Everything to know about Closing of a Nidhi Company

Closing of a Nidhi Company
Dashmeet Kaur
| Updated: Mar 31, 2020 | Category: Business, Nidhi Company

Nidhi originally means treasure; in legal terms, it is a type of Non-Banking Financial Company incorporated under Section 406 of Companies Act, 2013. The principal objective of a Nidhi Company is to cultivate the habit of thrift and savings among its members. However, if a Nidhi Company fails to comply with the provisions, then it’s better to file for closure procedure to avoid any penalties.

What does it mean to Close a Nidhi Company?

Closing of Nidhi Company is also known as Company Closure or Strike Off. It can be closed owing to multiple internal or external factors. The newly notified (Removal of Names of Companies) Rules, 2016 governs Nidhi Company closure process under Section 248 of Companies Act, 2013.

The government of India suggests that if a company does not carry any business activity or performs the compliances, then it is prudent to close it. However, it requires adequate skills to legally wind-up a Nidhi Company business.

Advantages of Nidhi Company Closure

Nidhi Company must strike off when it is not functional or not earning much profit. Here are the benefits that one can avail from closing this Company:

  • No compliance: After undertaking the closing procedure, Nidhi Company eliminates the need to keep a check of its annual compliances. 
  • Non-imposition of penalty: Once a Nidhi Company in India shuts down its business, it becomes free from paying a penalty fee, which may be subject to undressed causes.
  • Maintenance of documents not needed anymore: After you submit the closure documents, there is no condition to maintain the legal documents.
  • Saves compliance cost: This has to spend a large sum of its income on filing the yearly compliances. However, when the Company gets closed at an appropriate time, it saves the cost of filing unnecessary compliances.
  • No more default of the Director: Every Nidhi Company must perform certain compliances post-incorporation like filing the annual documents to Registrar of Companies. Moreover, the Company’s Director is held liable in the case of non-compliance. A Director can take a sigh of relief when the Nidhi Company applies for the winding process as he/she will not mandatorily have to do the Annual Filing until unless specified by ROC.

Methods to Close a Nidhi Company 

There are 3 ways of closing of this Company which are as follows:

  • Defunct Company: In general, a defunct refers to a Company with nil assets and liabilities. Basically, such a Company fails to commence its operation within a year of its Incorporation. A Nidhi Company is considered to be a Defunct Company when it cannot file the annual compliance to meet the legal needs and do not make any returns on the yearly basis.
  • Voluntarily Winding-up of Business: Another mode of closure is voluntary winding-up wherein all the members of a Nidhi Company takes a mutual decision to close internal as well as external operations of the Company. Therefore, the Company also disassociates with the external legal Partnership, if any. Passing a Special Resolution in the Board Meeting is indispensable to strike off the Nidhi Company voluntarily.
  • Selling of Nidhi Company: The last method that can be used to close a Company is to sell it. Though it is much similar to the Voluntary Winding-up; yet it takes away the power from the existing members and transfers it to the new prospective buyers. All the assets, belongings and legal attachments of the Nidhi Company are transferred to the new owner who purchases the Company.

Also, Read: How Is Nidhi Company Different From NBFC: A Complete Guide

Checklist of Documents Required

As documentation is important for any Registration or closing process, likewise it is essential for Nidhi Company closure too.  The documents are mentioned below which an applicant must submit to close a Company:

  • Indemnity Bond notarized by the Directors (STK 3);
  • Statement of Accounts entailing the details of Company’s assets and  liabilities Audited by a competent Chartered Accountant;
  • An Affidavit in STK  4 Form by the Company;
  • Latest Statement of Accounts;
  • Special Resolution which showcases the consent of 75% Nidhi Company’s members;

Optional Documents (If applicable)

  • Company’s PAN card 
  • Bank Account Closure Certificates

Procedure for Close a Nidhi Company

It takes about a month to close a Nidhi Company completely. Follow the steps listed below, if you also want to strike off your Business:

  • Filing for Closure Application: The first step is to draft and file a Closure Application through DSC to ROC.
  • Notice by ROC: Therefore, ROC (Registrar of Companies) shall grant his approval to your Application and send a Notice for the same.
  • Finally closed: If nobody raises any objection, then the Company’s name shall be strike off, and it will finally close.

Things to consider during Nidhi Company Closure

Keep the things mentioned below in mind before applying for the closure procedure:

  • Clear off all the liabilities: Any Nidhi Company that intents to wind-up its business must repay its liabilities and attain a NOC (No Objection Certificate) from the all the members. 
  • At least 75% of members must show their consent: As a Nidhi Company is formed for the members of its entity, thus while closing the Company, the consent of majority of members is utmost important . To strike off a Nidhi Company, one must get at least 75% consent of the Shareholder or members. Further, a Director must be allotted the duty to carry out the closing procedure.
  • Prepare the Application: After getting the written consent of members, now you can proceed to prepare the Application.
  • Digital Signature Certificate (DSC) should be processed;
  • Only a qualified person must draft and submit the closure Application;
  • Every document shall be required to be submitted in each phase.

The whole process usually takes 20 to 25 working days, however it may also differ depending upon the processing time of the Government.

Eligibility for fast Closure of Nidhi Company

In case, a Nidhi Company wants to wind-up on fast track basis, then it must fulfil the conditions listed below:

  • Nidhi Company applying under the Fast Track Exit must not possess any assets & liabilities.
  • The Company must not have started any business operations since its Incorporation or within a period of 1 year.
  • The Company must have appropriately filed all the finances to ROC (Registrar of Companies) till the time of its closure.


Running a Nidhi company without functioning operations or not filing timely compliance is a matter of an offence in the eyes of law. There are many reasons to start a Nidhi company in India. Thus, Closing of this Company is the best choice to be made to avoid being in default and pay hefty penalties.

Take the guidance of a reputed legal consultant, Swarit Advisors to wind-up your Nidhi Company. Being experts in handling several Nidhi Registration and closure cases, we can streamline the legal procedure for you.

Also, Read: Nidhi Company Rules and Regulations: Complete Guide


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