{"id":2775,"date":"2018-10-10T14:51:09","date_gmt":"2018-10-10T09:21:09","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=2775"},"modified":"2020-07-21T14:16:14","modified_gmt":"2020-07-21T08:46:14","slug":"nidhi-company-registration-process","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/","title":{"rendered":"What is the Nidhi Company Registration Process"},"content":{"rendered":"\n<p class=\"has-drop-cap\">A Nidhi Company is required to be registered under Section 406 of the Companies Act, 2013 and Companies (Nidhi Companies) Rules, 2014. These entities are quite popular in the southern part of the country. The word Nidhi means Treasure in Hindi. The purpose of <strong>Nidhi Company Registration Process<\/strong> is based on:-<\/p>\n\n\n\n<ul><li>Encouraging the habit of saving amongst the members<\/li><li>Receives deposits from its members only and can, in turn, lend only to its memberships.<\/li><li>The main objective behind&nbsp;Nidhi Company registration process is to cultivate in its members the spirit of mutual benefit.<\/li><\/ul>\n\n\n\n<p>Nidhi Companies are Non-Banking Financial Corporations&nbsp;which does not require any Reserve Bank of India (RBI) license. Hence the Nidhi companies are relatively easy to form.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2b7459d3b2e\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2b7459d3b2e\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Checklist_for_Nidhi_Company_Registration\" title=\"Checklist for Nidhi Company Registration :\">Checklist for Nidhi Company Registration :<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Nidhi_company_registration_process\" title=\"Nidhi company registration process:\">Nidhi company registration process:<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Documents_required_for_Nidhi_company_registration\" title=\"Documents required for Nidhi company registration\">Documents required for Nidhi company registration<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Restrictions_on_Nidhi_Company_Registration\" title=\"Restrictions on Nidhi Company Registration\">Restrictions on Nidhi Company Registration<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Restrictions_on_certain_businesses\" title=\"Restrictions on certain businesses\">Restrictions on certain businesses<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Cant_issue_preference_shares_debentures_or_any_other_debt_instrument\" title=\"Can\u2019t issue preference shares, debentures or any other debt instrument\">Can\u2019t issue preference shares, debentures or any other debt instrument<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Restrictions_on_current_account\" title=\"Restrictions on current account\">Restrictions on current account<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Constraints_on_carrying_other_business\" title=\"Constraints on carrying other business\">Constraints on carrying other business<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Constraints_on_advertisement\" title=\"Constraints on advertisement\">Constraints on advertisement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Cannot_enter_into_an_agreement\" title=\"Cannot enter into an agreement\">Cannot enter into an agreement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#Constraints_on_pledging_assets\" title=\"Constraints on pledging assets\">Constraints on pledging assets<\/a><\/li><\/ul><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/learning\/nidhi-company-registration-process\/#What_is_the_importance_of_registering_a_Nidhi_Company\" title=\"What is the importance of registering a Nidhi Company?\">What is the importance of registering a Nidhi Company?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Checklist_for_Nidhi_Company_Registration\"><\/span>Checklist for Nidhi Company Registration :<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li>To start a Nidhi Company, at least 7 members on board with 3 of them designated as Directors of the Company are must.<\/li><li>The start-up equity share capital needs to be minimum INR 5 lakh.<\/li><li>The Nidhi Company cannot indulge in chit funds, issue of preference shares, lease finance, hire or purchase finance, provide insurance or securities related business.<\/li><li>The word \u2018Nidhi Ltd.\u2019 needs to be added to the name of the company.<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Nidhi_company_registration_process\"><\/span><strong>Nidhi company registration process:<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ol><li>Obtain the Digital Signature Certificate for authorised signatories and Director Identification Number for designated directors of the company.<\/li><li>Make an application for the name approval of the company with the Ministry of Corporate Affairs.<\/li><li>Once the name is approved, the Forms along with the required documents need to be submitted to the Ministry for incorporation.<\/li><li>Form DIR 2 is to be filed by the Directors as per rule 5 and 6 of Nidhi Rules and is required to be signed by each member.<\/li><\/ol>\n\n\n\n<p>The approved Nidhi Company needs to fulfill certain obligatory requirements within a year of formation to validate its existence as a Nidhi.<\/p>\n\n\n\n<ul><li>Should have at least 200 members on board.<\/li><li>Net owned funds need to be minimum 10 lakh rupees.<\/li><li>Ratio of net owned funds to deposits cannot be more than 1:20.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Documents_required_for_Nidhi_company_registration\"><\/span><strong>Documents required for Nidhi company registration<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The mandatory documents that need to be submitted along with the application are:-<\/p>\n\n\n\n<ul><li>Identity proofs of the Directors and the Shareholders<\/li><li>Ownership document or the lease agreement of the registered address of the company<\/li><li>No objection certificate from the landlord in case of rented place<\/li><li>Address proof of the Directors and the Shareholders<\/li><li>Photos of the Directors and shareholders<\/li><li>PAN card photocopies of the Directors and the shareholders<\/li><li>The Digital Signature Certificate of the authorised persons and Directors<\/li><li>Director Identification Number of the directors.