Nidhi Company

WHAT IS A NIDHI COMPANY?

Nidhi Company is one of the categories of Non-Banking Financial Company (NBFC) which does not require any Reserve Bank of India (RBI) license. This Company works through its members. It can accept deposits and lends loans to its members only.

The companies doing Nidhi business, viz. borrowing from members and lending to members only, are known under different names such as Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds, and Mutual Benefit Company. Nidhis are more popular in South India and are highly localized single office institutions.

It is formed to increase the habit of savings only for mutual benefit among its member only. The main goal of funding for the This Company is the contribution of the members. The registration of Nidhi Company is very simple and less complicated. It has been more popular in the southern part of India.

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ADVANTAGES OF NIDHI COMPANY

Easy of Formation

Unlike other NBFCs, Nidhis don’t have to obtain a license from RBI. They just have to incorporate themselves as a public company with the MCA with the required capital as per Nidhi Rules 2014.

Lower Rate of Credit

The loans given to the members are at a lower rate of interest than the market rate. This brings greater savings to the members.

Separate Legal entity

A Nidhi Company is a legal entity and a juristic person established under the Act. Therefore, a Nidhi company has wide legal capacity and can own property.

Business Continuity

A Nidhi company has ‘perpetual succession’, that is uninterrupted existence until it is legally dissolved. A Nidhi company is unaffected by the death or other departure of any member.

Limited Liability

Personal assets of the shareholders will not be at risk, in the event of the company facing financial distress. Liability of the shareholder is limited to the unpaid amount on his shareholding.

Channelizing small savings

The main aim of such companies is to promote the habit of saving and thrifts among lower and middle section of the society.

ADVANTAGES OF PARTNERSHIP FIRM

Larger resources

More resources can be procured from all the partners when compared to sole proprietorship.

Easy to form

A partnership firm is easy to form. An oral or written agreement between the partners is all that is needed to start a partnership.

Better Management

Better management of the business can be done as the number of persons managing the business are more.

Ensures secrecy

The statement of accounts of the firm need not be published and this ensures secrecy.

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PRE-REQUISITES FOR INCORPORATION OF NIDHI COMPANY

Benefit of Members

The objective of such a firm would be to imbibe in the members a habit of thrift and saving and the services would only be restricted to its members.

Minimum Required Capital

A minimum capital of Rs. 5,00,000 is required to incorporate a Nidhi Company.This can be increased to any amount (no upper limit).

Submission

Submit the duly filled Form 1, stamped partnership deed and Lease agreement to RoF(Registrar of Firms)

NBFC business

An NBFC company can acquire stocks, shares, debentures & securities from govt. as well as local authority or any other marketable securities.

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