January 18, 2019

Formation of a Nidhi Company And Their Compliances:

Section 406(1): “Nidhi” or “Mutual Benefit Society” means a company which the central government may, by notification in the official gazette, declare to be Nidhi” or “Mutual Benefit Society”, as the case may be.

Section 406(2): The central government may by notification in the official gazette, direct that any of the provisions of this act specified in the notification:

A) Shall not apply to any Nidhi or Mutual benefit society; or
B) Shall apply to any Nidhi or Mutual benefit society with such exemptions, modifications and adaptations as may be specified in the notification.

APPLICABLE RULE: NIDHI RULES, 2014

CONTENTS:

1. Incorporation And Incidental Matters.
2. Requirements For Minimum No. Of Members,
Net Owned Fund Etc.
3. General Restrictions Or Prohibitions.
4. Membership & Allotment Of Shares.
5. Branches( Opening & Closing).
6. Deposits And Loans By Nidhis.
7. Rules Relating To Directors.
8. Penalty For Non-Compliance.
9. Exemptions To Nidhi Company.

1.INCORPORATION AND INCIDENTAL MATTERS

1) A Nidhi to be incorporated shall be a public company having a minimum paid up equity share capital of Rs. 5,00,000/-.
2) No Nidhi shall issue preference shares.
3) Minimum number of proposed members and directors shall be 7 and 3 respectively.
4) Every “Nidhi” company shall have the last words ‘Nidhi Limited” as part of its name. Reserved through “RUN” service.

2.REQUIREMENTS FOR MINIMUM No. OF MEMBERS, NET OWNED FUND Etc.

Every Nidhi shall, within a period of 1 year from Its incorporation ensure that it has:

(a) Not less than 200 members.
(b) Net Owned Funds of Rws. 10,00,000 or more.
(c) Unencumbered Term Deposits of not less than 10% of the outstanding.
(d) Ratio of Net Owned Funds to deposits of not more than 1:20.

1. Form NDH-1 (Annual Nidhi Company Compliance):

Need to be filed within 90 days of closing financial year, duly certified by CA/CS/CMA in practice.

2. Form NDH-2 (for getting extension to the RD):

Need to be filled within 30 days from the closing of first financial year if there is a non-compliance regarding the following:

a. There are close to 200 members in a financial year.
b. The net owned funds to deposit ratio is 1: 20.

3. NDH-3 (half yearly compliance to be file with the Registrar):

Need to be filed within 30 days by A Nidhi Company covered under rule 2 from the conclusion of each half-yearly duly certified by CA/CS/CMA in practice.

3.GENERAL RESTRICTIONS OR PROHIBITIONS.

No Nidhi shall:
(a) Carry on the business of chit fund, hire purchase/leasing finance, insurance or acquisition of securities issued by any body corporate;
(b) Issue preference shares, debentures or any other debt instrument by any name or in any form;
(c) Open any current account with its members;
(d) Acquire another company by purchase of securities or control the composition of the Board of Directors,etc.
(e) Carry on any business other than the business of borrowing or lending ;
(f) Accept deposits from or lend to any person, other than its members;
(g) Pledge any of the assets lodged by its members as security;
(h) Take deposits from or lend money to any body corporate;
(i) Enter into any partnership arrangement in its borrowing or lending activities;
(j) Issue or cause to be issued any advertisement in any form for soliciting deposit,
(k) Pay any brokerage or incentive for mobilising deposits from members.


4.MEMBERSHIP & ALLOTMENT OF SHARES:

(1) A Nidhi shall Not admit a Body-corporate/Trust/minor as a member (deposits may be accepted in name of minor, if made through natural/legal guardian who is a member of Nidhi) and ensure that its membership is not reduced to less than 200 at any time.

(2) Allot to every Deposit Holder minimum 10 Shares of Rupees 10 each (equivalent to Rs. 100/-) & at least 1 share of Rupees 10 to Savings Account Holder.

5.BRANCHES (OPENING & CLOSING):

(1) A Nidhi may open branches, only if it has earned net profits after tax continuously during the preceding 3 financial years up to 3 branches within the District.
(3) To open more than 3 branches within the district or any branch outside the district, o prior aproval RD required and intimation given to ROC within 30 days of such opening.
(6) A Nidhi shall not close any branch unless publishes an advertisement in a newspaper in vernacular language in the place where it carries on business, at least 30 days prior to such closure.

6.DEPOSITS AND LOANS BY NIDHIS
DEPOSITS;

(1) A Nidhi shall not accept deposits exceeding 20 times of its Net Owned Funds (NOF) as per its last audited financial statements.
(2) The fixed deposits shall be accepted for a minimum period of 6 months and maximum period of 60 months and a Recurring deposits shall be accepted for a minimum period of 12 months and a maximum period of 60 months.

LOANS:

(1) A Nidhi shall provide loans only to its members.
(2) Loans to a member shall be subject to the limits, namely:

• Rs. 2 Lakh where a total amount of Deposits form its members is less than Rs. 2 crore
• Rs. 7.50 Lakh where the total amount of Deposits form its members is more than Rs. 2 crore but less than twenty crore rupees
• Rs. 12 Lakh where the total amount of Deposits form its members is more than Rs. 20 crore but less than Fifty crore rupees
• Rs. 15 Lakh where the total amount of Deposits form its members is more than Rs. 50 crore
• Members who have taken a loan from Nidhi and defaulted in repayment of such loan shall not be allowed to take fresh loans form Nidhi.

Note: Rate of Interest Charged By a Nidhi Company not greater than 7.5% P.A

7.RULES RELATING TO DIRECTORS

(1) The Director shall be a member of Nidhi.
(2) The Director of a Nidhi shall hold office for a term up to 10 consecutive years
(3) The Director shall be eligible for re-appointment only after the expiration of 2 years of ceasing to be a Director.
(4) 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.
(5) 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 (sec.164).

8.PENALTY FOR NON-COMPLIANCE:

As per rule 24, contravention of any provisions of the rules prescribed herein, the company and every officer of the company who is in default liable to fine fine up to Rs.five 5000/- and up to Rs. 500/- per day in case contravention is a continuing one.

9.EXEMPTIONS TO NIDHI COMPANY:

MCA issued a Notification on 5th June, 2015 mentioning those sections of the Companies Act, 2013 where exemption is granted to Nidhi as below:

• Section: 2(20), 42, 47(1)(b), 62, 67(1), 123(5), 127, 136(1), 160, 185, 197(1), 403

 

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