Nidhi Company Registration

After incorporation of the Nidhi Company, it must meet all of the following conditions within a period of 12 months:-

1. It must have 200 or more members (shareholders)
2. It must have Net Owned Funds (NOF) of Rs. 10 Lakhs or more
3. It must have unencumbered term deposits of 10% or more of the outstanding deposits
4. It must have a ratio of Net Owned Funds to Deposits of not more than 1:20

Net Owned Fund = Paid up Equity Share Capital + Free Reserves – Accumulated Losses- Intangible Assets (as per last audited Balance Sheet)

Every Nidhi shall invest and continue to keep invested, in unencumbered term deposits with a Scheduled commercial bank (other than a co-operative bank or a regional rural bank), or post office deposits in its own name an amount which shall not be less than ten per cent of the deposits outstanding at the close of business on the last working day of the second preceding month.

A Nidhi Company shall not admit a body corporate, trust or minor as a member.

If the company fails to comply with the minimum member criteria, it shall within 90 days from the close of the first financial year, apply to the Regional Director in Form No. NDH-2 for extension of time and the Regional Director may consider the application and pass orders within 30 days of the receipt of the application.

If even after the second financial year, the Nidhi Company is unable to comply the membership requirement, then it shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions for operating as a Nidhi Company and be liable for penal consequences.

No, a Nidhi Company cannot borrow funds or lend to an outsider who is a non-member.

A Nidhi Company can accept deposits not more than 20 times of its NOF as per the latest audited financial statements.

Nidhi Companies are not required to take RBI license for incorporation. RBI has exempted the Nidhi Companies from the core provisions of the RBI Act and other directions applicable to NBFCs. The provisions of Section 45-IA (Compulsory Registration with RBI), Section 45-IB (Maintenance of Liquid Assets), Section 45-IC (Creation of Reserve fund) have been exempted for Nidhi Companies. However, R.B.I can issue direction to Nidhi Companies.

Nidhi Companies have been prohibited from performing the following activities:

• Leasing finance, insurance, chit fund, hire purchase finance, lotteries or acquisition of securities issued by any body corporate.
• Issue of preference shares, debentures or any other debt instruments by any name or in any form
• Open a current account with its members (though it can open a savings account)
• Accept deposits from or lend to any person, other than its members
• Pledge or sell any of the assets lodged by its members as security for a loan
• Take deposits from or lend money to a body corporate
• Pay any commission or incentive for mobilizing deposits from members
• Advertise in any form for inviting deposits. However, private circulation of the details of fixed deposit scheme among the members only is allowed and will not be considered as advertisement.
• Entering into any partnership arrangement for carrying out lending and borrowing activities
• Carry on a business other than borrowing and lending to its members. Provided that Nidhis may provide locker facilities to its members subject to the condition that locker rental income shall not exceed 20% of the gross income of Nidhi Company at any point of time during the financial year.

Following are the statutory compliances for Nidhi Company:

Form NDH-1

A Nidhi Company must submit the list of members in Form NDH-1 within 90 days from the end of every financial year, duly certified by a CS/CA/CMA in practice.

Form NDH-3

A half yearly return in Form NDH-3 to be filed with ROC duly certified by a CS/CA/CMA in practice.

Annual Filings

• Annual Return with MCA in Form MGT-7
• Financial Statements in Form AOC-4
• Income Tax Return by 30th September of the following financial year