All about Nidhi company

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1. NIDHI COMPANY
All you want to know is here…..
by CS Manoj V. Ayadi

2. What is Nidhi Company ?
NidhiintheIndiancontextmeanstreasure.However,intheIndian
financialsectoritreferstoanymutualbenefitsocietynotifiedby
theCentral/UnionGovernmentasaNidhiCompany.
Theyarecreatedmainlyforcultivatingthehabitofthriftand
savingsamongstitsmembers.TheCompaniesdoingNidhi
business,viz.borrowingfrommembersandlendingtomembers
only,areknownunderasNidhiCompany,
NidhiCompanyareformedonlyforthebenefitofitsmembersonly,
onoutsideri.e.whoisnotthemembersoftheNidhiCompanyare
notallowedtodepositanymoneyordoinganykindofbusiness
withtheconcernedNidhiCompany
Section406ofCompaniesAct2013andNidhiRule2014
governedthelawandprocedureforNidhiCompany.
by CS Manoj V. Ayadi

3. "Nidhi"meansacompanywhichhasbeenincorporatedasanidhi
withtheobjectofcultivatingthehabitofthriftandsaving
amongstitsmembers,receivingdepositsfrom,andlendingto,its
membersonly,fortheirmutualbenefit,andwhichcomplieswith
therulesmadebythecentralGovernmentforregulationofsuch
classofcompanies.
EveryCompanywhichhadbeendeclaredasaNidhiCompanyor
MutualBenefitSocietyundersub-section(1)ofsection620Aof
theCompaniesAct,1956
EverycompanyfunctioningonthelinesofaNidhiCompanyor
MutualBenefitSocietybuthaseithernotappliedfororhas
appliedforandisawaitingnotificationtobeaNidhiCompanyor
MutualBenefitSocietyundersub-section(1)ofsection620Aof
theCompaniesAct,1956
by CS Manoj V. Ayadi

4. Incorporation of Nidhi Company
ANidhiCompanytobeincorporatedundertheActshallbea
publiccompanyandshall
have a minimum paid up equity share capital of five lakh
rupees.
have a minimum Three Directors and Seven Members at the
time of application for registration
EveryCompanyincorporatedasaNidhishallhavethelastwords
‘NidhiLimited’aspartofitsname.
NidhiCompanycannotissuepreferenceshares.
by CS Manoj V. Ayadi

5. 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 hundredmembers
(b) Net Owned Funds of ten lakh rupees ormore
(c)Unencumberedtermdepositsofnotlessthanten%
of the outstanding deposits as specified in rule 14
AND
(d) Ratio of Net Owned Funds to deposits of not more than1:20
by CS Manoj V. Ayadi

6. Rule 3A. Declaration of Nidhi
ProvidedthataNidhiincorporatedundertheActonorafter
thecommencementoftheNidhi(Amendment)Rules,2019
shallfileFormNDH-4withinsixtydaysfromthedateof
expiryof:-
(a)oneyearfromthedateofitsincorporationor
(b)theperioduptowhichextensionoftimehasbeen
grantedbytheRegionalDirector
TheCentralGovernment,onreceiptofapplicationinForm
NDH-4alongwithfeethereonofapubliccompanyfor
declaringitasNidhiandonbeingsatisfiedthatthecompany
meetstherequirementsundertheserules,shallnotifythe
companyasaNidhiintheofficialGazette:
1Rule3AamendmentEffectivefrom15thAugust2019.
by CS Manoj V. Ayadi

7. General Restrictions or Prohibitions
Cannotdothebusinessofchitfund,hirepurchase
finance,leasingfinance,insuranceoracquisitionof
securitiesissuedbyanybodycorporate;
Cannotissuepreferenceshares,debenturesorany
otherdebtinstrumentbyanynameorinanyform
whatsoever;
Cannotopenanycurrentaccountwithits
members(OnlySavingAccount);
RentalincomefromLockerfacilitiesshallnotexceed
24%.ofthegrossincomeoftheNidhi
by CS Manoj V. Ayadi

8. Cannotpledgeanyoftheassetslodgedbyits
membersassecurity;
Cannottakedepositsfromorlendmoneytoany
bodycorporate;
Cannotenterintoanypartnershiparrangementin
itsborrowingorlendingactivities;
Cannotissueorcausetobeissuedany
advertisementinanyformforsolicitingdeposit:
Cannotlendmoneytoanyotherpersonotherthan
member
by CS Manoj V. Ayadi

