India is known as the land of business structures. With several company frameworks, Nidhi registered the company and also performed a crucial role. A registered Nidhi company functions as a non-banking financial institution (NBFC). Often, these companies are recognized as “Mutual Benefit Funds.” The major aim is to introduce the Nidhi company registration under Indian law structure to improve and encourage a community for savings. Even such companies are also eligible to offer financial support to their community members.

For anyone who is seeking to establish a company to encourage savings, Nidhi company registration can be the best legal structure. In this blog, we will delve into the discussion of the Nidhi company under Indian law. The page further explores, from basic details to the whole company registration online process, everything that you should know. 

What Exactly Is a Nidhi Company Formation?

A Nidhi company is recognized under Section 406. Nidhi Company, which acts as a “non-banking” institution, is governed by the Companies Act, 2013, and Nidhi Rules, 2014. As mentioned, the primary focus was to establish the Nidhi rules to foster the habit of saving among the members and lending money to them. In addition, such companies are regulated by the Ministry of Corporate Affairs (MCA) under the Companies Act. The benefit is that such non-banking financial institutions are not required to secure a license from the Reserve Bank of India (RBI). 

However, the companies that are registered as Nidhi companies are restricted from dealing with the general public. It means borrowing and lending money are limited to its community members. Since traditional banks and other NBFCs engage with the general public, Nidhi companies are prohibited from interacting with them.

Also Read: 4 Golden Rules Every New Nidhi Company Must Follow

The Benefits of Registering a Nidhi Company Under Indian Law

Nidhi registration offers multiple benefits to a company. A detailed look at Nidhi Company’s advantages:

1. No RBI License Required: For the Nidhi company formation, there is no need to obtain a license from the Reserve Bank of India (RBI). The restriction on obtaining the license from the RBI made the registration process more seamless and flexible. 

2. Easy and cost-effective Formation: As compared to other company registrations, the legal structure of a Nidhi company is simple and cost-effective. The individuals who are seeking to build a financial institution for their community members make its process more accessible. 

3. Limited Liability Protection: In a Pvt Ltd company, the personal assets of directors are protected from debts or financial risks. Similarly, the legal framework of Nidhi company rules gives a transparent structure that protects members’ personal wealth from sudden financial losses or debts.

3. Foster Savings: The primary aim was to establish the Nidhi company to encourage people to save. Promoting the mode of savings is the way to prepare them financially for the future. For the members, the Nidhi company acts as a mutual financial assistance. 

4. Lower Risk: In the Nidhi company, the members can obtain the loans they need. It eliminates the need for several forms of security. 

5. Professional Management: Such companies are only formed by people who have experience in the relevant field or are qualified for financial operations. 

6. Perpetual Succession: The existence of the Nidhi company won’t be affected even if a community member leaves or is joined by a new individual. 

What are the eligibility requirements for Nidhi Company Registration under Indian law?

Before starting the journey for the Nidhi company formation, the individual is first required to familiarize themselves with its eligibility. The eligibility requirements are:

Minimum Members

The Nidhi company must be registered as a public company, including seven members, who are required during its incorporation. 

Capital Share

For the company operations, the individuals must have to provide the paid-up equity share capital of Rs 5 lakh. The capital invested in the company serves as the foundation, used during company activities.  

Minimum Directors

A Nidhi company is required to have at least three directors during its incorporation. Moreover, individuals who wish to serve as directors must also be members of the Nidhi company.

“Nidhi Limited” Suffix

It is mandatory to use “Nidhi Limited” in the Nidhi company name. The suffix determines the identity and nature of the company. 

Net Owned Funds (NOF)

A Nidhi company is required to possess funds amounting to approximately Rs 10 lakh within one year of its establishment.

Legal Compliance

The registered Nidhi company must align with the rules and regulations of the Nidhi Rules, 2014. 

Also Read: Why Wait? Register Your Nidhi Company Online with 20% OFF 

Key Considerations and Challenges of the Nidhi Company Process

Understanding the challenges of Nidhi formation is as important as understanding its importance. Before online Nidhi company registration, be aware of these challenges. 

Strict Adherence to Nidhi RulesThe Nidhi Rules, 2014, serve as the most recognized and significant framework. Non-compliance with these rules can lead your Nidhi business to serious consequences. Therefore, it is vital to go through the authority guidelines. 
Member ManagementTo grow a Nidhi company, a strong connection between the members of a community is crucial. The whole operation of such a non-banking company depends on its members. 
Capital AdequacyTo meet the Net Owned Funds (NOF), the initial capital must be sufficient. It is also crucial to manage the operations. 
Professional GuidanceTo make the process simple and more approachable, seek support and guidance from legal consultants. An expert will stay and update you throughout the company registration online process. The guidance of an expert is instrumental in reducing legal risks and making the process more seamless.

Conclusion | Online Nidhi Company Registration

The Nidhi company registration under Indian law provides numerous benefits to an individual or a group that wants to focus on savings. These non-banking financial institutions further foster mutual support within a community. For those who are seeking to operate in the financial sector, the Nidhi Limited registration can be the best choice. Navigate the registration process with professional guidance. Overall, the Nidhi company process requires detailed requirements and attention. Commence your Nidhi company registration process with our company registration online specialists. We will support you till the end and turn your dreams into reality.