LLP Annual & ROC Compliance

What is Nidhi Company?

A Nidhi Company in India is a type of Non-Banking Financial Company (NBFC) that primarily focuses on helping its members by lending and borrowing money among themselves. Its main goal is to encourage members to save money and offer loans to them at low-interest rates. A Nidhi Company works for the mutual benefit of its members and is not allowed to accept deposits from or give loans to people who are not members.

Legal and Regulatory Framework

• Nidhi Rules, 2014: These rules govern membership limits, deposits, and loans within the company.
• Companies Act, 2013: Nidhi Companies are registered under this act, which outlines their formation and operation rules.
• Ministry of Corporate Affairs (MCA): Regulates Nidhi Companies and ensures compliance with statutory requirements.
• Reserve Bank of India (RBI): Exempts Nidhi Companies from most stringent provisions applicable to NBFCs, though certain restrictions still apply.

Reasons to Choose Nidhi Company

• Easy Formation: The registration process is simpler and requires less documentation.
• Low-Cost Registration: More cost-effective compared to other NBFCs.
• Fully Electronic Process: Entire incorporation process is done online.
• Limited Capital Requirement: Can be formed with a paid-up share capital of ₹10 lakhs.
• Minimum Risk of Non-Payment of Loans: Loans are secured by assets like gold or property, reducing non-repayment risks.
• Simpler Compliance: Enjoys relaxed regulations compared to other financial institutions.
• Limited RBI Regulations: Exempt from most stringent RBI regulations, allowing operational flexibility.

Minimum Requirements

• Capital: Minimum equity share capital of ₹5 lakh required; preference shares are not allowed.
• Company Name: Must be unique and include the suffix “Nidhi Limited.”
• Directors: At least 3 directors, with one resident director.
• Registered Office: Must have a local registered office within the country.
• Members: Minimum of 7 members to start and at least 200 members within one year of incorporation.

Restrictions on Nidhi Companies

• Advertising for public deposits.
• Engaging in chit funds, lotteries, or insurance services.
• Providing leasing or hire-purchase financing services.
• Partnering with others for lending and borrowing activities.
• Accepting deposits or lending to non-members.
• Issuing certain types of shares or debt instruments.
• Opening current accounts for members (savings accounts are allowed).
• Lending to or accepting deposits from corporations.
• Paying commissions or fees to attract deposits.
• Engaging in business other than borrowing and lending to members.

Documents Required

• PAN Card, Aadhaar, and address proof (for directors and members).
• Passport-sized photographs of all directors and members.
• Proof of registered office (e.g., electricity bill, rent agreement).
• Digital Signature Certificate (DSC) for directors.

Advantages After Incorporation

• Promotes Saving Habits: Encourages members to save money.
• Low-Cost Loans: Provides loans to members at lower interest rates.
• Limited Liability Protection: Members' liability is limited to their investment.
• Simpler Compliance: Relaxed regulatory requirements compared to other financial companies.
• Perpetual Succession: The company continues despite changes in members or directors.
• No Outside Interference: Operations are limited to members only, with no external involvement.
• No RBI Approval Required: RBI approval is not mandatory for Nidhi Companies.

Compliance Requirements

• NDH-1 Form: Submit list of members within 90 days at the end of each financial year.
• NDH-2 Form: Apply for an extension with MCA if 200 members are not achieved in the first financial year.
• NDH-3 Form: Submit a half-yearly return in addition to NDH-1.
• Annual General Meeting (AGM): Held within 6 months of the financial year-end.
• Annual Returns (Form MGT-7 or MGT-7A): Filed within 60 days of AGM.
• Auditor Appointment (Form ADT-1): Appoint an auditor within 30 days of incorporation, with annual audits required.
• Board Meetings: Minimum of 4 meetings annually.
• Director KYC (Form DIR-3 KYC): Annual KYC for all directors.
• Director’s Report: Prepared and submitted with financial statements in Form AOC-4.
• Financial Statements (Form AOC-4): Filed annually with MCA.
• GST Filings (if applicable): Regular GST return filings (GSTR-1, GSTR-3B).
• Income Tax Filing (ITR-6): Filed annually with the Income Tax Department.
• Statutory Registers: Maintain mandatory registers for members, directors, and loans.