Nidhi Company

Analysis of Nidhi (Amendment) Rules, 2023

calendar01 Feb, 2023
timeReading Time: 10 Minutes
Analysis of Nidhi (Amendment) Rules, 2023

The MCA or the Ministry of Corporate Affairs vide a notification dated 20 January 2023 named Nidhi (Amendment) Rules, 2023 amended the Nidhi Rules of 2014 in the exercise of its powers granted under Section 406 (1) read with Section 469 (1) and (2) of the Companies Act of 2013. The notification aims to amend forms NDH-1, NDH-2, NDH-3, and NDH-4. It shall come into effect from 23 January 2023. Before diving into the amendments brought forth by the notification, let us understand what a Nidhi (Amendment) Rules, 2023.

What is a Nidhi Company?

A Nidhi company is a Non-Banking Finance Company or an NBFC which is formed with the specific purpose of borrowing and lending money to its members. It has been granted specific exemptions from the Reserve Bank of India or RBI in the sense that it doesn’t need to obtain prior approval from the RBI before acquiring registration. Generally, it is mandated that NBFCs shall obtain prior permission from the RBI before obtaining registration. However, Nidhi companies are not required to receive such approval from the RBI. A Nidhi company is governed by the Ministry of Corporate Affairs and is registered in accordance with Section 406 of the Companies Act of 2013 and according to the Nidhi Rules of 2014.

As provided under the Nidhi Rules of 2014. Nidhi companies are formed with the objective of “cultivating the habit of thrift and savings among its members and receiving from and lending to the members for their mutual benefit, also duly complying with the rules formed by the Central Government”. Nidhi companies are also called mutual benefit companies.

For a Nidhi company to be incorporated, it must be a public company but at least seven shareholders and three directors. After one year of its incorporation, it must have net owned funds of at least ₹10,00,000. The net owned funds shall comprise of free reserves and equity share capital after reducing accumulated losses and intangible assets. The net owned funds to deposit ratio is required to be 1:20, and the unencumbered term deposits must not be less than 10% of the deposits. Moreover, there must be at least 200 shareholders.

A Nidhi company is expressly prohibited from dealing with securities business, leasing of finances, chit funds, insurance business, hire purchase finance, issuing debt instruments or shares and accepting money from any other person or entity other than its own members or lend fans to an entity or person that is not its member.

There are certain documents are required for the incorporation of a Nidhi company, and they are as follows:

  • proof of identity of the shareholders and directors
  • address proof of the shareholders and directors
  • copy of the pan card of the shareholders and directors
  • passport size photographs of the shareholders and directors
  • If there is a registered office for the company, then proof of ownership of the premises, like a sale deed. If the office space is on a rented property, then the lease deed and no objection certificate from the landlord. The applicant shall also provide utility bills like the electricity bill or water bill for the office space.

Nidhi (Amendment) Rules, 2023 – A Brief

The Nidhi (Amendment) Rules, 2023, was notified by the MCA[1] on 20 January 2023 to amend certain forms pertaining to Nidhi companies as provided under the Nidhi Rules of 2014. The forms which have been amended are Form NDH-1, Form NDH-2, Form NDH-3, and Form NDH-4. The amended version of these forms has been attached in the Annexure of the Nidhi (Amendment) Rules, 2023.

  • Form NDH-1 (Nidhi (Amendment) Rules, 2023)
    This form is titled “Return of Statutory Compliances”. The laws governing Form NDH-1 are Section 406 of the Companies Act of 2013, read with Rule 5 (2) of the Nidhi Rules 2014. All Nidhi companies are required to file the return of statutory compliances under Form NDH-1 before the expiry of 90 days from the end of its first financial year or second financial year, wherever applicable, from the date of incorporation of the company.

Form NDH-1 shall be filed with the Registrar along with the prescribed fee as is provided under the Companies (Registration Offices and Fees) Rules of 2014. In case there is any delay in filing the form, as mentioned above, additional late fees shall be applicable. Before filing the form as above, it must also be certified by a chartered accountant in practice or cost accountant in practice or a company secretary in practice.

Details to be filled in Form NDH-1

The applicant is required to fill in details pertaining to the following:

  1. The company, like its name, registered office address, email ID, corporate identification number or CIN, date of incorporation of the company, and the end date of the financial year.
  2. The number of members of the company who are subscribed to the memorandum from the date of incorporation of the company till the date of the closure of the first financial year or the next financial year, wherever applicable, in accordance with Rule 5 (1) of the Nidhi Rules of 2014, number of persons who were admitted as members and who ceased to be members in the above mentioned and the total number of members at the closure of the first or second financial year, as applicable.
  3. Whether the number of members at the end of the first or second financial year, wherever applicable, as per Rule 5 (1) of the Nidhi Rules of 2014, is more than 200.
  4. financials of the company like the paid-up equity share capital, free reserves, accumulated losses, intangible assets and net owned funds,
  5. Unencumbered term deposits: total unencumbered deposits along with break up of deposits in scheduled commercial banks and the post office, outstanding deposits on the last working day at the close of business of the second last month.
  6. The ratio of net owned funds to deposits and whether the net owned funds to deposits ratio at the closure of the first or second financial year, as applicable, as per Rule 5 (1) of the Nidhi Rules of 2014, is not less than 1:20.

Attachments to Form NDH-1

There are specific attachments which have to be added while filing Form NDH-1, and they are as follows:

  1. List of all the members of the company along with their PAN, residential address and the amount of deposit which has been accepted by each of them
  2. The breakup of deposits with the bank or post office, along with the branch details and account number
  3. Any other optional attachment
  • Form NDH-2 (Nidhi (Amendment) Rules, 2023)
    This form is titled “Application to Regional Director and Intimation to Registrar”. Form NDH-2 is filed to apply to the regional director for an extension of time. It is governed by Rule 5(3), Rule 6(d), Rule 10(3), Rule 10 (6)(a) and Rule 14 of the Nidhi Rules of 2014. Form NDH-2 is required to be filed following the mandate under Rule 5(3) of the Nidhi Rules of 2014.
    Rule 5(3) states that in situations where a Nidhi company has not complied with Rule 5 (1) (a) or (d), it is required to apply to the Regional Director for an extension of time before the expiry of 30 days from the date of the end of the first financial year under Form NDH-2. When the Regional Director receives such an application, she may consider it and pass requisite orders before the end of 30 days from the receipt of such application. The Regional Director can provide an extension for up to a year from when the application was received. A prescribed fee, as provided under the Companies (Registration Offices and Fees) Rules of 2014, shall also be submitted along with the form. Before filing the form as above, it must also be certified by a chartered accountant in practice or cost accountant in practice or a company secretary in practice.

Details to be filled in Form NDH-2

The applicant is required to fill in details pertaining to the following:

  1. The company, like its name, registered office address, email ID, corporate identification number or CIN, date of incorporation of the company, financial year end date or date of opening or closure of branch or proposed date closure of branch or date of closure of the collection centres.
  2. The purpose for which the application is being filed, namely, whether it’s for:
    • the extension of time as provided under Rule 5 (3) of the Nidhi Rules of 2014 or
    • taking the approval of the regional director to open a branch as per Rule 10(6) of the Nidhi Rules of 2014 or
    • the approval of the regional director to close the branch in accordance with Rule 10(6) of the Nidhi Rules of 2014 or
    • intimating the Registrar to the opening or closing of a branch as per Rule 10 of the Nidhi Rules of 2014 or
    • intimating the Registrar of the closure of collection centres as per Rule 10 of the Nidhi Rules of 2014 or
    • the approval of the regional director to withdraw unencumbered deposits as per Rule 14 of the Nidhi Rules of 2014
  3. The number of members of the company who are subscribed to the memorandum.
  4. The ratio of net owned funds to deposits.
  5. Branches or collection centres of the company along with their address.
  6. Profits of the company for the last three financial years
  7. if the application is being made seeking to withdraw unencumbered term deposits temporarily, then the reason for the withdrawal
  8. details with justification and explanation for the application
  9. board resolution passed, including further information regarding the date of passing of the board resolution, mode of the resolution, number of votes cast in favour and against the resolution

Attachments to Form NDH-2

There are specific attachments which have to be added while filing Form NDH-2, and they are as follows:

  1. Last available audited financial statements
  2. List of all the members of the company along with their PAN, residential address and the amount of deposit which has been accepted by each of them
  3. Any other optional attachment
  • Form NDH-3 (Nidhi (Amendment) Rules, 2023)
    This form is titled “Return of Nidhi Company for the Half Year Ended”. Form NDH-3 is required to be filed by Nidhi companies to follow the mandate of filing half yearly returns before the expiry of 30 days from the close of each half year with the Registrar of Companies. It is governed by Rule 21 of the Nidhi Rules of 2014.
    Rule 21 states that every Nidhi company is required to file half yearly returns with the Registrar of companies under Form NDH-3 before the expiry year 30 days from the closure of each half year. A prescribed fee, as provided under the Companies (Registration Offices and Fees) Rules of 2014, shall also be submitted along with the form. Before filing the form as above, it must also be certified by a chartered accountant in practice or cost accountant in practice or a company secretary in practice.

