Basis<\/strong><\/td>Nidhi Company<\/strong><\/td>Section 8 Micro Finance Company<\/strong><\/td><\/tr>| Governing Law<\/td> | Companies Act + Nidhi Rules<\/td> | Section 8 of Companies Act<\/td><\/tr> | | Nature<\/td> | Mutual Benefit Company<\/td> | Non-profit Company<\/td><\/tr> | | Main Objective<\/td> | Member finance activities<\/td> | Social welfare & financial inclusion<\/td><\/tr> | | Profit Distribution<\/td> | Allowed among members<\/td> | Not allowed<\/td><\/tr> | | Loan Facility<\/td> | Only to members<\/td> | To eligible beneficiaries\/groups<\/td><\/tr> | | Deposit Acceptance<\/td> | Allowed from members<\/td> | Not allowed<\/td><\/tr> | | RBI Registration<\/td> | Exempted<\/td> | Exempted<\/td><\/tr> | | Members Requirement<\/td> | Minimum 7 members<\/td> | Minimum 2 Members<\/td><\/tr> | | Minimum Directors<\/td> | 3 Directors<\/td> | 2 Directors<\/td><\/tr> | | Name Requirement<\/td> | Must use \u201cNidhi Limited\u201d<\/td> | No mandatory suffix<\/td><\/tr> | | Tax Benefits<\/td> | Limited<\/td> | 12A & 80G benefits possible<\/td><\/tr> | | Area of Operation<\/td> | Restricted member network<\/td> | Wider social operations<\/td><\/tr> | | Annual Compliance<\/td> | Mandatory filing of NDH Forms (NDH-1, NDH-3, etc., as applicable) along with annual ROC filings<\/td> | Mandatory annual ROC filings, including forms such as AOC-4 and MGT-7\/MGT-7A, as applicable<\/td><\/tr> | | Profit Motive<\/td> | Commercial mutual benefit<\/td> | Charitable\/social purpose<\/td><\/tr> | | Funding Structure<\/td> | Member deposits<\/td> | Grants, donations, funding support<\/td><\/tr> | | Share Transfer<\/td> | Restricted<\/td> | Controlled as per MOA\/AOA<\/td><\/tr> | | Business Scope<\/td> | Finance among members<\/td> | Micro-credit & welfare activities<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<\/span>Detailed Comparative Analysis<\/strong><\/span><\/h2>\n\n\n\n<\/span>1. Nature of Business<\/strong><\/span><\/h3>\n\n\n\nA Nidhi Company works like a mutual finance institution where members contribute deposits and receive loans. It is a closed financial system restricted to members only.<\/p>\n\n\n\n On the other hand, a Section 8 Micro Finance Company focuses on helping economically weaker sections by offering financial assistance and developmental support.<\/p>\n\n\n\n <\/span>2. Profit Motive<\/strong><\/span><\/h3>\n\n\n\nNidhi Companies operate with a profit motive. The profits earned can be distributed among shareholders in the form of dividends.<\/p>\n\n\n\n In contrast, Section 8 Companies cannot distribute profits among members. Any surplus income must be used only for achieving its objectives.<\/p>\n\n\n\n This is one of the biggest practical differences between both structures.<\/p>\n\n\n\n <\/span>3. Deposit Acceptance<\/strong><\/span><\/h3>\n\n\n\nA Nidhi Company can legally accept deposits from its members subject to Nidhi Rules compliance.<\/p>\n\n\n\n However, a Section 8 Micro Finance Company cannot accept public deposits and does not operate as a deposit-taking institution.<\/p>\n\n\n\n <\/span>4. Lending Activities<\/strong><\/span><\/h3>\n\n\n\nNidhi Companies provide loans only to members and cannot deal with outsiders.<\/p>\n\n\n\n Section 8 Micro Finance Companies may provide micro-credit support to:<\/p>\n\n\n\n | | | |