What Is A Nidhi Company, And What Makes It Unique In Finance?

Understanding Nidhi Companies in India

1. Member-Focused: Nidhi Companies aim for mutual benefit, fostering a culture of saving and thrift among members as their main objective.

2. No External Involvement: Nidhi Companies are limited to lending or borrowing solely with members, and barred from external commercial activities or dealings with institutions.

3. Limited Funding Sources: Nidhi Companies raise funds exclusively from members, refrain from accepting deposits or loans from external parties, and circulate funds within their membership.

4. Membership Structure: Nidhi Company membership is exclusive to individuals, formed by a group aiming to foster savings and thrift habits within the community.

5. Limited Liability: In a Nidhi Company, members have limited liability, being liable only for the remaining unpaid subscription amount up to a nominal value in the event of winding up.

6. Minimum and Maximum Members: Nidhi Companies are required to attain a minimum of 200 members within one year of incorporation, with a maximum limit set at 20 times the number of directors.

7. Minimum Net Owned Funds: These companies are required to maintain a minimum net owned funds (NOF) of Rs. 10 lakhs or more, as prescribed by the regulatory authorities.

8. Regulation and Compliance: Nidhi Companies are regulated by the Ministry of Corporate Affairs (MCA) and are subject to the rules outlined in the Companies Act, 2013, and the Nidhi Rules, 2014.

9. Objectives and Activities: Nidhi Companies engage in mutual borrowing and lending among members, fostering saving practices and utilizing savings within the group for mutual benefit.

10. Perpetual Succession: A Nidhi Company, like other companies, enjoys perpetual succession, unaffected by changes in membership or the death of any member.

11. Distinctive Name: The name of a Nidhi Company is required to include the words "Nidhi Limited," highlighting its unique status as a mutual benefit financial institution.