Nidhi Company is also known as Permanent Fund, Benefit Funds and Mutual Benefit Company. It belong to the Non Banking Financial sector and recognized under section 406 of the Nidhi Company Act 2013, the reason behind choosing Nidhi Company needs minimum 7 members with 5 lakhs capital for incorporation that is very low compared to start of any other from of NBFC of Banks and limitations of Nidhi Company is it can borrow and lend money only between its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit.
Nidhi Company is one of the classifications of Non-Banking Fiancial Company (NBFC) which does not require any Reserve Bank of India (RBI) permit. Nidhi Company works though its individuals.
It is registered as a public company and should have “Nidhi Limited” as the last words of its name.
Nurturing the habit of saving a money.
Lending money to and receiving deposits from its members only, for their common benefit.
Minimum of seven members is required to start a Nidhi Company out of which three members must be the directors of the company.
Minimum paid up share capital required for Nidhi company registration is only five lakh rupees. Every Company must be registered as a Nidhi. Compulsorily shall have last words as 'Nidhi Limited' as parts of its name. The company should have minimum 3 directors and 7 members. The first director of the company can be the member in the company.
1. Minimum of 200 members (within 1 year)
2. Net owned fund of Rs. 10,00,000 (within 1 year)
3. Unencumbered term deposit not less than 10% of o/s deposits.
4. Compulsorily filing of Annual Accounts, Audit and Tax returns.
If Nidhi Company satisfies all above conditions, it should file NDH-1 along with prescribed fees within 90 days from the end of the first financial year after incorporation. The form must be duly certified by practicing CA/ CS/ CWA.
Extension of another financial year can be availed upon submission of NDH-2 to the Regional Director within 30 days from the end of the first financial year.
If even after the second financial year, it doesn’t fulfill the requirements, it can’t accept deposits till it complies with the provisions, and also penalty will be imposed.