifetime validity. DIN is required for all existing and new (proposed) directors of a company.
What is the limited liability protection?
The company, being a separate person, is the owner of its assets and bound by its liabilities. The liability of a member as shareholder extends to the contribution to the share capital of the company up to the nominal value of the shares held and not paid by them. In other words, a shareholder is liable to pay the balance, if any, due on the shares held by him, when called upon to pay and nothing more, even if the liabilities of the company far exceed its assets.
Who is ROC (Registrar of Companies)?
The Registrar of Companies is the government authority under the Ministry of Corporate Affairs which deals with registration, administration and regulation of Limited Liability Partnership (LLP) and Companies registered under Companies Act,2013 and Companies Act,1956.
What is Authorised Share Capital and Paid up Share Capital?
The authorized share capital of a company is the amount of share capital that the company is authorized by its constitutional documents to issue (allot) to shareholders.
Paid-up Share Capital of the company is the part of authorized share capital for which the shares were issued to the shareholder. Paid-up capital is the amount that is actually paid by the shareholders to the company.
What is difference between Nidhi Company and different form of organisation?
We have prepared a detailed and easy to understand comparative table showing availability of features and advantages of one form of business to that of others. The same can be found at the end of this page.
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