Details to be filled in Form NDH-3

The applicant is required to fill in details pertaining to the following:

  1. The company like its name, registered office address, email ID, corporate identification number or CIN, date of incorporation of the company
  2. The date on which the half year ends.
  3. branches of the company
  4. Profits of the company
  5. The number of members of the company who are subscribed to the memorandum at the beginning of the half year, the number of new members admitted during the half year, the number of people who ceased to being such members during the half year and the total number of members at the end of the half year.
  6. Deposits: details regarding the nature of deposits, balance of deposits at the beginning of the half year, deposits received and repaid during the period and balance of deposits at the end of the period.
  7. Loans: details regarding the nature of loans, the balance of loans at the beginning of the half year, loans disbursed and repaid during the period and the balance of loans at the end of the period.
  8. Any litigation which is pending at the start of the half year filed and disposed of during the half year and the number of outstanding litigations at the closure of the half year.
  9. Unencumbered term deposits
  10. Ratio of net owned funds to deposits.
  11. Bank or post office where deposits have been placed
  12. Financials of the company like the paid-up equity share capital, free reserves, accumulated losses, intangible assets and net owned funds, amount of preference share capital which is outstanding at the commencement of the half year, redeemed during the half year and outstanding at the closure of the period.

Attachments to Form NDH-3

There are specific attachments which have to be added while filing Form NDH-3, and they are as follows:

  1. List of all members of the company along with details of their name, status as a member, members added during the half year, members who eased as members of the company during the half year period, residential address, PAN and amount of deposits taken from each member.
  • Form NDH-4 (Nidhi (Amendment) Rules, 2023)
    This form is titled “Form for filing application what accreditation as Nidhi company and for updation of status by Nidhis”. All Nidhi companies which have been incorporated either before or after the commencement of the Nidhi (Amendment) Rules of 2019 are required to file Form NDH-4 to apply to be declared as a Nidhi company or to update their status as a Nidhi company. Before filing the form as above, it must also be certified by a chartered accountant in practice or cost accountant in practice or a company secretary in practice.
    Nidhi companies incorporated on or after 28 April 2014 are required to file this form to declare their status as a Nidhi company. Nidhi Companies incorporated after the commencement of the Nidhi (Amendment) Rules of 2019 are required to file Form NDH-4 before the expiry of 60 days from one year after the incorporation of the company or the period till which an extension of time has been granted by the regional director in accordance with Rule 5(3) of Nidhi Rules of 2014 filed under Form NDH-2, whichever is later.
    Nidhi companies incorporated before 28 April 2014 shall file this form to update their status. Companies which have been incorporated before the commencement of the Nidhi (Amendment) Rules of 2019 are required to file Form NDH-4 together to declare or update their status as a Nidhi company either before the expiry of one year from the date of incorporation of the company or within nine months the date of commencement of the Nidhi (Amendment) Rules of 2019, whichever is later.
    It is governed by Section 406 of the Companies Act of 2013, read with Rule 3A. Rule 3B, Rule 23A and Rule 23B of the Nidhi Rules of 2014.

Details to be filled in Form NDH-4

The applicant is required to fill in details pertaining to the following:

  1. The company, like its name, registered office address, email ID, corporate identification number or CIN, and date of incorporation of the company.
  2. the number of members of the company who are subscribed to the memorandum from the date of incorporation of the company till the due date of filling out the application,
  3. Financials of the company like the paid-up equity share capital, free reserves, accumulated losses, intangible assets and net owned funds,
  4. deposits
  5. The ratio of net owned funds to deposits.
  6. branches of the company
  7. profits of the company
  8. other details pertaining to the objectives of the company, the purchase of securities, and whether the company has complied with the Nidhi Rules of 2014.

Attachments to Form NDH-4

There are specific attachments which have to be added while filing Form NDH-4, and they are as follows:

  1. Copy of the notification via which the company was declared a Nidhi company, the Companies Act, or any other previous company law
  2. List of all the members of the company along with their PAN, residential address and the amount of deposit which has been accepted by each of them
  3. The breakup of deposits with the bank or post office, along with the branch details and account number
  4. A certificate which has been signed by two directors of the company in relation to the number of members of the company on the date of the application, which shall not be less than 200 members.
  5. Declaration in relation to the fulfilment of the criteria as mentioned under Rule 3B (3) of the Nidhi Rules of 2014 regarding “fit and proper person” by all the directors and promoters of the company.
  6. A copy of the resolution passed by the board of directors supporting the proposal of the company.
  7. Any other optional attachment

Conclusion

A Nidhi company is a Non-Banking Finance Company which is formed with the sole purpose of borrowing and lending money only to its members. It is expressly prohibited from engaging in activities other than the purpose for which it was formed like securities business, leasing of finances, chit funds, insurance business, hire purchase finance, issuing debt instruments or shares and accepting money from any other person or entity other than its own members or lending funds to an entity or person that is not its member. The Nidhi (Amendment) Rules, 2023, was notified by the MCA to amend certain forms pertaining to Nidhi companies which are provided under the Nidhi Rules of 2014. The forms that have been amended are Form NDH-1, Form NDH-2, Form NDH-3, and Form NDH-4. The amended version of these forms has been attached to the Annexure of the Nidhi (Amendment) Rules, 2023 and shall come into effect from 23 January 2023.

Read Our Article: Guide On Benefits Of Nidhi Company Registration In India

Request a Call Back

Are you human? : 3 + 7 =

Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality