Understanding the Legal Requirements for Nidhi Company Registration

  • February 21, 2023
  • Dushyant Sharma
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A Nidhi Company is an entity governed under the Companies Act of 2013 with the objective of promoting thrift and savings among its members. It is a Non-Banking Financial Institute that exclusively lends and deposits services to its members, it can be understood that a Nidhi Company consists of funding from its members/shareholders. In this article, we have detailed the legal requirements for Nidhi Company registration in India. So, we request you to pay attention.

 

Benefits of registering a Nidhi Company in India

Nidhi Company is one of the specialized corporate structures enjoying several perks from the Government, making Nidhi Registration a beneficial affair for its applicants. Some of the benefits of  Nidhi registration are as follows:

Nidhi can easily avail of Loans

As a recognized infrastructure by the Central Government, Nidhi is trusted more by the banks for funds. Registering as a Nidhi Company will make it easy for you to acquire loans and other funding.

Nidhi can perpetually exist

A Nidhi enjoys the perk of continued existence after one of the directors or members dies or leaves the Firm.

You can easily incorporate a Nidhi in India

The Nidhi Incorporation is quite easy, as one has to follow a standard procedure for Nidhi registration in India.

Nidhi is a Separate Identity from its Members

A Nidhi Company is a separate legal identity in India. Post-incorporation, a Nidhi becomes a separate individual who can own property, invest, rent, etc.

Nidhi limits the liability of its Members to their shares

A Nidhi imparts limited liability to its members, so in the event of incurring a loss, the Nidhi members won't have their assets compromised.

 

What are the Legal requirements for Nidhi Company Registration in India?

In this section, we will share some of the general and specific requirements necessary for adherence before applying for Nidhi Registration in India. Some of the general eligibilities are as follows:

  • Minimum Allowed Directors in a Nidhi must be three
  • At least one member director must be an Indian National
  • The minimum number of Shareholders in a Nidhi must be seven
  • A Nidhi Company must maintain a minimum equity share capital of INR 5 Lakhs at all times

Now, let us get into the specific requirements for the Nidhi Company Registration as per the MCA directives:

Pre-Incorporation Requirements

Prior to the incorporation procedure, the applicant Nidhi must be registered as a public company with MCA. It must have the required paid-up equity share capital, which is a minimum of five lakh rupees. The applicant Nidhi Company Is liable to issue preference shares. It must not have any object in its Memorandum of Association other than the habit cultivation of thrift and savings amongst the Nidhi members. Lastly, an applicant, Nidhi, must add 'Nidhi Limited' to its trading name.

Maintenance of the Share Capital in Nidhi

The MCA mandates every Nidhi Company to issue equity shares of the nominal value. Their nominal value must not be less than ten rupees each. A Nidhi cannot levy a service charge for the issue of shares. It must allow at least ten equity shares or the equivalent of one hundred rupees to each Nidhi depositor. In a Nidhi, a savings account and a recurring deposit account holder must hold at least one equity share of ten rupees.

In addition, every Nidhi must maintain Net Owned Funds, which excludes preference share capital proceeds of a minimum of ten lakh rupees as the Central Government specifies from time to time.

Nidhi Membership

The MCA restricts a Nidhi from admitting a corporate body or a trust as its member. Also, a Nidhi must maintain its membership well above two hundred members. A Nidhi cannot treat a minor as a member. But, it can accept deposits in the name of a minor if the legal guardian is a Nidhi member.

Rate of Interest

A Nidhi must rate any loan which does not exceed 7.5% percent of the highest interest rate offered on Nidhi deposits. The Nidhi must calculate the rate as per the reducing balance method.

Directorship Regulations in a Nidhi

Every Nidhi director must be its member first. The director can hold office for at most ten consecutive years on the Company’s Board. Every Director in a Nidhi is eligible for re-appointment. But the re-appointment can occur after the expiration of two years of his Directorship cessation. The Directors must also comply with the Nidhi Act requirements. In addition, no director must not be disqualified from any prior appointment.

For more on the Nidhi Company Registration procedure and associated process, connect with the Incorporation Experst at Registrationwala.


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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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