Nidhi company
A Nidhi company is a public company whose object is to cultivate thrift among its members, take deposits from them, and lend only to them. Company Suggestion incorporates it under the Companies Act, 2013 and files Form NDH-4 so the Central Government can notify it as a Nidhi.
What is a Nidhi company?
Section 406 and the Nidhi Rules, 2014 allow this mutual-benefit company. It is incorporated as a public company, so it starts with at least 7 members and 3 directors. The name ends with Nidhi Limited. Outsiders do not deposit and do not borrow.
It does not take an RBI certificate of registration. That does not make the rules light. The Nidhi Rules fix who can be a member, how much can be deposited, and which forms go to the Registrar.
What must it meet before it can take deposits?
A public company incorporated on or after 19 April 2022 applies in Form NDH-4 within 120 days of incorporation. It does not accept deposits until the Central Government notifies it as a Nidhi. Rule 3B of the Nidhi Rules requires both of these before that application.
- Paid-up equity share capital of at least ₹10 lakh, which Rule 4 requires at incorporation.
- At least 200 members.
- Net Owned Funds of ₹20 lakh or more.
- Once deposits are taken, unencumbered term deposits of at least 10 per cent of the deposits outstanding.
If those conditions are missed, the company cannot file the share-capital forms SH-7 and PAS-3, and it cannot take deposits. After notification, the half-yearly return NDH-3 is filed within 30 days of the end of each half year.
What can a Nidhi not do?
The rules close the businesses that would make it an ordinary finance company.
- It cannot run a chit fund, hire purchase, leasing, or insurance business, or acquire securities of a body corporate.
- It cannot issue preference shares, debentures, or any other debt instrument.
- It cannot open a current account with its members, or take a deposit from or lend to anyone who is not a member.
- It cannot advertise for deposits.
- A dividend cannot exceed 25 per cent. A director’s consecutive term cannot exceed 10 years, and reappointment waits two years.
What are the incorporation steps?
Company Suggestion takes the company through four steps.
- The public company is incorporated through SPICe+, with Nidhi objects, paid-up equity of at least ₹10 lakh, and at least 7 members and 3 directors.
- Membership and Net Owned Funds are built to 200 members and ₹20 lakh.
- Form NDH-4 is filed within 120 days of incorporation.
- Deposits from members start only after the Central Government notifies the company as a Nidhi.
Frequently asked questions
4 questions cover the rules that decide this registration.
Does a Nidhi need an RBI licence?
No. A Nidhi does not take a certificate of registration from the Reserve Bank. It is a public company governed by the Nidhi Rules, 2014, and it is notified as a Nidhi by the Central Government after Form NDH-4.
What capital does a new Nidhi need?
Paid-up equity share capital of at least ₹10 lakh. Form NDH-4 also needs at least 200 members and Net Owned Funds of ₹20 lakh. The older ₹5 lakh paid-up figure is not the rule.
When can it take deposits?
Only after the Central Government notifies it as a Nidhi. Until that notification, it does not take deposits from members or lend to them. It also keeps unencumbered term deposits of at least 10 per cent of the deposits outstanding.
Which returns does a Nidhi file?
Form NDH-4 within 120 days of incorporation. After it is notified, Form NDH-3 within 30 days of the end of each half year, AOC-4 within 30 days of the AGM, and MGT-7 within 60 days of the AGM.