Compliance for Nidhi Company with New Amendment Rules, 2019

Compliance for Nidhi Company

Definition of Nidhi:-

Every company declared as Nidhi or Mutual Benefit Society under sub-section (1) of Section 406 of the Act”

“Nidhi” means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with the rules made by the Central Government for regulation of such class of companies.’

Nidhi (Amendment) Rules, 2019

[Shall come into force with effect from 15 August, 2019]

Rule 23A:- Compliance with rule 3A by certain Nidhis:-

Declaration of Nidhis vide notification dated 1^st July 2019:-

FORM NDH-4 Form for filing application for declaration as Nidhi Company and for updation of status by Nidhis.

The due date for filing of NDH-4 are as follows:-

Particular	Due date
For every new Nidhi Company – Due date for filing of Form NDH-4 by the Nidhi incorporated under the Act on or after 1st July, 2019	Within 60 days after the expiry of 1 year from the date of its incorporation or the period up to which extension of time has been granted by the Regional Director.
Due date for filing of Form NDH-4 by every existing Nidhi company incorporated before 1st July, 2019	Within a period of 1 year from its date of incorporation OR within a period of 6 months from the date of commencement of Nidhi rules 2019, whichever is later.
Due date for filing of Form NDH-4 by Companies declared as Nidhi under previous Company Law	Within a period of 6 months from the date of commencement of Nidhi (Amendment) Rules, 2019.

In case failure to file form NDH-4, Companies 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).

Compliance:-

There are certain compliance are specified As Annual, Half yearly compliance. [General Circular No.09/2014 dated 25^th April, 2014.]

Attachments	Description
NDH-1 (Yearly)	Within 90 days from the closure of the first financial year after its incorporation and where applicable, from second financial year, Nidhi shall file a return of statutory compliances in Form NDH – 1 along with such fee as prescribed with the Registrar duly Certified by company secretary in practice or a chartered accountant in practice or a cost accountant in practice. E-Form GNL-2 Form for submission of documents with the Registrar.
NDH-2(for extension)	Within 30 days from the close of the first financial year, apply to the Regional Director along with fee specified in Companies (Registration Offices and Fees) Rules, 2014 for extension of time and the Regional Director may consider the application and pass orders within thirty days of receipt of the application. Regional director may extend the time unto 1 One year. E-Form RD-1 Applications made to Regional Director.
NDH-3 (Half yearly)	Within 30 days from the conclusion of each half year duly certified by a company secretary in practice or chartered accountant in practice or cost accountant in practice. E-Form GNL-2 Form for submission of documents with the Registrar.

Annual Filing of Financial Statements and Annual Return by Nidhi Company:-

Form AOC-4: Filing of Financial Statements

Every Nidhi company is required to file its Financial Statements, along with Notice calling General Meeting, Directors Report, Auditors Report and Balance sheet to ROC within 30 days from the date of Annual General Meeting of the Company.

Cash Flow Statement is mandatory for Nidhi Company.

Form MGT-7: Annual Return

Every Nidhi company is required to file its Annual Return along with List of members of Nidhi Company within 60 days from date of Annual General Meeting.

Reporting of Resolutions:

As a Public Limited Company Nidhi Company is required to File Form MGT-14 for Disclosure of Directors interest, Approval of Financial Statements and Directors Report.

Rule 10 Branches [Rules [Chapter XXVI Nidhi Rules, 2014]:-

As concerned to branch Nidhi can open the branch only in the state of registered office. A branch can be opened after the lapse of three years from incorporation and three branches are permitted in the district.

Closure of branch-before closure of branch Nidhi has to comply with following requirement-

It publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least 30 days prior to such closure.

Informing the public about such closure; fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least 30 days from the date on which advertisement was published and

Intimate to the Registrar of Companies within 30 days of such closure.

Rule 15 Loans [Chapter XXVI Nidhi Rules, 2014]:-

The Loan Limit in Nidhi set against deposit made

Deposit made	Loan Amount
2 Crore	2 Lakh
More than 2 Crore Less than 20 Crore	7.5 Lakh
More than 20 crore Less than 50 crore	12 Lakh
50 Crore	15 Lakh

Loans are permitted against following security

1) Gold/Jewellery

2) Fixed Deposit

3) Property

4) Security

5) Insurance Policy

Following type of Loans are not permitted in Nidhi

♦ Personal Loan

♦ Micro Finance small credit

♦ Vehicle Finance

♦ Hire Purchase

The rate of interest to be charge on any loan given by a Nidhi shall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and Interest charged on loan amount is on reducing balance method.

