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Nidhi Definition:Nidhi company is a non-banking Finance company which is approved by the Central Government by notification in official gazette. As per section 406 of the Companies Act 2013, “Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Government for regulation of such class of companies.

They are regulated by Ministry of Corporate Affairs. Reserve Bank of India is empowered to direct them in the matters relating to their acceptance of deposit. These companies usually deal with their shareholder-members only.

Nidhi companies is governed by the Nidhi Rules, 2014. They are incorporated in the nature of Public Limited company.So, they need to comply with two set of norms, one is of Public limited company as per Companies Act, 2013 and another is of Nidhi rules, 2014.

Requirements for Nidhi Company :There are some requirements for formation of a Nidhi company and for maintaining the status.

1. The name of the company needs to be unique and should end with “Nidhi Limited”.
2. It must have a minimum paid up equity share capital of Rs. 5,00,000/- and should be increased to Rs.10,00,000 or more within completion of one year from the date of incorporation of the company and unencumbered term deposits of not less than ten percent of the outstanding deposits as specified in Rule 14.
3. Minimum number of shareholders should be 7 and minimum number of directors should be 3 and by the completion of one year, the members of the company should atleast be 200.
4. Ratio of Net Owned Funds to deposits should not be more than 1:20.

Restrictions of a  Nidhi Company :

A Nidhi Company have some restrictions to spread their business.

1. No issuance of preference shares, Debentures, Any Other Debt Instrument by any name or in any form whatsoever.
2. Nidhi company cannot open a current bank account with its members.
3. Cannot operate as chit fund, hire purchase finance, leasing Finance and Insurance or Acquisition of Securities issued by any corporate.
4. Cannot acquire another company byPurchase of its securities orControl the composition of the Board of Directors of any other company in any manner whatsoever or perform any arrangement or takeover or compromise, unless it has passed a special resolution in its general meeting andobtained the prior approval of the Regional Director having jurisdiction over the Nidhi.
5. Cannot enter into any partnership for its borrowing or lending activities.
6. Carry on any business other than the business of borrowing or lending in its own name, take or accept any deposit from any individual or body corporate.
7. Cannot pledge any of the assets mortgage by its member as security
8. Cannot pay any brokerage or incentive for collecting deposits from its members or for arrangement of funds or for granting loans, and
9. Cannot issue any advertisement for augmenting deposits.

Procedure of formation of a NidhiCompany :There are some formalities to incorporate a Nidhi Company.

1. Application for reservation of New Company name by the RUN services (Reservation of a Unique Name).
2. After procuring approval of name from MCA, we shall proceed with the formation part under Spice Form.
3. The documents for the same-

i)DIRECTOR -

                   1)PAN card

2)Identification proof - Voter/Aadhar/Passport/Driving License

3)Residential proof - Electricity/Telephone/Mobile/Bank Statement

4)​2​ copy Passport size photo for each.

ii)COMPANY-

1)Electricity Bill of the premise

2)Property Tax Bill

3)Rent agreement of the property, if it is rented

4)NOC from the landowner

Compliances ofa Nidhi Company:There are some mandatory compliances which needs to be filed on time to time basis.

1)NDH-1(Return of Statutory Compliances)-It needs to be filed within 90 days from the closure of the first financial year after its incorporation and where applicable, the second financial year. The Company shall file a return of statutory compliances in Form NDH – 1 along with such fee as prescribed with the Registrar duly certified by a Company Secretary in practice or a Chartered Accountant in practice or a Cost Accountant in practice.

2)NDH-2(Extension of NON filing of returns on time)- If the company is not complying with the above, it shall, within90 days from the close of the first financial year, apply to the Regional Director in Form NDH -2 along with 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.

In case of failure, the company shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions besides being liable for penal consequences provided in the Act.

3)NDH-3(Half Yearly Return)- The company shall file Form NDH-3 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within thirty days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice.