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What is Nidhi Company - Key features

To understand the meaning of Nidhi Company in a best possible way, is to understand through its features. Nidhi Company is basically
a finance company which can accept deposit from members and lend the same money to its members. Nidhi Company mainly earns through interest on loans and its main expenditure is to pay interest on deposits (FD, RD and savings).

Lowest Price

Lowest Price

Nidhi Company Registration at just Rs. 14,900/-
(lowest price across web)
No RBI Requirement

No RBI Requirement

Nidhi Company do not require RBI registration to do loan business in India
Interest on loan

Interest on loan

Nidhi Company can earn max 20% interest on loan on reducing balance method
Interest on deposits

Interest on deposits

Nidhi Company can accept FD, RD & savings and can earn 12% rate of interest
Branches for Nidhi

Branches for Nidhi

Nidhi Company can open 3 branches after 3 years within the district
Loan against security

Loan against security

Nidhi Company can lend only against gold, property, FD, Govt securities
Members under Nidhi Company

Members under Nidhi Company

Nidhi Company can deal with its members only & has to make min 200 members
No Microfinance In Nidhi

No Microfinance in Nidhi

Nidhi Company cannot do micro finance business & vehicle finance business

A Critical Analysis of Nidhi Company Compliances

A Nidhi Company is a type of non-banking financial organization registered under the Companies Act, 2013.The primary motive of a Nidhi Company includes borrowing and lending money amongst its members.

Nidhi Companies are also known as Mutual Benefit Finance Company.

Every Nidhi Company is required to follow the rules and regulation prescribed under the Companies Act, 2013 and Nidhi Companies Rules, 2014.

In the case, the Nidhi Company doesn't follow the prescribed compliances, then both the company and officers in default would be subject to punishment.

Why is it necessary to comply with the Nidhi Company Compliances?

Firstly, the Nidhi Company is registered under the Companies Act, 2013. Therefore, it becomes mandatory for every company registered under this act to follow the prescribed compliances.

Secondly, the Nidhi Company has the status of Public Limited Company. Protecting the interest of stakeholders is one of the most essential duties of the company. Hence, it's mandatory to follow the compliances of Nidhi Company.

Furthermore, to ensure the operations of the company don't hamper and continue without any legal complication, following the compliance is obligatory.

Post incorporation compliances of Nidhi Company

Typically, after the incorporation, Nidhi Companies are required to follow two types of compliances namely :

Annual compliances, and

Event-based compliances.

Apart from these, there are a few obligatory compliances that every Nidhi Company has to meet within one year of incorporation as per Nidhi Rules, 2014. Those compliances are as follows :

Compliances to follow within 1 year of Nidhi Company Incorporation

Within 1 year of the company's incorporation, the number of members should increase to at least 200.

The NOF (Net-owned Fund) of the Nidhi Company should become Rs. 10 lakh or more.

The ratio of NOF to the deposit shouldn't exceed 1:20.

As per Rule 14 of the Nidhi Rules, 2014, the unencumbered deposits shouldn't be less than 10% of the outstanding deposits.

Nidhi Company Annual Compliances

Annual compliance of Nidhi Company, as the name suggests, needs to be filed annually. However, a few of them is supposed to be filed after a certain interval of time.

Mainly, such compliances describes the performance and status of Nidhi Company operations throughout the year

A Nidhi Company must fulfil the annual compliances as prescribed in the Nidhi Rules, 2014 and the Companies Act, 2013.

Checklist for Annual Compliance for Nidhi Company

Below we have described the mandatory checklist for Nidhi Company compliances which every Nidhi Company should meet within the due time. Those compliances are as follows :

Form NDH 1

Every Nidhi Company has to file the form NDH-1 mandatorily within 90 days from the closure of the first or second (as applicable) financial year after the company's incorporation.

Moreover, this form should be duly certified by the practicing chartered accountant or company secretary or cost accountant. One needs to file this return along with the prescribed fees, whatever applicable.

Form NDH 2

The form NDH-2 should be filed in the case the company fails to fulfil the following compliances :

1. If the company fails to add at least 200 members within one year of incorporation, and

2. Failure in maintaining the NOF to deposit ratio of 1:20.

The company needs to file NDH-2 with the Regional Director within 90 days form the financial year closure along with the prescribed fees.

After examining the application, the Regional Director will pass orders within 30 days of the arrival of the NDH-2 application. The application is filed to request time extension for meeting the above compliances, if the company is unable to perform the same within the prescribed time frame.