<\/li><li>Memorandum of Association and Articles of Association of the Company.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Restrictions_on_Nidhi_Company_Registration\"><\/span><strong>Restrictions on Nidhi Company Registration<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Well, everything has pros and cons. So businesses with Nidhi Company Registration too have. It has some restrictions due to which such companies aren\u2019t allowed to do the following business:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Restrictions_on_certain_businesses\"><\/span><strong>Restrictions on certain businesses<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>They can\u2019t start the business of chit-funds, Hire Purchase Finance, Leasing Finance, Insurance, and acquisition of shares issued by companies.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cant_issue_preference_shares_debentures_or_any_other_debt_instrument\"><\/span><strong>Can\u2019t issue preference shares, debentures or any other debt instrument<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Such companies can\u2019t issue securities such as preference shares, debentures, or any other debt instrument as they deal with their members only.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Restrictions_on_current_account\"><\/span><strong>Restrictions on current account<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Businesses with a Nidhi Company registration are prohibited from opening any current account with its members because RBI exempts it to follow procedures of banking regulations. However, it can opt to open a savings bank account.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Constraints_on_carrying_other_business\"><\/span><strong>Constraints on carrying other business<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>The only business of a Nidhi Company includes borrowing and lending money to its members and it\u2019s the only business it can run in its name. Apart from these, it cannot indulge in any other kind of business.<\/p>\n\n\n\n<p>Since money transactions take place, it\u2019s necessary to provide locker facilities.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Constraints_on_advertisement\"><\/span><strong>Constraints on advertisement<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Unlike others, Nidhi Companies cannot advertise for depositing schemes. However, it can do so among its members only.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cannot_enter_into_an_agreement\"><\/span><strong>Cannot enter into an agreement<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Nidhi companies have restrictions on entering into an agreement. They cannot enter into partnership agreements or any big finance projects because these are non-commercial companies that work on the principle of mutuality.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Constraints_on_pledging_assets\"><\/span><strong>Constraints on pledging assets<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Nidhi Companies can\u2019t pledge assets or raise loans for any other entity or bank because the money belongs to members.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_importance_of_registering_a_Nidhi_Company\"><\/span>What is the importance of registering a Nidhi Company?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><em>Typically there are three valid reasons for registering a Nidhi company.<\/em><\/p>\n\n\n\n<ol><li>Registration of a Nidhi company gives the entity an individual legal existence. In other words it means that the company can acquire assets in the said name, purchase or sell assets as well as take loan on its name. Legally it can file a case against any other entity; similarly have a case registered against its name too.<\/li><li>Funds are available for mutual benefit and are lent at much lower interest rates compared to other lending institutions in the market.<\/li><li>The other reason for <a href=\"https:\/\/swaritadvisors.com\/nidhi-company-registration\"><strong>Nidhi Company<\/strong> <strong>registration<\/strong><\/a> is the benefit that members get in terms of limited liability which is directly proportional to the value of contribution or investment of the member.<\/li><\/ol>\n\n\n\n<div class=\"read\"><p><b>Read, Also:<\/b> <mark><a href=\"https:\/\/swaritadvisors.com\/learning\/advantages-process-of-nidhi-company-registration\/\" target=\"_blank\" rel=\"noopener noreferrer\">Advantages &amp; Process of Nidhi Company Registration<\/a><\/mark>.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>A Nidhi Company is required to be registered under Section 406 of the Companies Act, 2013 and Companies (Nidhi Companies) Rules, 2014. These entities are quite popular in the southern part of the country. The word Nidhi means Treasure in Hindi. The purpose of Nidhi Company Registration Process is based on:- Encouraging the habit of [&hellip;]<\/p>\n","protected":false},"author":7,"featured_media":2776,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[153],"tags":[154,152],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/2775"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=2775"}],"version-history":[{"count":9,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/2775\/revisions"}],"predecessor-version":[{"id":11779,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/2775\/revisions\/11779"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/2776"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=2775"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=2775"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=2775"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}