9. Membership
ANidhiCompanyshallnotadmitabodycorporateor
trustasamember.
Membershipnotreducedtolessthantwohundred
membersatanytime.
AminorshallnotbeadmittedasamemberofNidhi
Company
Providedthatdepositsmaybeacceptedinthenameof
aminor,iftheyaremadebythenaturalorlegal
guardianwhoisamemberofNidhi.
by CS Manoj V. Ayadi

10. Allotment of Share for
Membership
Nidhishallissue
1
[fullypaidup]equitysharesofthe
nominalvalueofnotlessthantenrupeeseach:
Noservicechargeshallbeleviedforissueofshares.
Nidhishallallottoeachdepositholderatleasta
minimumoftenequitysharesorsharesequivalentto
onehundredrupees:
Providedthata savingsaccountholderanda
recurringdepositaccountholdershallholdatleast
oneequityshareofrupeesten
by CS Manoj V. Ayadi

11. Rate of interest
Therateofinteresttobechargedonanyloangiven
byaNidhishallnotexceedsevenandhalfpercent.
abovethehighestrateofinterestofferedon
depositsbyNidhiandshallbecalculated
onreducingbalancemethod:
ProvidedthatNidhishallchargethesamerateof
interestontheborrowersinrespectofthesame
classofloansandtheratesofinterestofallclasses
ofloansshallbeprominentlydisplayedonthe
noticeboardattheregisteredofficeandeach
branchofficeofNidhi.
by CS Manoj V. Ayadi

12. Dividend
ANidhiCompanyshall notdeclaredividend
exceedingtwentyfivepercent .orsuchhigher
amountasmaybespecificallyapprovedbythe
RegionalDirectorforreasonstoberecordedinwriting
andfurthersubjecttothefollowingconditions,
namely:-
(a)anequalamountistransferredtoGeneralReserve
(b)therehasbeennodefaultinrepaymentofmatured
depositsandinterestand
(c)ithascompliedalltherulesasapplicabletoNidhis
by CS Manoj V. Ayadi

13. Deposit-Tenure & Interest
ANidhishallnotacceptdepositsexceedingtwentytimesofitsNet
OwnedFunds(NOF)asperitslastauditedfinancialstatements.
Thefixeddepositsshallbeacceptedforaminimumperiodofsix
monthsandamaximumperiodofsixtymonths.
Recurringdepositsshallbeacceptedforaminimumperiodof
twelvemonthsandamaximumperiodofsixtymonths.
Themaximumbalanceinasavingsdepositaccountatanygiven
timequalifyingforinterestshallnotexceedonelakhrupeesatany
pointoftimeandtherateofinterestshallnotexceedtwopercent
abovetherateofinterestpayableonsavingsbankaccountby
nationalisedbanks.
ANidhimayofferinterestonfixedandrecurringdepositsatarate
notexceedingthemaximumrateofinterestprescribedbythe
ReserveBankofIndiawhichtheNon-Banking
by CS Manoj V. Ayadi

14. Loans
A Nidhi shall provide loans only to its members.
Providedfurtherthatamembershallnotbeeligible
foranyfurtherloanifhehasborrowedanyearlierloan
fromtheNidhiandhasdefaultedinrepaymentofsuch
loan.
ANidhishallgiveloanstoitsmembersonlyagainstthe
followingsecurities,namely:-
oGold,silverandjewellery,
oimmovableproperty,
ofixeddeposit,receipts,
oNationalSavingsCertificates,
ootherGovernmentSecuritiesand
oinsurancepolicies
by CS Manoj V. Ayadi

15. The loans given by aNidhito a member shall be subject to the
followinglimits, namely:-
(a)twolakhrupees,wherethetotalamountofdeposits
ofsuchNidhifromitsmembersislessthantwocrorerupees;
(b)sevenlakhfiftythousandrupees,wherethetotalamountof
depositsofsuchNidhifromitsmembersismorethantwocrore
rupeesbutlessthantwentycrorerupees;
(c)twelvelakhrupees,wherethetotalamountofdeposits
ofsuchNidhifromitsmembersismorethantwentycrorerupees
butlessthanfiftycrorerupees;and
(d)fifteenlakhrupees,wherethetotalamountofdeposits
ofsuchNidhifromitsmembersismorethanfiftycrorerupees:
ProvidedthatwhereaNidhihasnotmade
profitscontinuouslyinthethreeprecedingfinancialyears,it
shallnotmakeanyfreshloansexceedingfiftypercent.of
themaximumamountsofloansspecifiedinclauses(a),(b),
(c)or(d).
by CS Manoj V. Ayadi