Form NDH 3

NDH-3 is a half-yearly return which needs to be filed with the ROC (Registrar of Companies). Every Nidhi Company must file this form along with the prescribed fees within thirty days from the end of each half year.

Again, the form should be duly signed by the practicing chartered accountant or company secretary or cost accountant.

ADT-1, Auditor's appointment

According to Section 139 of the Companies Act, 2013, every company needs to intimate the ROC (Registrar of Companies) about the appointment of auditor in a prescribed format. ADT-1 is the required form to inform ROC about the auditor's appointment.

Maintenance of Books of Accounts

Every Nidhi Company must maintain the books of accounts on a timely basis. Books of Accounts are compulsory to maintain for the purpose of Income Tax.

Every company whose gross receipts exceed Rs. 1, 50,000 in three preceding year needs to maintain the books of accounts

Maintenance of Statutory Registers

As per the Companies Act, 2013, every company registered with the MCA has to maintain the statutory registers mandatorily. Further, every company must present the register before ROC within certain time limits along with the prescribed fees.

In general, the statutory register is a record of the company's directors, shareholders, and the meetings held.

Preparing Financial Statements

Whether it's Nidhi Company or any other, preparation of Financial Statements is imperative for every entity. Financial Statements consist of Cash Flow Statement, Balance Sheet, Profit & Loss Account of the company, etc.

Director's Report

Under the Companies Act, 2013, Director's report is one of the mandatory compliances that every Nidhi Company needs to follow.

A Director's report is a record of the company and its compliance with a set of accounting, financial, and corporate social responsibility standards produced by the board of directors.

Conduct Statutory Meetings

It is obligatory for every Nidhi Company to convene statutory meetings such as Board of Director's meetings and meeting of Shareholders.

Filing Income Tax Returns

Every Nidhi Company must file the annual Income Tax Returns by 30th September of the next financial year.

Form AOC-4, Filing of Financial Returns

For every company, it's imperative to file the financial return with the MCA (Ministry of Corporate Affairs). AOC-4 is the prescribed form for filing the financial statements of the company.

Financial statements need to be filed every year within 30 days of a company's AGM (Annual General Meeting). Moreover, the form should be certified by the Chartered Accountant in practice or the company secretary in practice.

MGT-7, Filing of ROC Annual Returns

Ministry of Corporate Affairs provides the form MGT-7 to all the companies to give their annual return details. Hence, every Nidhi Company is supposed to file MGT-7 within the due time as prescribed by the MCA.

Event-based Compliances of Nidhi Company

Generally, event-based compliances are those required to file only once during the company incorporation process.

Furthermore, such compliances must also be followed when there's any change in the company structure which are non-periodical.

Unlike the annual compliances of Nidhi Company, these compliances aren't required to be filed at every certain interval.

Checklist for Event-based Compliance of Nidhi Company

Here's the list of event-based compliances that every Nidhi Company needs to follow while any change in the organization takes place :

Any change in the Registered Office Address;

Change in the company's name;

Appointment or resignation of a Director;

Appointment or resignation of an Auditor;

Amendments in the company's objective;

Transfer of shares;

Change in the company's capital structure;

Increase of Authorised Capital of the company;

Appointment of the KMP (Key Managerial Personnel).

Penalties for Non-Compliance

If a Nidhi Company fails to comply by any provision of Companies Act, 2013 and Nidhi Rules, 2014, then the following will be the penalties :

The company along with every officer in default will be guilty and would be subject to fine extending to Rs. 5000/-.

If the contravention continues, the company will have to pay Rs. 50/- per day till the default continues.

Due dates for filing Nidhi Company Compliances

Being a Nidhi Company, you need to ensure you follow the compliances on time. Therefore, for your convenience, we have mentioned the due dates for filing Nidhi Compliances on time as follows :


Compliance of Nidhi Company Due Dates
AGM (Annual General Meeting) 30 th September
AOC-4 Within 30 days of AGM
MGT-7 Within 60 days of AGM
NDH 1 Within 90 Days of Financial Year
NDH 3 Half Yearly
Income Tax Return 30 th September

A. DO'S AFTER INCORPORATION FOR NIDHI COMPANIES :

1. Open a current account with any scheduled bank in the name of the Company and file Form 20A accordingly before commencing its business operations.

