‘Nidhi’ means a company that aims to increase the sustainability and saving habits of its members, to take deposits, and to lend only to its members for their mutual benefit. Only an individual can be a member of a Nidhi company. A corporation or limited partnership cannot become a member of a Nidhi Company. Hence it cannot take deposits from or lend money to any corporate body. A Nidhi Company also provides loans to its members at a lesser rate comparatively than Banks. The company independently still must adhere with the rules and regulations set by the Central Government for regulation of such companies.
Basic Conditions For Incorporation Of A Nidhi Company
There are some basic conditions for incorporation of a Nidhi company, which are as follows:
- Can only act as a Public Company: The Nidhi Co. that has been incorporated should only act as a Public Company.
- Cannot issue Preference Shares: Preference shares cannot be issued by any Nidhi company to its members at any condition.
- Paid-up Share Capital: Every Nidhi company need to have a paid-up equity share capital for the company, of the amount of Rs. 500000 (five lakhs only).
- Inclusions in MOA: Every Nidhi company should include objects in its MOA other that these objects of receiving deposits from and lending money to its members only for mutual benefit.
- Company Name: All Nidhi companies should end its company name with Nidhi Ltd. Only.