What is a Nidhi Company?
A NIDHI COMPANY, is one that belongs to the non-banking Indian finance sector and is recognized under section 406 of the Companies Act, 2013.Their core business is borrowing and lending money between their members. They are also known as Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Company. They are regulated by Ministry of Corporate Affairs. Reserve Bank of India is empowered to issue directions to them in matters relating to their deposit acceptance activities. However, in recognition of the fact that these companies deal with their shareholder-members only.
Nidhi companies existed even prior to the existence of companies Act 1913. The basic concept of Nidhi is "Principle of Mutuality" ("Paraspara Sahayata"). Thus they function for the common benefit advantage of all their members/share holders.
Why Nidhi Company?
- Easy Financial Transfers
- Less Capital
- No Mandatory Requirements
- Tax Benefits
Frequently Asked Questions
- How many directors can be there in a Nidhi company?
The minimum number of directors required to start a Nidhi Company is 3 and the maximum number of the directors is 15.
- What is the minimum capital required?
In order to start a Nidhi Company, a minimum amount of INR 5,00,000 is required as capital. There is no limit as far as the maximum capital is concerned.
- When can a company qualify as a Nidhi Company?
A public company is qualified to become a Nidhi Company if it fulfills certain criteria within one year of its commencement, like minimum 200 share holders and others.