NIDHI COMPANY

All you want to know is here…..

by CS Manoj V. Ayadi

What is Nidhi Company ?

Nidhi in the Indian context means treasure. However, in the Indianfinancial sector it refers to any mutual benefit society notified bythe Central / Union Government as a Nidhi Company.

They are created mainly for cultivating the habit of thrift andsavings amongst its members. The Companies doing Nidhibusiness, viz. borrowing from members and lending to membersonly, are known under as Nidhi Company,

Nidhi Company are formed only for the benefit of its members only,on outsider i.e. who is not the members of the Nidhi Company arenot allowed to deposit any money or doing any kind of businesswith the concerned Nidhi Company

Section 406 of Companies Act 2013 and Nidhi Rule 2014governed the law and procedure for Nidhi Company.

by CS Manoj V. Ayadi

"Nidhi" means a company which has been incorporated as a nidhiwith the object of cultivating the habit of thrift and savingamongst its members, receiving deposits from, and lending to, itsmembers only, for their mutual benefit, and which complies withthe rules made by the central Government for regulation of suchclass of companies.

Every Company which had been declared as a Nidhi Company orMutual Benefit Society under sub-section (1) of section 620A ofthe Companies Act, 1956

Every company functioning on the lines of a Nidhi Company orMutual Benefit Society but has either not applied for or hasapplied for and is awaiting notification to be a Nidhi Company orMutual Benefit Society under sub-section (1) of section 620A ofthe Companies Act, 1956

by CS Manoj V. Ayadi

Incorporation of Nidhi Company

A Nidhi Company to be incorporated under the Act shall be apublic company and shall

have a minimum paid up equity share capital of five lakhrupees.

have a minimum Three Directors and Seven Members at the time of application for registration

Every Company incorporated as a Nidhi shall have the last words‘Nidhi Limited’ as part of its name.

Nidhi Company can not issue preference shares.

by CS Manoj V. Ayadi

Post Incorporation Compliance

Every Nidhi Company 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%of the outstanding deposits as specified in rule 14

AND

(d) Ratio of Net Owned Funds to deposits of not more than 1:20

by CS Manoj V. Ayadi

Rule 3A. Declaration of Nidhi

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

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

(b) the period up to which extension of time has beengranted by the Regional Director

The Central Government, on receipt of application in FormNDH-4 along with fee thereon of a public company fordeclaring it as Nidhi and on being satisfied that the companymeets the requirements under these rules, shall notify thecompany as a Nidhi in the official Gazette:

1 Rule 3A amendment Effective from 15th August 2019.by CS Manoj V. Ayadi

General Restrictions or Prohibitions

Can not do the business of chit fund, hire purchasefinance, leasing finance, insurance or acquisition ofsecurities issued by any body corporate;

Can not issue preference shares, debentures or anyother debt instrument by any name or in any formwhatsoever;

Can not open any current account with itsmembers(Only Saving Account);

Rental income from Locker facilities shall not exceed24%. of the gross income of the Nidhi

by CS Manoj V. Ayadi

Can not pledge any of the assets lodged by itsmembers as security;

Can not take deposits from or lend money to anybody corporate;

Can not enter into any partnership arrangement inits borrowing or lending activities;

Can not issue or cause to be issued anyadvertisement in any form for soliciting deposit:

Can not lend money to any other person other thanmember

by CS Manoj V. Ayadi

Membership

A Nidhi Company shall not admit a body corporate ortrust as a member.

Membership not reduced to less than two hundredmembers at any time.

A minor shall not be admitted as a member of NidhiCompany

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

by CS Manoj V. Ayadi

Allotment of Share for Membership

Nidhi shall issue 1[fully paid up] equity shares of thenominal value of not less than ten rupees each:

No service charge shall be levied for issue of shares.

Nidhi shall allot to each deposit holder at least aminimum of ten equity shares or shares equivalent toone hundred rupees:

Provided that a savings account holder and arecurring deposit account holder shall hold at leastone equity share of rupees ten

by CS Manoj V. Ayadi

Rate of interest

The rate of interest to be charged on any loan givenby a Nidhi shall not exceed seven and half per cent.above the highest rate of interest offered ondeposits by Nidhi and shall be calculatedon reducing balance method:

Provided that Nidhi shall charge the same rate ofinterest on the borrowers in respect of the sameclass of loans and the rates of interest of all classesof loans shall be prominently displayed on thenotice board at the registered office and eachbranch office of Nidhi.

by CS Manoj V. Ayadi

Dividend

A Nidhi Company shall not declare dividendexceeding twenty five per cent. or such higheramount as may be specifically approved by theRegional Director for reasons to be recorded in writingand further subject to the following conditions,namely:-

(a)an equal amount is transferred to General Reserve

(b)there has been no default in repayment of matureddeposits and interest and

(c)it has complied all the rules as applicable toNidhis

by CS Manoj V. Ayadi

Deposit- Tenure & Interest

A Nidhi shall not accept deposits exceeding twenty times of its NetOwned Funds (NOF) as per its last audited financial statements.

