Nidhi company

Section 406 of Companies Act 2013 and Companies (Nidhi Companies) Rules, 2014 govern Nidhi Companies.

It is incorporated with following objectives:

1. to promote savings and thrift among its member
2. To lend Loans and receive money for the purpose from its members.
3. Since Nidhis come under NBFCs, the RBI is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, since Nidhis deal with their shareholder-members only, RBI has exempted such notified firms from the core provisions of the RBI Act and other directions applicable to NBFCs.

Requirements for Nidhi Company

1. A Nidhi company has to be a public company;
2. It must have a minimum paid up equity share capital of Rs.5,00,000/-;
3. No issuances of preference shares. 
4. 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;
5. The name must have Nidhi Limited at the end.

6. Requires atleast seven members to start with. Also requires three directors initially.

7. Every promoter or director shall need a copy of PAN card, ID proof and address proof to apply for Nidhi Company in India. It takes around 15 to 20 days to get Nidhi Company registered in India. 

Requirements after Incorporation

1. Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has a minimum membership of 200 people.
2. It must also ensure that net owned funds are Rs. 10,00,000/- or more

Nidhi Company can not Carry on the following business
a. Chit Fund,
b. Hire Purchase Finance.
c. Leasing Finance.

An interesting fact about Nidhi Companies: These companies are more popular in South India, and 80% of Nidhi companies are located in Tamil Nadu.