Rule 11 – Acceptance of Deposits by Nidhis [Chapter XXVI Nidhi Rules, 2014]

Ratio of Net Owned Funds to Deposits (as on 31.3. 2013)	Date by which the company has to achieve prescribed ceiling of 1:20
a) More than 1:20 but upto 1:35	By 31.3. 2015
b) More than 1:35 but upto 1:45	By 31.3. 2016
c) More than 1:45	By 31.3. 2017

Rule 13 – Term Related to Deposits [Chapter XXVI Nidhi Rules, 2014]

• Ø Fixed deposits shall be accepted for a minimum period of 6 months and a maximum period of 60 months.
• Ø Recurring deposits- minimum period: 12 months maximum period 60 months

The maximum balance in a savings deposit account at any given time qualifying for interest shall not exceed one lakh rupees at any point of time, and the rate of interest shall not exceed 2% of the rate of interest payable on savings bank account by nationalized banks.

Attachments:-

• Ø Copy of resolution to request for Nidhi status.
• Ø List of members certified by Two Directors
• Ø Auditor Certificate
• Ø Copy of notification issued under previous Company Law. Companies registered after 2014, can attached their Certificate of Incorporation.

Steps to be followed for Annual Return Filing:-

Annual General Meeting Notice:-

Annual General Meeting notice should be published in any one regional newspaper before twenty-one clear days of Annual General Meeting date.

Also, Directors report and financial statements should be circulated to all the Members twenty-one days before Annual General Meeting.

Rule 17 Retirement of Directors:-

The director of the Nidhi shall be a Member of Nidhi and shall hold office for a term up to 10 consecutive years. And shall be eligible for re-appointment only after expiration of 2 years of such cessation and has to comply with Section 152(4) and 164 of the Companies Act, 2013.

Where the Central Government in any case had already extended the tenure of any director, it shall terminate on expiry of such extended tenure.

Rule 19 Appointment of Appointment/ Re- appointment of Auditors:-

No Nidhi shall appoint or re-appoint an individual as auditor for more than one term of five consecutive years.

No Nidhi shall appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years;

Provided that an auditor (whether an individual or an audit firm) shall be eligible for subsequent appointment after the expiration of two years from the completion of his or its term.

Explanation: For the purposes of this proviso:

• Ø In case of an auditor (whether an individual or audit firm), the period for which he or it has been holding office as auditor prior to the commencement of these rules shall be taken into account in calculating the period of five consecutive years or ten consecutive years, as the case may be;
• Ø Appointment includes re-appointment.

Rule 7 Share Capital and Allotment:-

Every Nidhi Company shall issue equity shares of the nominal value of not less than ten rupees each.

No service charge shall be levied for issue of shares.

Every Nidhi shall allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees: It may be noted that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten.

Rule 18 Dividend:-

Under Rule 18 of Nidhi Rules, a Nidhi shall not declare dividend exceeding 25% or such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing and further subject to the following conditions, namely:

• Ø An equal amount is transferred to General Reserve
• Ø There has been no default in repayment of matured deposits and interest
• Ø It has complied with all the rules as applicable to Nidhis.

Rule 22 Auditors Certificate:-

STATUTORY AUDITORS CERTIFICATE

(Pursuant to Rule 22 of the Nidhi Rules, 2014)

This is to certify that, on the basis of books of accounts and other relevant documents verified by us and as per explanations given to us by the management, XXXXXX XXXX NIDHI LIMITED has complied with all the provisions contained in Nidhi Rules-2014 and have not contravened any of

the provisions contained in the said rules.

PLACE: XXXXX DATE: XXXXX

For XXXXXXXXXXX Chartered Accountants

Circular and Notifications:-

Exemptions to Nidhi Company: – Exemptions to Nidhis under section 462 of CA 2013

FORM NDH-4 [Pursuant to section 406 of the Companies Act, 2013 and rule 3A, rule 23A and rule 23B of the Nidhi Rules, 2014]:-

https://taxguru.in/company-law/nidhi-amendment-rules-2019.html

Exemptions from the provisions of RBI Act, 1934:-

https://taxguru.in/rbi/exemptions-provisions-rbi-act-1934.html

References:- MCA – Companies Act E-Book