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.
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.
Minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.
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.
Only one object will be mentioned in MoA of the company: “cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit..”
There are two forms which are required to be filed.
Within one year of its registration
If Nidhi Company satisfies all above conditions, it should file NDH-1 along with prescribed fees within 90 days from the end of the first financial year after incorporation. The form must be duly certified by practicing CA/ CS/ CWA.
Extension of another financial year can be availed upon submission of NDH-2 to the Regional Director within 30 days from the end of the first financial year.
If even after the second financial year, it doesn’t fulfill the requirements, it can’t accept deposits till it complies with the provisions, and also penalty will be imposed.