Nidhi (Amendment) Rules, 2022-Fresh Legal Web Spinned For Nidhi Companies

With the advent of Nidhi (Amendment) Rules, 2022 made effective from 19th April, 2022, yet another set of new legal compliances have been imposed on Nidhi Companies by the Ministry of Corporate Affairs ( MCA ) in wake of the rising frauds and mis-deeds of many of such Companies.

SYNOPSIS OF THE NEW RULES IMPOSED

1. Under the regime of the erstwhile Companies Act, 1956, Nidhi Companies had to get themselves notified before doing any business. However, the absence of such a provision in the new Companies Act, 2013, saw a sudden rise in the incorporation of Nidhi Companies.

But with the advent of the new Rules henceforth, it has been made mandatory for all new to be incorporated Public  Companies to get themselves notified as Nidhi within a period of 120 days calculated from the incorporation date by filing NDH4 wherein criteria of :

1. Minimum 200 members is achieved.

2. Net Owned Fund ( NOF ) is Rs. 20 lakhs or more.

3. “ Fit and proper “ criteria is met by all the Directors and Promoters of the Company.

2. The Central Government shall communicate their approval/ dissent on NDH4 within 45 days from the date of filing the said form. However, if no decision is taken by the Central Government, after the expiry of 45 days, it would be deemed as approved.

3. The Central Government on being satisfied that the particular Company meets all regulatory regime, shall declare the name of such Company in the Official Gazzette.

4. On approval of Nidhi or Mutual Benefit Company status , the concerned Company will file an intimation about the same with concerned ROC in Form 20A.

5. It is evident that such public Companies desirous of “Nidhi “ status . cannot start with their commercial operations until the approval is granted.

6. If the requisite regulatory compliances have not been met, the said Company would not be allowed to file form SH7 and PAS3

7. The existing NOF limits have been raised from Rs. 10 lakh to RS. 20 lakh.

For the existing Nidhi Companies, a transition period of 18 months is provided from the date of notification ie 19th April 2022 to achieve the same.

Th8. e new to be incorporated Public Companies desirous of “ Nidhi “ status ( hereinafter referred to as “ Potential Nidhi “ ) will now be incorporated with a minimum Paid Up Capital of 10 lakh.

For the existing Nidhi Companies, a transition period of 18 months is provided from the date of notification ie 19th April 2022 to achieve the same.

9. In the general prohibitions as enumerated in Rule 6 of the Nidhi Rules, the following clause has been added:

  • Raise loans from Banks or Financial Institutions or any other source for the purpose of advancing loans to Nidhi members.

The general restriction subsisting has been substituted with  :

  • Acquire or purchase securities of any other Company or control the composition of the Board of Directors of any other Company in any manner whatsoever or enter into any arrangement for the change of its management.

Thus, the special resolution with prior approval of the Authority for the acquisition or control has been done away with.

10. The Nidhi Companies or Potential Nidhi Companies which have not complied with the Rules or where the NDH4 submitted has been rejected by the Central Government , shall not raise deposits and/or advance loans to its members, either from the :

  • date of non compliance or
  • date of commencement of these Rules, ie 19th April 2022 or
  • date of rejection of NDH4

whichever is later.

11. If such Companies accept deposits even after the aforementioned date, such deposits accepted would be treated as “ Deposits “ under Chapter V of the Companies Act, 2013.

12. In case of transfer of Shares, a condition is imposed that subject to the minimum requirement of holding Shares, the member shall not transfer exceeding 50 % of his holding during the subsisting tenure of loan or deposit.

13. The entire sub rule 6 of Rule 10 which deals with closure of branches has been replaced. Under the new Rule, the branch office can be closed down where:

1. The proposal with detailed plan of how the existing deposits will be repaid and the existing loans will be recovered, has been duly approved by the Board members and

2. Prior approval of the Regional Director is taken at least 60 days before the closure date by filing for NDH2,  where the Regional Director will consider the application and pass necessary orders within 30 days from the date of filing NDH2

3. Where approval is granted,

  • the Company shall intimate its members via newspaper edition in vernacular language about such closure at least 30 days before the closure of the branch office and
  • the Company shall display a notice of closure at all conspicuous places in its offices for at least 30 days from the date of newspaper publication
  • give an intimation of closure of branch office to the concerned Registrar by filing NDH2 within 30 days from the date of closure.

Fresh Legal Web Spinned For Nidhi Companies

14. Where Nidhi Companies having any place of operation not described as registered or branch office, needs to be compulsorily closed down within 6 months from the commencement of these Rules and such intimation needs to be filed with the concerned Registrar in NDH2.

15. The words “ silver “ has been added wherever the word “ gold “ appears.

16. In case of joint shareholding, loan shall be provided to the first named .

17. The maximum cap of 25% has been provided for declaration of dividend in a financial year .

18. The words’ collection centres or offices or deposit centres or by whatever name called “ has been deleted.

19. In Rule 10 (3) and Rule 14 the words “ with the approval of Regional Director “ has been replaced with “ filing of Form NDH2 with necessary fees applicable “

20. Certain changes in Form NDH2 and NDH3 and NDH4 has been made and a new form NDH5 ( for publication of advertisement for closure of branch office ) has been introduced.

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