Understanding of Nidhi Company

As per Rule 3 (da) of Nidhi Rules, 2014, ‘Nidhi’ means a company which has been incorporated as a Nidhi with the object of cultivating the habit of thrift and saving 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.

INCORPORATION REQUIRMENT OF NIDHI COMPANY

• A Nidhi Company Shall be Public Company having minimum paid up equity capital of Rs. Five lakh.
• Nidhi shall have 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.
• Nidhi Company shall have Minimum 3 Director and 7 Shareholders. Out of 7 shareholders any 3 shareholders should be Director of the Nidhi Company.
• Nidhi Company Shall not issue Preference Shares.
• Nidhi Company shall issue fully paid up 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

OTHER MANDATORY REQUIRMENTS OF NIDHI COMPANY

Every Nidhi shall within a period of one year from the date of its incorporation ensure that it has

• Not less than two hundred members;
• Net Owned Funds of ten lakh rupees or more;
• Unencumbered term deposits of not less than ten per cent. of the outstanding deposits as specified in rule 14; and
• Ratio of Net Owned Funds to deposits of not more than 1:20.

If a Nidhi is not complying with abovementioned Condition then Company can file an application to the Regional Director in form NDH-2 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 period up to one year from the date of receipt of application.

GENERAL RESTRICTIONS OR PROHIBITIONS ON OF NIDHI COMPANY

Nidhi Company shall not:

• Carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by anybody corporate.
• 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.
• carry on any business other than the business of borrowing or lending in its own name

Nidhis which have adhered to all the provisions of these rules may provide locker facilities on rent to its members subject to the rental income from such facilities not exceeding twenty per cent of the gross income of the Nidhi at any point of time during a financial year.

• accept deposits from or lend to any person, other than its members
• pledge any of the assets lodged by its members as security
• take deposits from or lend money to any body corporate
• enter into any partnership arrangement in its borrowing or lending activities
• issue or cause to be issued any advertisement in any form for soliciting deposit

Private circulation of the details of fixed deposit schemes among the members of the Nidhi carrying the words “for private circulation to members only” shall not be considered to be an advertisement for soliciting deposits.

• pay any brokerage or incentive for mobilising deposits from members or for deployment of funds or for granting loans.

OTHER RESTRICTION ON NIDHI COMPANY:

• A Nidhi shall not admit a body corporate or trust as a member.
• Every Nidhi shall ensure that its membership is not reduced to less than two hundred members at any time.
• A minor shall not be admitted as a member of Nidhi

BRANCHES OF NIDHI COMPANY

♦ A Nidhi may open up to three branches within the district, subject to condition that it has earned net profits after tax continuously during the preceding three financial years and financial statement and annual return (up to date) are filed with the Registrar.

♦ 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 intimation is to be given to the Registrar about opening of every branch within thirty days of such opening.

♦ Nidhi shall not open branches or collection centres or offices or deposit centres, or by whatever name called outside the State where its registered office is situated.

CLOSURE OF BRANCH OFFICE OF NIDHI COMPANY

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; and

√ gives an intimation to the Registrar within thirty days of such closure.

RULES RELATED TO DIRECTOR OF NIDHI COMPANY:

♦ 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.

♦ The person to be appointed as a Director shall comply with the requirements of section 152(4) of the Act and shall not have been disqualified from appointment as provided in section 164 of the Act.

DIVIDEND BY NIDHI COMPANY

Nidhi shall not declare dividend exceeding twenty five percent or such higher amount as may be specifically approved by the Regional Director for reasons to be recorded in writing.

RULES RELATED TO AUDITOR OF NIDHI COMPANY:

√ Nidhi shall not appoint or re-appoint an individual as auditor for more than one term of five consecutive years.

√ Nidhi shall not appoint or re-appoint an audit firm as auditor for more than two terms of five consecutive years.

√ 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.

The Auditor of the company shall furnish a certificate every year 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.

FORMS RELATED TO NIDHI COMPANY

S.NO.	FORMS	PARTICULARS
1.	NDH-1	Return of Statutory Compliances
2.	NDH-2	Application for extension of time
3.	NDH-3	Return of Nidhi Company for the half year ended
4.	NDH-4	Application for declaration as Nidhi Company and for updation of status by Nidhis

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