Nidhi Company Incorporation Procedure

Posted by Enterslice on May 15th, 2018

What is Nidhi Company?

A Nidhi company is one of the Non-Banking Financial Companies that deal with the finance. Nidhi Company is being defined in Section 406 of the Companies Act, 2013 and governed by Company Nidhi Rules, 2014. The principal business of Nidhi Company is to lend and borrow money from their members only. Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company, are the other name of the Nidhi Company.

Nidhi Company is mainly used to cultivate savings amongst a group of people as the Nidhi Companies are only allowed to borrow from its members and lend to its members only. It is one of the categories of Non-Banking Financial Company which does not require a license from the Reserve Bank of India.

What Are The Requirement Before Incorporation Of Nidhi Company?

1. Nidhi Company is a public limited Company.
2. Minimum 3 Directors are required for the Nidhi Company Registration.
3. Minimum 7 members are required for the incorporation of a company.
4. No minimum capital is required.
5. Uses the word “NIDHI LIMITED” at the end of its name.
6. No preference shares shall be issued.
7. The object of the company shall be to cultivate the habit of savings among its members.

What Are The Requirement After Incorporation Of A Nidhi Company?

1. After incorporation Nidhi company must add at least 200 members to comply with the requirement of the law.
2. In case not able to reach the limit of 200 members; the company must intimate to the RD within 30 days of the closure of the financial year in a specified form.
3. No Corporate or trust shall become the member of the Nidhi Company.
4. A minor cannot become the member of the Nidhi Company.
5. Annual Compliance as mentioned in the Act and Rules in form NDH-1, NDH-2 and NDH-3 within a specified time.

What Will Be The Incorporation Process Of Nidhi Company?

1. Name Reservation

Firstly apply for the name of the company. The applied name must be unique and must comply with the Companies (Registration Offices and Fees) Rules, 2014.

The applied name must add the word NIDHI LIMITED at its end.

   2. Digital Signature

DIGITAL SIGNATURE of the proposed Director, as well as the Subscriber, is required to affix the signature digitally on the subscriber sheet.

3. Incorporation Form

Once the name is reserved the next step is to fill the Incorporation form. The details fill in the incorporation form must be true and correct. Incorporation form must be duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.

4. MOA and AOA

Along with the incorporation form, another form that needs to be given is Memorandum of Association and Articles of Association of the company. MOA discloses the basic details of the company like;

• Name Of The Company
• Registered Office of The Company
• The capital of The Company
• Liability of The Members 
• The object of The Company

Whereas AOA is the constitution of the company. MOA and AOA must be duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice

5. Filing Of Documents

Once all the documents and attachments are duly prepared the same shall be filed with the Registrar for incorporation of a company.

Annual Compliance of the Nidhi Company 

• Return of Statutory Compliances NDH-1

Nidhi Company shall within 90 days from the closure of the first Financial Year after its incorporation file a return of statutory compliances in Form NDH–1 with the registrar along with the prescribed fees. Such form must be duly certified by a Company Secretary in practice or a Chartered Accountant in practice or a Cost Accountant in practice.

• Extension of Delay NDH-2

If a Nidhi Company fails to comply with the above it may apply to the Regional Director for extension of time. The company shall within 90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 along with the fee for extension of time and the Regional Director may consider the application and pass orders within 30 days of the receipt of the application.

• Half Yearly Return NDH-3

A Nidhi Company must file a half yearly return with the registrar within 30 days from the closure of the half year. The form must be in compliance with such fees as provided in Companies (Registration Offices and Fees) Rules, 2014 and shall be duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.