Section 406 of Companies Act, 2013 & Nidhi Rules, 2014

Nidhi Company Registration

Statutory guidance and incorporation advisory for Nidhi Companies under Section 406 of the Companies Act, 2013 and Nidhi Rules, 2014. Comprehensive assistance with SPICe+ filing, MoA/AoA drafting, NDH-4 Central Government declaration, and ongoing statutory compliances.

CA Due Diligence
Official Portal Filing
State Stamp Advisory
Nidhi Company Registration Statutory Advisory
Turnkey Statutory Filing
MCA & Tax Practice
Official Govt of India AuthorityRegistrar of Companies (ROC) & Central Registration Centre (CRC)

MCA V3 Official Portal (Ministry of Corporate Affairs)

The official Government of India portal for Public Limited incorporation (SPICe+), Director Identification Numbers (DIN), and mandatory Nidhi filings (Form NDH-1, NDH-2, NDH-3, and NDH-4 Central Government declaration).

STATUTORY OVERVIEW

What is a Nidhi Company & Statutory Framework

A Nidhi Company is a specialized corporate entity classified under Section 406 of the Companies Act, 2013 and governed under the Nidhi Rules, 2014 (as amended by Nidhi (Amendment) Rules, 2022) by the Ministry of Corporate Affairs (MCA). Incorporated as a Public Limited Company, its sole statutory purpose is cultivating the habit of thrift, frugality, and recurring savings amongst its members, and receiving deposits from, as well as lending to, its members exclusively for their mutual benefit. Although recognized as a Non-Banking Financial Company (NBFC) under Section 45-I(f) of the Reserve Bank of India (RBI) Act, 1934, Nidhi Companies are explicitly exempted from the core registration and credit-reserve mandates of Section 45-IA of the RBI Act because their financial activities are strictly confined to their registered members. At H A V N & COMPANY, our corporate law and regulatory advisory team provides objective, professional support to ensure complete adherence to statutory benchmarks from pre-incorporation checks to NDH filings.

Statutory & Practice Summary • At-A-Glance
ICAI UDIN Authentication Mandate
Governing Framework

Section 406 of Companies Act, 2013 & Nidhi Rules, 2014

Regulatory Authority

Ministry of Corporate Affairs (MCA), Government of India

Professional Assurance

Chartered Accountants Attestation under ICAI Standards & Code of Ethics

DOCUMENTATION MATRIX

Mandatory Documents Checklist

Self-attested scanned copies required
1. Promoters / Partners / Directors KYC
  • ✓Permanent Account Number (PAN) Card of all 7 minimum Promoters/Subscribers and 3 Directors (Mandatory)
  • ✓Identity Proof: Aadhaar Card / Valid Passport / Voter ID / Driving License of each promoter
  • ✓Residential Address Proof: Bank Statement / Electricity Bill / Telephone Bill (less than 2 months old)
  • ✓Class 3 Digital Signature Certificates (DSC) for all 3 proposed Directors and authorized subscribers
  • ✓Passport-sized colour photographs with clear background for all promoters
  • ✓Consent to act as Director in Form DIR-2 and non-conviction affidavit in Form INC-9
2. Registered Office & Premises Proof
  • ✓Principal Place of Business Proof: Latest Electricity Bill / Gas Bill / Water Bill (< 2 months old)
  • ✓Registered Rent Agreement / Lease Deed on appropriate state non-judicial stamp paper
  • ✓Signed No-Objection Certificate (NOC) from the property owner permitting corporate usage
  • ✓Jurisdictional Police Station details for the company's registered office

3. Specific Statutory Declarations & Enclosures

  • •Custom e-MoA (INC-33) with exclusive statutory objects of cultivating thrift and savings among members only
  • •Custom e-AoA (INC-34) incorporating strict Nidhi deposit and loan limitations under Rule 6
  • •Net Owned Funds (NOF) compliance roadmap demonstrating scaling to minimum ₹20 Lakhs within statutory deadlines
PROCEDURAL ROADMAP

Step-by-Step Filing & Approval Process

Structured execution roadmap managed by our Chartered Accountants from pre-filing due diligence to certificate allotment.

01Day 1–2

Name Approval (RUN Form)

Reserving unique name ending with mandatory statutory suffix 'Nidhi Limited' on the MCA V3 portal.

02Day 3–5

SPICe+ Part B & Charter Drafting

Submitting integrated incorporation dossier for 7 members and 3 directors with Class 3 DSC and CA certification.

03Day 5–7

COI & Capital Deposit

Issuance of Certificate of Incorporation (CIN). Opening corporate bank account and filing Form INC-20A within 180 days.

04Within 120 Days

Central Govt Declaration (NDH-4)

Attaining 200 members and ₹20L NOF, then applying for official Central Government Nidhi declaration before taking public deposits.

1. What is a Nidhi Company & Key Statutory Characteristics

Mutual Benefit Structure: Operates strictly for the collective financial welfare of its members. Dealing with, soliciting deposits from, or advancing loans to the general public or non-members is legally prohibited.
Public Limited Corporate Status: Must be incorporated as a Public Limited Company under the Companies Act, 2013, with the mandatory suffix 'Nidhi Limited' at the end of its registered name.
Exemption from RBI Licensing: Exempted from core RBI NBFC licensing requirements and capital adequacy guidelines under Section 45-IA of the RBI Act, 1934, provided MCA Nidhi Rules are adhered to.
Separate Legal Entity & Limited Liability: Offers independent corporate legal personality, perpetual succession, and limited liability protection to all promoters and shareholders.
Transparent Regulatory Oversight: Governed directly by Chapter XXVI of the Companies Act, 2013, the Nidhi Rules, 2014, and subsequent MCA amendments through mandatory digital filings.

A Nidhi Company operates on the foundational principle of mutuality ('mutual benefit society'). It bridges localized financial accessibility by allowing a defined group of members to pool their savings and access micro-credit when needed. Key statutory characteristics under Indian company law include:

2. Purpose and Core Objectives of a Nidhi Company

Cultivating the Habit of Thrift: Promotes systematic savings, recurring deposits, and financial discipline among members, small business operators, and local community groups.
Accessible Member Credit: Enables members to obtain secured loans quickly at regulated, reasonable interest rates without the cumbersome procedural hurdles of traditional banking institutions.
Promoting Financial Inclusion: Bridges the credit gap in semi-urban and rural areas by mobilizing small savings and reinvesting them within the community.
Secured Lending Safeguards: Lending is strictly collateralized against gold, silver, fixed deposit receipts, National Savings Certificates (NSC), or unencumbered immovable property, mitigating default risks.
Mutual Wealth Creation: Financial surplus generated through lending is retained within the company to strengthen Net Owned Funds (NOF) and provide reasonable dividend returns to members.

The statutory purpose of a Nidhi Company is clearly articulated in Section 406(1) of the Companies Act, 2013. Nidhi Companies serve an essential role in fostering financial discipline and mutual credit assistance:

3. Mandatory Pre-Requisites & Eligibility for Incorporation

Minimum Membership & Directorate

Statutory Threshold

A Nidhi Company must be established as a public limited company from inception:

  • •Minimum of 7 members (subscribers/shareholders).
  • •Minimum of 3 directors (at least one must be a resident of India).
  • •Directors must have valid Director Identification Numbers (DIN) and Class 3 Digital Signature Certificates (DSC).

Minimum Paid-Up Equity Capital

2022 Amendment Mandate

As per the Nidhi (Amendment) Rules, 2022, the minimum paid-up equity capital threshold has been revised:

  • •Minimum paid-up equity share capital of ₹10,00,000 (Rupees Ten Lakhs) fully paid in cash.
  • •Preference shares are strictly prohibited; only equity shares may be issued.
  • •Every member must hold a minimum statutory face value of equity shares (minimum ₹100 or 10 equity shares of ₹10 each) to open a savings or deposit account.

Name Guidelines & Registered Office

MCA Naming Norms

The proposed corporate name must strictly comply with Rule 8 of the Companies (Incorporation) Rules, 2014:

  • •The name must explicitly end with the words 'Nidhi Limited'.
  • •The name must be unique and not conflict with registered trademarks or existing corporate entities.
  • •Valid registered office address proof in India with utility documentation and a No Objection Certificate (NOC) from the property owner.

To incorporate a Nidhi Company on the MCA V3 portal, the promoters must satisfy the following statutory threshold requirements under the Companies Act, 2013 and Nidhi (Amendment) Rules, 2022:

4. Step-by-Step Procedure for Nidhi Company Registration (MCA V3)

Step 1: Digital Signatures & Name Reservation (SPICe+ Part A)

Step 1 • RUN Web Form

Reservation of the proposed corporate name via MCA Central Registration Centre (CRC):

  • •Obtain Class-3 Digital Signature Certificates (DSC) for all proposed directors and subscribers.
  • •Submit up to 2 proposed names in order of preference with the suffix 'Nidhi Limited'.
  • •Provide primary business objects indicating mutual benefit and thrift under Section 406.
  • •Approved name is reserved for a validity period of 20 days for submitting incorporation documents.

Step 2: Integrated Incorporation Web-Form (SPICe+ Part B / INC-32)

Step 2 • INC-32 Web Form

Unified digital application capturing corporate, capital, director, and statutory details:

  • •Details of authorized capital (minimum ₹10 Lakhs) and subscribed capital.
  • •Allotment of DIN for up to 3 directors who do not currently hold a DIN.
  • •Promoter and subscriber profile submission, including PAN, Aadhaar, and address verifications.
  • •Integrated automatic applications for PAN (Income Tax) and TAN (Tax Deduction Account Number).

Step 3: Electronic Constitutional Charters (e-MoA & e-AoA)

Step 3 • INC-33 & INC-34

Preparation and digital execution of the Memorandum and Articles of Association:

  • •Form INC-33 (e-MoA): Object clause strictly drafted to reflect the statutory purpose of thrift and mutual assistance under Section 406.
  • •Form INC-34 (e-AoA): Internal governance regulations specifying membership admission, share qualification, deposit limits, interest ceilings, and board meetings.
  • •Digitally signed by all 7 subscribers using their Class 3 DSCs.

Step 4: Linked Compliance Forms & CRC Verification

Step 4 • AGILE-PRO-S

Mandatory linked digital filings executed concurrently with SPICe+ Part B:

  • •AGILE-PRO-S (INC-35): Facilitates registration for EPFO, ESIC, Professional Tax, and bank account opening.
  • •Form INC-9: Electronic declaration and affidavit by subscribers and first directors.
  • •Form DIR-2: Written consent of proposed directors to act in accordance with the Companies Act.
  • •Professional Certification: Form SPICe+ must be digitally verified and certified by a practicing Chartered Accountant (CA), Company Secretary (CS), or Cost Accountant (CMA).

Step 5: Issuance of Certificate of Incorporation (COI)

Step 5 • Final ROC Approval

Issuance of statutory corporate credentials by the Registrar of Companies (ROC):

  • •Upon successful verification by the Central Registration Centre (CRC), the ROC issues the Certificate of Incorporation (COI).
  • •Allocation of unique Corporate Identification Number (CIN), PAN, and TAN.
  • •The company is officially recognized as a legal corporate entity under Indian law.

Incorporation of a Nidhi Company is executed through the integrated SPICe+ (INC-32) portal on MCA V3. Below is the detailed procedural workflow:

5. Mandatory Post-Incorporation Compliances & Central Government Declaration

Form INC-20A: Declaration of Commencement of Business

Within 180 Days

Mandatory declaration filed under Section 10A of the Companies Act, 2013:

  • •Filed within 180 days from the date of incorporation.
  • •Requires confirmation that all subscribers have deposited the agreed value of shares into the company's bank account.
  • •Physical verification proof of the registered office address.

Form NDH-4: Application for Declaration as a Nidhi Company

Critical Compliance • Rule 3B

Mandatory application to the Central Government for formal notification as a Nidhi Company:

  • •Must be filed within 120 days of incorporation (or within extended statutory timeline).
  • •Requires having at least 200 members and Net Owned Funds (NOF) of ₹20,00,000 (Rupees Twenty Lakhs) or more.
  • •No Nidhi Company can commence deposit acceptance or lending activities before obtaining Central Government approval via Form NDH-4.

Form NDH-1: Annual Return of Statutory Compliances

Annual Filing • Within 90 Days

Filing of annual compliance certificate with the Registrar of Companies:

  • •Filed within 90 days from the close of the financial year.
  • •Confirms maintenance of minimum 200 members.
  • •Confirms that Net Owned Funds to deposit ratio does not exceed 1:20.
  • •Must be certified by a practicing Chartered Accountant, Company Secretary, or Cost Accountant.

Form NDH-2 & Form NDH-3: Regulatory Returns

Periodic Reporting

Monitoring and periodic regulatory disclosures:

  • •Form NDH-2: Application submitted to the Regional Director (RD) for an extension of time if member count (200) or NOF ratio (1:20) could not be achieved within the statutory timeframe.
  • •Form NDH-3: Half-yearly return filed within 30 days of the conclusion of each half-year (September 30 and March 31), certified by a practicing Chartered Accountant.

Unencumbered Term Deposits Mandate

Statutory Liquidity Reserve

Mandatory liquidity reserve under Rule 14 of Nidhi Rules, 2014:

  • •Every Nidhi must invest and continue to keep invested in unencumbered term deposits with a Scheduled Commercial Bank or Post Office an amount not less than 10% of total deposits outstanding at the close of business on the last working day of the second preceding month.

Incorporation as a public limited company is only the first phase. Under the Nidhi (Amendment) Rules, 2022, strict ongoing and post-incorporation statutory milestones must be met:

6. Statutory Restrictions & Permitted Operations under Nidhi Rules

Permitted Activities for Members

Allowed Operations

Operations strictly authorized within the registered membership base:

  • •Accepting Fixed Deposits (FD), Recurring Deposits (RD), and Savings Deposits from members.
  • •Granting loans to members against specified security: gold, silver, fixed deposits, Kisan Vikas Patra (KVP), National Savings Certificates, and unencumbered immovable property.
  • •Providing safe deposit locker services to members, where rental income does not exceed 20% of gross income.

Statutory Prohibitions under Rule 6

Strictly Prohibited

Activities that a Nidhi Company is legally barred from undertaking:

  • •Dealing with or soliciting business from non-members.
  • •Carrying on the business of chit funds, hire-purchase, leasing finance, or insurance.
  • •Issuing preference shares, debentures, or any debt instruments to the public.
  • •Acquiring securities or controlling stakes in other corporate bodies.
  • •Entering into partnership arrangements in borrowing or lending activities.
  • •Paying any commission, brokerage, or incentive for soliciting deposits or advancing credit.

To protect member funds and preserve the non-commercial mutuality status, Nidhi Companies are governed by explicit statutory boundaries:

7. Regulatory Advisory Role of Chartered Accountants (ICAI Code of Ethics Aligned)

Statutory Due Diligence: Verification of identity, KYC credentials, residential proof, and capital adequacy of promoters and proposed directors.
Statutory Charter Drafting: Preparation of legally compliant e-MoA (INC-33) and e-AoA (INC-34) tailored to the statutory objects permitted under Section 406.
Procedural Filing Assistance: Structuring and filing SPICe+ Part A, Part B, and AGILE-PRO-S web-forms on the MCA V3 portal.
NDH Form Certifications: Independent review and certification of statutory forms (NDH-1, NDH-2, NDH-3, NDH-4) as mandated by the Ministry of Corporate Affairs.
Statutory Audit & Books of Accounts: Setting up statutory registers, member share ledgers, loan registers, deposit registers, and conducting statutory annual audits under the Companies Act, 2013.
Statutory Annual Filings: Assistance with preparation and filing of annual statutory returns (AOC-4, MGT-7) and financial statements in compliance with MCA benchmarks.

In compliance with the Code of Ethics and Council Guidelines for Website prescribed by the Institute of Chartered Accountants of India (ICAI), our professional assistance is provided on an objective, factual, and regulatory compliance basis:

ONGOING GOVERNANCE

Mandatory Post-Registration Compliances

Failing to complete statutory post-incorporation actions carries steep daily penalties. Our CA firm manages continuous compliance:

Form NDH-4 / Central GovtWithin 120 Days of Inc / Achieving Criteria

Declaration of Nidhi Status (Form NDH-4)

Mandatory Central Government notification declaring the entity as an approved Nidhi Company before accepting deposits.

Form NDH-1 / Annual ReturnWithin 90 Days from Close of FY

Return of Statutory Compliances (Form NDH-1)

Annual statutory return certified by a practicing CA certifying 200+ members and 1:20 NOF to deposit ratio.

Form NDH-3 / Bi-AnnualWithin 30 Days from Close of each Half-Year

Half-Yearly Return (Form NDH-3)

Half-yearly filing reporting member count, deposit balances, and loans disbursed against approved collateral.

Forms AOC-4 & MGT-7Annual / Within 30/60 Days of AGM

Statutory Financial Statements (AOC-4 & MGT-7)

Annual ROC filings containing audited balance sheet, profit and loss statement, and directors' report.

FREQUENTLY ASKED QUESTIONS

Statutory FAQs & Practical Guidance

Frequently asked questions and procedural guidance regarding Nidhi Company Registration.

Can a Nidhi Company accept deposits from or give loans to non-members?
No. Under Section 406 of the Companies Act, 2013 and Rule 6 of the Nidhi Rules, 2014, a Nidhi Company is strictly prohibited from accepting deposits from, lending to, or doing any financial business with non-members or the general public. All transactions must be strictly with registered shareholders.
What is Form NDH-4 and why is it mandatory before taking deposits?
Under the amended Nidhi Rules, every newly incorporated Nidhi Company must file Form NDH-4 with the Central Government (Ministry of Corporate Affairs) to obtain official declaration as a Nidhi Company. An entity cannot commence deposit mobilization or micro-lending until NDH-4 approval is granted by the Central Government.
What types of collateral can a Nidhi Company lend against?
Under Rule 15 of the Nidhi Rules, 2014, loans can only be granted against approved collateral: (1) Gold, silver, and jewelry; (2) Immovable property (unencumbered land/building); (3) Fixed deposit receipts, National Savings Certificates (NSC), or insurance policies.
What is the Net Owned Funds (NOF) requirement for a Nidhi Company?
Under the Nidhi (Amendment) Rules, 2022, a Nidhi Company must possess minimum Net Owned Funds (NOF) of ₹20 Lakhs (or more) and maintain a ratio of Net Owned Funds to deposits of not more than 1:20 at all times.
STATUTORY ADVISORY DESK • PRACTICE INQUIRIES

Statutory Inquiries & Practice Advisory

In strict conformity with ICAI Council Guidelines No. 1-CA(7)/06/2004, professional engagements for Nidhi Company Registration are accepted following formal conflict verification and statutory documentation. Contact our registered practice offices for procedural guidance.