16. Directors
TheDirectorshallbeamemberofNidhi.
TheDirectorofaNidhishallholdofficeforatermupto
tenconsecutiveyearsontheBoardofNidhi.
TheDirectorshallbeeligibleforre-appointmentonlyafterthe
expirationoftwoyearsofceasingtobeaDirector.
ThepersontobeappointedasaDirectorshallcomplywiththe
requirementsofsubsection(4)ofsection152oftheActand
shallnothavebeendisqualifiedfromappointmentasprovided
insection164oftheAct
by CS Manoj V. Ayadi

17. Auditor
No Nidhi Company shall appoint or re-appoint anindividual 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 consecutiveyears;
Providedthatanauditor(whetheranindividualoranaudit
firm)shallbeeligibleforsubsequentappointmentafterthe
expirationoftwoyearsfromthecompletionofhisoritsterm.
by CS Manoj V. Ayadi

18. Branch
ANidhimayopenbranches,onlyifithasearnednetprofitsaftertax
continuouslyduringtheprecedingthreefinancialyears.Nidhimay
openuptothreebrancheswithinthedistrict.
NoNidhishallopenbranchesorcollectioncentresorofficesor
depositcentres,orbywhatevernamecalledoutsidetheStatewhere
itsregisteredofficeissituated.
ANidhishallnotcloseanybranchunlessit:-
Publishesanadvertisementinanewspaperinvernacularlanguagein
theplacewhereitcarriesonbusinessatleastthirtydayspriortosuch
closure,informingthepublicaboutsuchclosure;
GivesanintimationtotheRegistrarwithinthirtydaysofsuch
closure.
by CS Manoj V. Ayadi

19. Annual NIDHI Compliance
NDH -1 :-Return of Statutory Compliances.
Withinninetydaysfromthecloseofthefirstfinancialyear
afteritsincorporationandwhereapplicable,thesecond
financialyear,Nidhishallfileareturnofstatutory
compliancesinFormNDH-1alongwithsuchfeeasprovided
inCompanies(RegistrationOfficesandFees)Rules,2014
withtheRegistrardulycertifiedbyacompanysecretaryin
practiceoracharteredaccountantinpracticeoracost
accountantinpractice.
NDH-2:-ApplytotheRegionalDirectorforextensionoftime
Withinthirtydaysfromthecloseofthefirstfinancialyear,
applytotheRegionalDirectorinFormNDH-2alongwithfee
specifiedinCompanies(RegistrationOfficesandFees)
Rules,2014forextensionoftimeandtheRegionalDirector
mayconsidertheapplicationandpassorderswithin
thirtydaysofreceiptoftheapplication.
by CS Manoj V. Ayadi

20. NDH -3 :-Half yearly return with the Registrar:
EveryNidhiCompanyshallfilehalfyearlyreturnwiththe
RegistrarinFormNDH-3alongwithsuchfeeasprovidedin
Companies(RegistrationOfficesandFees)Rules,2014within
thirtydaysfromtheconclusionofeachhalfyearduly
certifiedbyacompanysecretaryinpracticeorchartered
accountantinpracticeorcostaccountantinpractice.

NDH -4 :-Declaration of Nidhis:

NidhishallfileFormNDH-4withinsixtydaysfromthedateof
expiryof:-

(a)oneyearfromthedateofitsincorporationor

(b)theperioduptowhichextensionoftimehasbeen
grantedbytheRegionalDirector
by CS Manoj V. Ayadi

21. Consult theExperts

Completeassistanceformakingthenecessaryfilings,
applicationsetc.forobtainingMCA’sapprovaltooperate
asNidhiCompany.

UpdatingCompanyonaregularbasisastothestatusof
thependingapplication.

Toknowthefurtherdetailscontactusat
[email protected]/[phone]
By CS Manoj V. Ayadi

22. by CS Manoj V. Ayadi