Nidhi Companies can only accept deposits from and lend to their members, ensuring that all transactions are among a closed group of individuals.

          Members have limited liability, protecting their personal assets from the company’s liabilities.

           Nidhi Companies are prohibited from taking deposits from or lending to non-members, and they cannot engage in external borrowing.

           The company must have a minimum paid-up equity share capital of ₹5 lakhs at the time of incorporation.

           Nidhi Companies are restricted from engaging in activities such as chit funds, insurance, or dealing in securities.

           Nidhi Companies typically provide unsecured loans to members at a relatively low rate of interest, promoting financial inclusion.

           Nidhi Companies foster a habit of savings among members, offering a reliable and organized way to manage personal finances.

           Compared to other NBFCs, Nidhi Companies are easier to form and operate as they are regulated by the MCA and do not require RBI approval.

           Operating within a closed group of members reduces the risk of bad debts, as all transactions are internal.

           Since Nidhi Companies cannot borrow from or lend to external parties, they are insulated from external financial shocks.

           Nidhi Companies can avail of certain tax benefits, making them a cost-effective structure for mutual benefit societies.

           Select a name for the Nidhi Company that complies with the naming guidelines set by the MCA and includes the word “Nidhi” to reflect its purpose.

           Acquire Digital Signature Certificates for all proposed directors for electronic submission of documents.

           Obtain DIN for the proposed directors through the MCA portal.

           Draft the Memorandum of Association (MOA) and Articles of Association (AOA), outlining the company’s objectives, governance structure, and operational rules.

Submit the incorporation application with the ROC, including MOA, AOA, DSCs, DINs, and the relevant forms.

Upon approval, the company will receive a Certificate of Incorporation, enabling it to start operations.

           Apply for a PAN card in the company’s name for tax filing purposes.

           Open a bank account in the company’s name, using the Certificate of Incorporation, PAN card, and proof of registered address.

Within one year of incorporation, the company must meet the following criteria to be classified as a Nidhi Company:

• At least 200 members.

            Register for GST if the company’s turnover exceeds the prescribed limit or if it engages in inter-state trade. Voluntary registration is also an option to avail of input tax credits Register for GST if the company’s turnover exceeds the prescribed limit or if it engages in inter-state trade. Voluntary registration is also an option to avail of input tax credits.

            For small businesses, MSME (Udyam) registration is beneficial to avail of government schemes and benefits.

            If applicable, the company must register for professional tax based on the state regulations.

Nidhi Companies are required to file annual returns and financial statements with the ROC.

The company must maintain proper books of accounts, statutory registers, and minutes of meetings.

Additionally, Nidhi Companies are subject to the restrictions set forth by the MCA, including limitations on issuing preference shares, engaging in speculative activities, and opening branches.

           Consider registering a trademark to protect the company’s name, logo, or brand identity.

            For further credibility, a Nidhi Company can obtain ISO certification to assure its members of the quality of services provided.

            For companies engaging in Corporate Social Responsibility (CSR) activities, registration can be useful for receiving CSR funds from other companies.