All about NIDHI Company

NIDHI

Meaning of Nidhi Company:

“Nidhi” means a company which has been incorporated as a Nidhi with the object of:

ü  cultivating the habit of thrift and savings amongst its members,

ü  receiving deposits from, and

ü  lending to, its members only, for their mutual benefit,

Governing Law:

Nidhi Company is governed by Nidhi Rules, 2014. Nidhi companies are incorporated in the nature of Limited company and hence, they have to comply with two set of norms, one of Public limited company as per Companies Act, 2013 and another is for Nidhi Rules, 2014. No RBI approval is necessary to register the Nidhi Company. RBI has specifically exempted this category of NBFC in India to comply with its core provisions such as registration with RBI etc.

Applicability of these Rules:

ü  Every company which had been declared as a Nidhi or Mutual Benefit Society under sub-section (1) of section 620A of the Companies Act, 1956;

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

ü  Every company incorporated as a Nidhi pursuant to the provisions of section 406 of the Act.

Requirements need to be fulfilled:

ü  A Nidhi  shall be a Public Company,

ü  Nidhi company shall have a minimum paid up capital of Five lakh rupess.

ü  Every Nidhi company shall have the last words ‘Nidhi Limited’ as part of its name.

Every Nidhi company, within a One year of incorporation, Ensure it has:-

ü  Not less than Two hundred members;

ü  Net Owned Funds of Ten lakh rupees or more;

ü  Ratio of Net Owned Funds to deposits of not more than 1:20.

No Nidhi shall:-

Ø  Carry on the business of:

ü  Chit Fund	ü  Insurance
ü  Hire Purchase finance	ü  Acquisition of Securities of other co.

Ø  Issue preference shares, debentures or any debt instruments by any name;

Ø  Open any current account with its members;

Ø  Carry any other business other than borrowing or lending on its own name;

Ø  Accept deposit or lend, other than its members;

Ø  Pledged any assets lodged by its members as security;

Ø  Enter into any partnership arrangement in its borrowing or lending activities;

Ø  Issue or cause to be issued any advertisement in any form for soliciting deposit:

Share Capital and Allotment:

Ø  Every Nidhi shall issue equity shares of the nominal value of not less than Ten Rupees each:

Ø  Every Nidhi shall allot to each deposit holder at least a minimum of Ten equity shares or shares equivalent to One hundred rupees:

Provided that a savings account holder and a recurring deposit account holder shall hold at least one equity share of rupees ten.

Membership:

Ø  A Nidhi shall not admit a body corporate or trust as a member.

Ø  A Minor shall not admitted as a member of Nidhi; (except if they are deposited by the guardian of minor, who is member of Nidhi)

Branches:

Ø  A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding three financial years and a Nidhi may open upto 3 branches within the district.

Ø  If proposes to open more than three branches then 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.

Ø  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.

Ø  A Nidhi shall not close any branch unless it-

o   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;

o   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) ; and

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

Acceptance of Deposits:

Ø   A Nidhi shall not accept deposits exceeding Twenty times of its Net Owned Funds (NOF) as per its last audited financial statements.

Ø  The fixed deposits shall be accepted for a minimum period of Six months and a maximum period of Sixty months.

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

Ø  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 two per cent. above the rate of interest payable on savings bank account by nationalized banks

Ø  A Nidhi may offer interest on fixed and recurring deposits at a rate not exceeding the maximum rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.

Loan

Ø  A Nidhi shall provide loans only to its members subject to the following limits, namely:-

Up to Rs. 200,000/-	If deposit is less than 2 Crore Rupees
Up to 7,50,000/-	2 Cr. < If deposit < 20 Cr.
Up to 20,00,000/-	20 Cr. < If deposit < 50 Cr.
Up to 50,00,00/-	If deposit more than 50 Cr. rupees

# Provided that where a Nidhi has not made profits continuously in the three preceding financial years, it shall not make any fresh loans exceeding fifty percent of the maximum amounts of loans specified in above table

# Provided further that a member shall not be eligible for any further loan if he has borrowed any earlier loan from the Nidhi and has defaulted in repayment of such loan.

Ø  A Nidhi shall give loans to its members only against the following securities, namely:-

A.    Gold, Silver and Jewellery	B.     F.D receipts, National saving certificates
C.    Immovable Property	D.    Insurance Policies

Ø  The rate of interest to be charged on any loan given by a Nidhi shall not exceed seven and half per cent.

Directors of Nidhi

Ø  The Director shall be a member of Nidhi and shall hold office for a term up to ten (10) consecutive years on the Board of Nidhi.

Ø  The Director shall be eligible for re-appointment only after the expiration of two (2) years of ceasing to be a Director.

Ø  Section 152 (appointment) and 164 (Disqualification) of Companies Act, 2013 shall be complied by the person to be appointed as Director

Dividend

Ø  A Nidhi shall not declare dividend exceeding twenty five per cent (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:-

(a) An equal amount is transferred to General Reserve;

(b) There has been no default in repayment of matured deposits and interest; and

(c) It has complied with all the rules as applicable to Nidhis.

Returns to be filed by by Nidhi

Ø  NDH-1: Every Nidhi need to be file a return in form NDH-1 with in 90 days from the closure of financial year, duly certified by Practicing CS, CA and CMA.

Ø  NDH-2: If Nidhi failed to comply the above requirements, then it need to apply to RD in for NDH-2 for extension of time.

Ø  NDH-3: Every Nidhi shall file half yearly return with the Registrar in Form NDH-3 within thirty days from the conclusion of each half year duly certified by a Practicing CS, CA and CMA

Penaltyfor Non Compliance

If a Nidhi Co. 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.

Regards

CS Chetan Bhadouria

(ACS, B.Com)

Mob: 9899399209

E-mail: cschetanbhadouria@gmail.com