About Nidhi Company

The feature that differentiates Nidhi Company from other companies, NBFCs etc. is that “Nidhi” deals with “deposits from” and “loans to” it’s members (shareholders) only, and works for the mutual benefits of it’s members. Accordingly, certain exemptions have been provided to these companies in respect of annual compliances and taxation.

Nidhi Companies in India are formed, governed, and regulated by Section 406 of the new Indian Companies Act of 2013, the Companies (Nidhi Companies) Rules of 2014, and the Chapter XXVI of the Companies Rules, 2014.

The objective of incorporating a Nidhi Company is to encourage savings amongst it’s members. And To fulfill this objective of cultivating the habit of saving amongst it’s members. Nidhi companies are allowed to take a deposit from and lend to the members only. In other words, the funds contributed to a Nidhi company come only from it’s members (shareholders) and are to be used only by the shareholders of the Nidhi Company. The name “Nidhi” in Nidhi Company means “treasure” and it originates from the Hindi vocabulary.

Nidhi Company is a certain category of NBFC. Though not directly regulated by the RBI, still RBI has powers to issue directives for them related to their deposit acceptance activities. Moreover, because these “Nidhis” deal with their shareholder-members only, they have been exempted from the core provisions of the RBI Act and other directions applicable to NBFCs. Therefore, Nidhi Company is an ideal legal entity to take a deposit from and lend to a specific group of people.

Better image and credibility in Market

Private limited company is popular and well known business structure. Corporate Customers, Vendors and Govt. Agencies prefer to deal with Private Limited Company instead of proprietorship or normal partnerships.

Easy to raise funds and loans

Pvt. Ltd. company enjoys wide options to raise funds through bank loans, Angel Investors, Venture Capitalists, in comparison to LLPs and OPCs.

Favorite Business structure for Investors

Investors love to invest in Private Limited companies as it is well structured and less strings attached. Most important it is very easy to exit from a private limited company.

Easy to attract Employees

For startups putting together a team and keeping them for long time is a challenge, due to confidence attached to private limited structure, it is easy to hire people as well as motivate them with corporate designations and stock options.

Easy to Sell

Private Ltd. is easy to sell, very less documentation and cost is involved in selling a Pvt. Ltd. company.