2. Within a period of one year, ensure that it has-

(a) not less than two hundred members;

(b) Net Owned Funds of Rupees Ten Lakh (Rs. 10,00,000) or more;

(c) Unencumbered (i.e. free from any kind of charges) term deposits of not less than ten per cent. of the outstanding deposits, and

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

In the event the Company is not complying with (a) or (d) above, it shall within thirty days from the closure of the first financial year, apply to the Regional Director in Form NDH-2 for extension of time.

3. Comply with the contents of the application form as prescribed.

4. For the purpose of identification, take proof of identity and address as prescribed (not older than two months) from depositors.

5. Adhere to prudential norms as prescribed under Rule 20 of the Nidhi Rules, 2014.

B. DONT'S AFTER INCORPORATION FOR NIDHI COMPANIES :

1. carry on the business of chit fund, hire purchase finance, leasing finance, insurance or acquisition of securities issued by any Body corporate;

2. issue preference shares, debentures or any other debt instrument by any name or in any form whatsoever;

3. open any current account with its members;

4. acquire another company by purchase of securities or control the composition of the Board of Directors of any other company in any manner whatsoever or enter into any arrangement for the change of its management, unless special resolution has been passed and obtained prior approval from Regional Director;

5. carry on any business other than the business of borrowing or lending in its own name. Provided that the Nidhi Company may provide locker facilities and earn rental income thereof but such income shall not exceed 20% of the gross income.

6. accept deposits from or lend to any person, other than its members;

7. pledge any of the assets lodged by its members as security;

8. take deposits from or lend money to any body corporate or trust or minor;

9. enter into any partnership arrangement in its borrowing or lending activities;

10. issue or cause to be issued any advertisement in any form for soliciting deposit:

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

12. Levy service charge for issue of shares.

C. SHARE CAPITAL AND ALLOTMENT BY NIDHI COMPANIES :

1. Allot to each deposit holder at least a minimum of ten equity shares or shares equivalent to one hundred rupees .

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

D. LOAN BY NIDHI COMPANIES :

1. Loan shall be provided only to members of the Company and further, subject to the following limits :


TOTAL AMOUNT OF DEPOSITS LOAN AMOUNT (In Lacs)
< 2 crores 2
2 crores > 20 crores 7.50
20 crores > 50 crores 12
> 50 crores 15

In case the Company has not made profits continuously in the three preceding years, it shall not make fresh loans exceeding 50% of the aforementioned amount.

2. The loan shall be given only against the following, namely :

gold, silver and jewellery;

immovable property, and

fixed deposit receipts, National Savings Certificates, other Government Securities and insurance policies.

E. RATE OF INTEREST :

1. The rate of interest to be charged on any loan given by a Nidhishall not exceed 7.5% above the highest rate of interest offered on deposits by Nidhi and shall be calculated on reducing balance method.

2. The maximum interest on savings account shall not exceed 2% above of what is being by the nationalized banks..

3. The rate of interest being offered on fixed and recurring deposits shall not exceed the rate of interest prescribed by the Reserve Bank of India which the Non-Banking Financial Companies can pay on their public deposits.

F. UN-NUMBERED TERM DEPOSITS :

The Nidhi Company shall keep invested an unnumbered term deposits with a scheduled commercial bank or post office, which shall be not less than 10% of the deposits outstanding at the close of business on the last working day of the second preceding month.

G. DIRECTORS OF NIDHI COMPANIES :

The director shall be the member of Nidhi and shall hold office for a term up to ten consecutive years on the Board of Nidhi.

H. OPENING OF BRANCHES BY NIDHI COMPANIES :

1. It may open branches, within the state, only if it has earned net profits after tax continuously during the preceding three years.

2. No Nidhi shall open branches outside the State where its registered office is situated.

3. No Nidhi shall open branches unless financial statement and annual return (up to date) are filed with the Registrar.

4. A Nidhi shall not close any branch unless it publishes advertisement, fixes a copy of such advertisement on the notice board of Nidhi Company and gives intimation of such closure to the Registrar thereof.

I. ACCEPTANCE OF DEPOSITS BY NIDHI COMPANIES :

1. It shall not accept deposits exceeding twenty times of its Net Owned Funds as per its last audited financial statements.

2. Fixed Deposits shall be accepted for minimum 6 months and maximum 60 months.

3. Recurring Deposits shall be accepted for minimum 12 months and maximum 60 months.

4. The maximum balance in a saving account qualifying for interest shall not exceed Rupees One Lacs at any point and the rate of interest on the same shall not exceed 2% above what being paid by nationalized banks.





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