Nidhi Company is a type of Non-Banking Financial Company (NBFC). It is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit. These companies typically operate in the southern part of the country.
Nidhi Company isn’t required to receive the license from Reserve Bank of India (RBI), hence it is easy to form.
It is registered as a public company and should have “Nidhi Limited” as the last words of its name.
A Nidhi company is a legal entity and a juristic person established under the Act. Therefore, a Nidhi company has wide legal capacity and can own property and also incur debts. The members (Directors) of a Nidhi company have no liability to the creditors of a Nidhi company.
The Board of Management of a Nidhi company can be easily changed by filing simple forms with the Registrar of Companies. The Board of Management of a Nidhi company controls the activities of the Nidhi company.
A Nidhi company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. A Nidhi company, being a separate legal person, is unaffected by the death or other departure of any member but continues to be in existence irrespective of the changes in membership.
A Nidhi company being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No member can make any claim upon the property of the Nidhi company as long as it is a going concern.
A Nidhi company enjoys better credibility when compared to Mutual Benefit Organizations. Nidhi companies are registered and monitored by the Central Government. Mutual Benefits Organization are on the other hand governed and monitored by State Governments.
Activities Prohibited in a Nidhi Company
Nidhi Company can’t deal with chit funds, hire-purchase finance, leasing finance, insurance or securities business. It is strictly prohibited from accepting deposits from or lending funds to, any other person except members.
Also, it can’t advertise itself to ask for any deposits.
Number of members
Minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.
Share Capital and Owners’ Funds
A minimum of 5 lakh rupees, is required as the equity share capital to start a Nidhi Company. Nidhi Company can’t issue preference shares.
Documents required for registration
Proof of the registered place of business (Ownership documents/ rent or lease agreement)
No Objection Certificate (signed by the owner/ landlord)
Address proofs of the members
Photos of the members
PAN card copies of the members
Digital Signature (DSC)
Director Identification Number (DIN) of the directors
Memorandum of Association of the company (MoA)
Articles of Association of the company (AoA)
Minimum Requirements for Incorporation
Minimum 7 shareholders
Minimum 3 Directors
Minimum Capital of Rs. 10 lacs
DIN for all directors
Minimum number of 200 Shareholders
Net owned Fund shall not be less than Rs. 10 Lacs
Unencumbered deposits of not less than 10% of the outstanding deposits
Net owned funds to deposits ratio should be more than 1:20