All about Nidhi Companies

1. Meaning of Nidhi Companies

Nidhi Company also called the ‘Mutual benefit society’

These kind of companies mostly found in the  southern part of the Country

2. Objects of the Nidhi Companies

There are following objects of the Nidhi Companies-

i. To lend and borrow money to the members, for the purpose of their mutual benefits.

ii. To Cultivate the habits of savings among the members.

3. Meaning of Nidhi Company as per law

Nidhi or Mutual Benefit Society means a Company which notified as Nidhi or Mutual Benefit society by the Central Government under this Act or in previous Company Law i.e Section 620A of the Companies Act, 1956.

4. Classification head

As mentioned above that the main object of Nidhi Company is mutual benefits of the Members i.e borrowing and lending of Funds, Hence its classified as non banking financial Company (NBFC).

5. Eligibility  for incorporation

1. Nidhi Company shall be Public Company.

2. A Nidhi Company shall have a Min. paid up equity share Capital of 5,00,000.

3. No Nidhi shall issue preference shares.

4. If  Nidhi company already issue the preference share before Commencement of this Act, such preference shares shall be redeemed in accordance with the terms of issue of such shares

5. Every ‘Nidhi’ shall have the last words “Nidhi Limited” as part of its name.

6. No Nidhi shall any objects in its Memorandum of Association other than the-

a. The object of cultivating the habit of thrift and savings amongst its members,

b. receiving deposits from lending to, its members only, for their mutual benefit.

6. Minimum No. of Members

200 Members

7. Net owned funds

10,00,000 or more

8. Unencumbered term deposit

Not less than 10% of the outstanding deposits

9. Net owned fund to deposit Ratio

Not more than 1:20

10. Filling of Return of statutory Compliances to ROC

Within 90 days from the closer of 1st Financial Year after incorporation, or in second financial year, Nidhi shall file a return of statutory compliance in Form NDH-1 with ROC duly certified by the Practicing Professional.

11. Time period to fulfill the Parameters of points 6, 7, 8, 9

With a period of One year

12. If Nidhi failed to fulfill the parameters within the time period

It shall within 30 days from the close of the 1st financial year, apply to RD in form NDH-2 along with such fees as may be prescribed under the rules for extension of time;

RD may consider the application and pass order within 30 days of receipt of application.

RD may extend the period upto 1 year from the receipt of application.

13. Restriction on the Activities which the Nidhi shall not perform

1. Carry on business of acquisition of securities, hire purchase finance, Insurance, Leasing finance, hire purchase finance, chit fund

2. Issue of preference share

3. Issue of debentures or debt instruments,

4. Open any current account with its members

5. Acquire any other company

6. carry on any other business other than business of borrowing or lending in its own name

7. Deals in deposits;

8. enter into partnership agreements in its borrowing or lending activities, etc

14. Share Capital of Nidhi Company

1. Nidhi company shall  issued share of nominal value of not less than Rs. 10 each.

2. No Service charge shall be levied for issue of shares

3. Every Nidhi shall allot to each deposit holder at least a minimum of 10 equity shares of Rs. 10

15. Membership in Nidhi

1. A Nidhi shall not admit a body corporate or trust as a member.

2. every Nidhi shall ensure that its membership is not reduced to less than 200  members at any time.

3. A minor shall not be admitted as a member of Nidhi:

Provided that deposits may be accepted in the name of a minor, if they are made by the natural or legal guardian who is a member of Nidhi.

16. Branches of Nidhi

1. If a Nidhi has earned net profit after tax continuously during the preceding 3 F.Y then it may open branches.

2. A Nidhi can open up to 3 branches in a district,

3. It can only open the branches, deposit centre only in the state in which the registered office of the Nidhi Company is situated.

4. No Nidhi company shall open its branches unless it financial statements and annual returns are filed with ROC in form NDH-3

17. Closure of branch

Conditions to be follow before closure-

1. An advertisement in a newspaper in vernacular language of the district where it carries on business at least 30 days prior to such closure,

2. Gives an intimation to ROC within 30 days of  closure

18. Half yearly return to be filed with ROC

Nidhi company shall file in Form NDH-3 with in 30 days from the conclusion of each half year, a half yearly return duly certified by the Practicing Professional.

19. Declaration of Nidhi by entities

The Central Goverrrment, on receipt of application of a public company for declaring it as Nidhi and on being satisfied that the company meets the requirements under these  rules, shall notify the company as a Nidhi in the official Gazette:

Provided that a Nidhi incorporated under the Act on or after the commencement of the Nidhi (Amendment) Rules, 2019 shall file Form NDH-4 within sixty days from the date of expiry of :-

(a) one year from the date of its incorporation or

(b) the period up to which extension of time has been granted by the Regional Director under sub-rule (3) of rule 5:

Provided further that nothing in the first proviso shall prevent a Nidhi from filing  Form NDH-4 before the period referred therein:

Provided also that that in case a company does not comply with the requirements of this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment).]

20. Compliance for nidhi company incorporated before the commencement of Nidhi (Amendments) Rules 2019

They shall also get itself declared as such in accordance with rule 3A within a period of one year from the date of its incorporation or within a period of  9 Months  from the date of commencement of Nidhi (Amendment) Rules, 2019, whichever is later:

Provided that in case a company does not comply with the requirements of this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment).]

21. Compliance for nidhi company incorporated under previous Companies Act

Every Nidhi companies incorporated under previous Companies Act shall file Form NDH-4 for updating its status:

Provided that no fees shall be charged under this rule for filing Form NDH-4 in case it is filed within  9 Months  of the commencement of Nidhi (Amendment) Rules, 2019:

Provided further that, in case a company does not comply with the requirements of this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of share capital) and Form PAS-3 (Return of Allotment).

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December 2020