CS Preetika Chawla
Article explains What Is A Nidhi Company, Basic Conditions For Incorporation As Nidhi Company, Requirements For Minimum Number of Members, Net Owned Fund Etc., General Restrictions on Nidhi Companies, Share Capital And Allotment by Nidhi Companies, Membership of Nidhi Companies, Net Owned Funds to be maintained by Nidhi Companies, Condition on Opening Branches Of Nidhi Companies, Conditions for Acceptance of Deposit by Nidhi Companies, Rate Of Interest on Loan by Nidhi Companies, Rules Relating To Directors of Nidhi Companies, Rules for Deceleration of Dividend by Nidhi Companies, Rules for Appointment Of Auditors by Nidhi Companies, Filing Of Half Yearly Return by Nidhi Companies, Auditor’s Certificate to be furnished by Auditor of Nidhi Companies, Rules for Declaration Of Nidhis, Compliance With Rule 3A By Certain Nidhis, Power of Registrar To Enforce Compliance by Nidhi Companies and Penalty For Non-Compliance of Rules on Nidhi Companies.
‘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.’
1.The Nidhi Co. incorporated shall act as a “Public Company” only.
2. It shall have minimum paid up equity share capital of five lakh rupees.
3. No Nidhi Co. can issue preference shares to its members.
4. Objects in MOA other than the objects of cultivating the habit of thrift and savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefits, are void.
5. Every Nidhi shall have the last words as “Nidhi Limited.”
√ Every Nidhi shall, within a period of one year from the commencement of these rules, ensure that it has-
(a) not less than two hundred members;
(b) Net Owned Funds of ten lakh rupees or more;
(c) unencumbered term deposits of not less than ten per cent of the outstanding deposits as specified in rule 14; and
(d) ratio of Net Owned Funds to deposits of not more than 1:20
√ Within ninety days from the close of the first financial year after its incorporation and where applicable, the second financial year, Nidhi shall file a return of statutory compliances in Form NDH-1 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 with the Registrar duly certified by a company secretary in practice or a chartered accountant in practice or a cost accountant in practice.
√ If a Nidhi is not complying with clauses (a) or (d) of sub-rule (1) above, it shall within thirty days from the close of the first financial year, apply to the Regional Director in Form NDH-2 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.
√ If the failure to comply with sub-rule (1) of this rule extends beyond the second financial year, Nidhi shall not accept any further deposits from the commencement of the second financial year till it complies with the provisions contained in sub-rule (1), besides being liable for penal consequences as provided in the Act.
No Nidhi shall-
√carry on the business of :
√ issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever.
√ open any current account with its members.
√ acquire another company by purchase of securities 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, unless it has passed a special resolution in its general meeting and also obtained the previous approval of the Regional Director having jurisdiction over such Nidhi;
√ Every Nidhi 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.
√ A Nidhi shall not admit a body corporate or trust as a member.
√ Members shall not reduced to less than two hundred at any point of time.
√ 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
√ Every Nidhi shall maintain Net Owned Funds (excluding the proceeds of any preference share capital) of not less than ten lakh rupees or such higher amount as the Central Government may specify from time to time.
√ A Nidhi may open branches, only if it has earned net profits after tax continuously during the
√ preceding three financial years.
√ Subject to the provisions contained in sub-rule (1), a Nidhi may open up to three branches within the district.
√ If a Nidhi proposes to open more than three branches within the district or any branch outside the district, it shall obtain the prior permission of the Regional Director and an intimation is to be given to the Registrar about opening of every branch within thirty days of such opening.
√ No Nidhi shall open branches or collection centres or offices or deposit centres, or by whatever name called outside the State where its registered office is situated.
√ A Nidhi shall not close any branch unless it-
♦ publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least thirty 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 thirty days from the date on which advertisement was published under clause (a) ;
♦ gives an intimation to the Registrar within thirty days of such closure.
√ The fixed deposits shall be accepted for a minimum period of six months and a maximum period of sixty months.
√ Recurring deposits shall be accepted for a minimum period of twelve months and a maximum period of sixty months.
√ The rate of interest to be charged on any loan given by a Nidhi shall not exceed seven and half per cent above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method:
√ The Director shall be a member of Nidhi.
√ The Director of a Nidhi shall hold office for a term up to ten consecutive years on the Board of Nidhi.
√ The Director shall be eligible for re-appointment only after the expiration of two years of ceasing to be a Director.
√ Where the tenure of any Director in any case had already been extended by the Central Government, it shall terminate on expiry of such extended tenure.
√ The person to be appointed as a Director shall comply with the requirements of sub-section (4) of Section 152 of the Act and shall not have been disqualified from appointment as provided in section 164 of the Act.
A Nidhi shall not declare dividend exceeding twenty five per cent 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-
√ an equal amount is transferred to General Reserve;
√ there has been no default in repayment of matured deposits and interest; and
√ it has complied with all the rules as applicable to Nidhis.
√ 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.
√ Every company covered under rule 2 shall file half yearly return with the Registrar in Form NDH-3 along with such fee as provided in Companies (Registration Offices and Fees) Rules, 2014 within thirty 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.
√ The Auditor of the company shall furnish a certificate every year to the effect that the company has complied with all the provisions contained in the rules and such certificate shall be annexed to the audit report and in case of non-compliance, he shall specifically state the rules which have not been complied with.
The Central Government, on receipt of application (in Form NDH-4 along with fee thereon) 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:
√ one year from the date of its incorporation; or
√ the period up to which extension of time has been granted by the Regional Director under sub-rule (3) of rule 5.
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).
√ Every company referred to in clause (b) of rule 2 and every Nidhi incorporated under the Act, before the commencement of Nidhi (Amendment) Rules, 2019, 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 six 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).
√ For the purposes of enforcing compliance with these rules, the Registrar of companies may call for such information or returns from Nidhi as he deems necessary and may engage the services of chartered accountants, company secretaries in practice, cost accountants, or any firm thereof from time to time for assisting him in the discharge of his duties.
√ In respect of any Nidhi which has violated these rules or has failed to function in terms of the Memorandum and Articles of Association, the concerned Regional Director may appoint a Special Officer to take over the management of Nidhi and such Special Officer shall function as per the guidelines given by such Regional Director:
Provided that an opportunity of being heard shall be given to the concerned Nidhi by the Regional Director before appointing any Special Officer.
√ If a company falling under rule 2 contravenes any of the provisions of the rules prescribed herein, the company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees, and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which the contravention continues.