Nidhi Company

Establishing and Managing a Nidhi Company

In the realm of financial entities in India, Nidhi Companies play a unique role, providing a platform for good savings and mutual benefit among their members. We are advising business owners and entrepreneurs through the process of registering a Nidhi Company, the necessary checklist, comparisons with other types of companies, and the crucial aspects of Nidhi filings on a half-yearly and yearly basis.

Purpose of Registering a Nidhi Company:

Nidhi Companies are essentially non-banking financial institutions that facilitate the acceptance of deposits and lending to their members only. The primary objective is to promote the habit of thrift and savings among members, creating a mutual benefit society.

Checklist for Nidhi Company Registration:

To ensure a smooth and compliant registration process, a comprehensive checklist is crucial. Here’s an overview:

1. Memorandum of Association (MOA) and Articles of Association (AOA): Clearly outline the objectives and rules governing the company.
2. Minimum Capital Requirement: Ensure compliance with the prescribed minimum capital requirement for Nidhi Companies. Nidhi company needs to have net owned capital of Rs.20Lac.
3. Registered Office: Provide the details of the registered office, which must be established within 180 days of incorporation.
4. Minimum Members: A Nidhi Company must have a minimum of 200 members within one year of incorporation.
5. Directorial Requirements: Appoint a minimum of three directors, ensuring compliance with the Companies Act.
6. Name Approval: Obtain Name approval for the company name from the Ministry of Corporate Affairs, before getting into registration with encloser of declaration for compliance as per Nidhi Company.
7. Nidhi Status Confirmation: Declare the company’s intention to function as a Nidhi in its MOA and AOA.

Advantages of Nidhi Companies over Other Financial Institutions

In the financial landscape of India, Nidhi Companies stand out as a viable and advantageous option compared to traditional banks, NBFCs, and other finance companies. Here’s a concise overview of why opting for a Nidhi Company can be a strategic choice:

1. No RBI Approval Required: Unlike banks and NBFCs that necessitate approval from the Reserve Bank of India (RBI), Nidhi Companies operate without such stringent regulatory requirements. This expedites the setup process, allowing for quicker establishment and commencement of operations.
2. Cost-Effective Startup: The cost of initiating a Nidhi Company is considerably lower compared to establishing a bank or an NBFC. This makes it an attractive option for entrepreneurs looking to enter the financial sector without incurring exorbitant setup expenses.
3. Minimal Compliance Burden: Nidhi Companies enjoy a simplified regulatory framework, resulting in fewer compliance obligations. This not only reduces the administrative burden but also enables smoother day-to-day operations, making it an appealing choice for those seeking a streamlined regulatory environment.
4. Focus on Member Benefit: Unlike profit-centric financial institutions, Nidhi Companies are inherently designed for the mutual benefit of their members. This member-centric approach fosters a sense of community and shared financial goals, aligning with the ethos of financial inclusion.
5. Limited External Borrowings: Nidhi Companies are restricted in their capacity to borrow from external sources. While this may seem limiting, it inherently safeguards the financial stability of the company, promoting a conservative and sustainable approach to lending.

How to Register a Nidhi Company:

The registration process involves the following steps:

1. Name Approval: Apply for the reservation of the company name through the RUN (Reserve Unique Name) service.
2. DSC for all the subscribers: obtain the DSC for all subscribers to MOA
3. Incorporation Application: File the SPICe+ form with the Ministry of Corporate Affairs, including MOA, AOA, and other necessary documents.
4. Certificate of Incorporation: Once approved, the Registrar of Companies (RoC) issues the Certificate of Incorporation.
5. PAN and TAN: Obtain Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the company.
6. Nidhi vs. Other Types of Companies in India:

• Nidhi vs. Public Limited Company: While both can raise funds from the public, Nidhi Companies focus on benefiting their members, distinguishing them from profit-oriented public limited companies.
• Nidhi vs. NBFC: Unlike Non-Banking Financial Companies (NBFCs), Nidhi Companies are exempt from the stringent regulatory requirements, allowing for simpler operations.

5. Nidhi Filings: Nidhi Companies must adhere to half-yearly and yearly filings, including:
6. Half-Yearly Filings: Nidhi companies are required to file Form NDH-3 within 30 days from the end of the first half of the financial year.
7. Year-End Filings: Form NDH-4 must be filed within 60 days from the conclusion of the financial year.

Year-End Nidhi MCA Filings Overview:

At the close of the financial year, Nidhi Companies are required to submit various filings to the Ministry of Corporate Affairs (MCA) in India. These filings include:

1. AOC-4 (Financial Statements): File AOC-4, providing the audited financial statements, including the balance sheet, profit and loss account, and other financial disclosures, within 30 days from the Annual General Meeting (AGM).
2. MGT-7 (Annual Return): Submit Form MGT-7 within 60 days from the AGM date, detailing the company’s activities, financial performance, and governance structure during the financial year.
3. NDH-4 (Nidhi Company Annual Return): Specific to Nidhi Companies, file Form NDH-4 within 60 days from the end of the financial year, providing a summary of the company’s financials and compliance status.
4. Income Tax Return (ITR): Besides MCA filings, Nidhi Companies need to file their income tax return using the appropriate ITR form, ensuring compliance with the Income Tax Act.

Team IN Filings Support for Nidhi Filings: Engaging a professional team like Team IN Filings can significantly streamline the registration and compliance process for Nidhi Companies. With expertise in company law, taxation, and compliance, they provide tailored solutions to meet the unique requirements of Nidhi entities.