Nidhi organizations are formed to lend and borrow money on behalf of all members. This is built on the premise of mutual benefit and instills in all of its members the habit of saving. These businesses are popular in southern India.

What is Nidhi Company?

A Nidhi Company is a non-bank financial institution (NBFC). Nidhi Company Registration is formed with the goal of borrowing and lending money to its members. It operates on the mutual benefit philosophy and encourages its members to save.

These enterprises are very common in southern India. Nidhi firms are not needed to file for a licence with the Reserve Bank of India (RBI). However, they must be registered as a public company and bear the suffix ‘Nidhi Limited.

Prohibition Activities in Nidhi Company

Certain limitations imposed on Nidhi Companies in terms of their activities must be followed. These activities include the following:

• Nidhi Companies are not permitted to trade in chit funds.
• Nidhi Companies are unable to provide hire-purchase financing.
• Nidhi Companies are unable to cope with financial leasing.
• Nidhi Companies are unable to do insurance business.
• Nidhi Companies are not permitted to engage in the securities sector.
• Nidhi Companies are not permitted to collect deposits from anybody other than members.
• Nidhi Companies cannot accept deposits from any other person except members.
• Nidhi Companies cannot lend funds to any other person except members.

Benefits of Registering as Nidhi Company

There are various benefits which can be availed by registering as a Nidhi Company. These advantages can be summed up as follows:

Legal existence: 

When a corporation is registered as a Nidhi Company, it becomes an independent entity. As a recognized Mutual Benefit Society, it has its own legal existence. The firm, being a separate entity from its members, can buy or dispose of assets in its own name.

Limited liability:

Depending on the amount invested or contributed by the members of the company, their liabilities will be limited. The members will be liable only for their share in the company. Personal liabilities of the members cannot be used to meet the company’s liabilities.

Availability of funds: 

The members can borrow from the funds contributed by themselves at lower interest rates.

Documents Required for Nidhi Company Registration

The following documents must be submitted in order to get a company registered as a Nidhi Company:

• Ownership documents or a rent/lease agreement has to be provided as proof of address of the registered place of business
• A No Objection Certificate (NOC) duly signed by the landlord or the owner of the place where the business is registered
• Identity proofs
• Address proofs of the members of the company
• Photographs of the members of the company
• Digital Signature Certificate (DSC) of the company
• Copies of PAN cards of the members
• Director Identification Numbers (DIN) of all the directors
• Certified copy of the updated Memorandum of Association (MoA) of the company
• Certified copy of the updated Articles of Association (AoA) of the company

Nidhi Companies FAQs

What is the bare minimum of directors necessary to form a Nidhi Company?

A minimum of three directors are required to file for and register as a Nidhi Company.

Is it possible for a Nidhi Company to create branch offices?

Yes, a Nidhi Company is allowed to have branch offices. Despite the fact that the conditions for opening a branch office must be met.

How many branches may a Nidhi Company open?

Within a district, a Nidhi Company may open no more than three branches. If the corporation wishes to open more than three branches, each new branch must be approved by the Regional Director.

What qualifications are required to become a director of a Nidhi Company?

A corporate member must be a director, and Section 152 requirements must be followed.