The fixed deposits shall be accepted for a minimum period of sixmonths and a maximum period of sixty months.

Recurring deposits shall be accepted for a minimum period oftwelve months and a maximum period of sixty months.

The maximum balance in a savings deposit account at any giventime qualifying for interest shall not exceed one lakh rupees at anypoint of time and the rate of interest shall not exceed two per centabove the rate of interest payable on savings bank account bynationalised banks.

A Nidhi may offer interest on fixed and recurring deposits at a ratenot exceeding the maximum rate of interest prescribed by theReserve Bank of India which the Non-Banking

by CS Manoj V. Ayadi

Loans A Nidhi shall provide loans only to its members.

Provided further that a member shall not be eligiblefor any further loan if he has borrowed any earlier loanfrom the Nidhi and has defaulted in repayment of suchloan.

A Nidhi shall give loans to its members only against thefollowing securities, namely :-

o Gold, silver and jewellery,o immovable property,o fixed deposit, receipts,o National Savings Certificates,o other Government Securities ando insurance policies

by CS Manoj V. Ayadi

The loans given by a Nidhi to a member shall be subject to the following limits, namely:-

(a) two lakh rupees, where the total amount of depositsof such Nidhi from its members is less than two crore rupees;

(b) seven lakh fifty thousand rupees, where the total amount ofdeposits of such Nidhi from its members is more than two crorerupees but less than twenty crore rupees;

(c) twelve lakh rupees, where the total amount of depositsof such Nidhi from its members is more than twenty crore rupeesbut less than fifty crore rupees; and

(d) fifteen lakh rupees, where the total amount of depositsof such Nidhi from its members is more than fifty crore rupees:

Provided that where a Nidhi has not madeprofits continuously in the three preceding financial years, itshall not make any fresh loans exceeding fifty per cent. ofthe maximum amounts of loans specified in clauses (a), (b),(c)or (d).

by CS Manoj V. Ayadi

Directors

The Director shall be a member of Nidhi.

The Director of a Nidhi shall hold office for a term up toten consecutive years on the Board of Nidhi.

The Director shall be eligible for re-appointment only after theexpiration of two years of ceasing to be a Director.

The person to be appointed as a Director shall comply with therequirements of subsection (4) of section 152 of the Act andshall not have been disqualified from appointment as providedin section 164 of the Act

by CS Manoj V. Ayadi

Auditor

No Nidhi Company shall appoint or re-appoint an individual as

auditor for more than one term of five consecutiveyears.

No Nidhi Company 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 auditfirm) shall be eligible for subsequent appointment after theexpiration of two years from the completion of his or its term.

by CS Manoj V. Ayadi

Branch A Nidhi may open branches, only if it has earned net profits after tax

continuously during the preceding three financial years. Nidhi mayopen up to three branches within the district.

No Nidhi shall open branches or collection centres or offices ordeposit centres, or by whatever name called outside the State whereits registered office is situated.

A Nidhi shall not close any branch unless it :-

Publishes an advertisement in a newspaper in vernacular language inthe place where it carries on business at least thirty days prior to suchclosure, informing the public about such closure;

Gives an intimation to the Registrar within thirty days of suchclosure.

by CS Manoj V. Ayadi

Annual NIDHI Compliance NDH -1 :- Return of Statutory Compliances.

Within ninety days from the close of the first financial yearafter its incorporation and where applicable, the secondfinancial year, Nidhi shall file a return of statutorycompliances in Form NDH-1 along with such fee as providedin Companies (Registration Offices and Fees) Rules, 2014with the Registrar duly certified by a company secretary inpractice or a chartered accountant in practice or a costaccountant in practice.

NDH -2 :- Apply to the Regional Director for extension of time

Within thirty days from the close of the first financial year,apply to the Regional Director in Form NDH-2 along with feespecified in Companies (Registration Offices and Fees)Rules, 2014 for extension of time and the Regional Directormay consider the application and pass orders withinthirty days of receipt of the application.

by CS Manoj V. Ayadi

NDH -3 :- Half yearly return with the Registrar:

Every Nidhi Company shall file half yearly return with theRegistrar in Form NDH-3 along with such fee as provided inCompanies (Registration Offices and Fees) Rules, 2014 withinthirty days from the conclusion of each half year dulycertified by a company secretary in practice or charteredaccountant in practice or cost accountant in practice.

NDH -4 :- Declaration of Nidhis :

Nidhi shall file Form NDH-4 within sixty days from the date ofexpiry of :-

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

(b) the period up to which extension of time has beengranted by the Regional Director

by CS Manoj V. Ayadi

Consult the Experts

Complete assistance for making the necessary filings,applications etc. for obtaining MCA’s approval to operateas Nidhi Company.

Updating Company on a regular basis as to the status ofthe pending application.

To know the further details contact us atcsmanojayadi93@gmail.com/+91 9773112128

By CS Manoj V. Ayadi

by CS Manoj V. Ayadi