Nidhi companies are registered as Non-Banking Finance Sector Company. Nidhi companies are registered to provide benefits to its members. The main function of the Nidhi Company is to borrow and lend money between the members.
Closing of Nidhi Company can be due to multiple reasons arising from external to internal causes. Closing of Nidhi Company defines that company would not be functional anymore. However, it is advised to follow the proper compliance and procedure defined for closing Nidhi Company.
In this blog, we will discuss various procedures for closing of Nidhi Company.
What do you mean by Closing of Nidhi Company?
The process of closing of Nidhi Company is known as Strike Off or Company Closure. Closing of Nidhi Company is done under newly notified rules, 2016. These rules are governed by section 248 of Companies Act, 2013.
It’s recommended by the government, that if no business activity is being carried nor the compliances are being performed by the Nidhi Company, it’s better to close the Nidhi Company. Here, Nidhi Company requires special skills adequately to ease you from all the responsibilities.
What are the advantages of closing of Nidhi Company?
If Nidhi Company is not considered to be functional and profitable, along with this if members of Nidhi Company are not willing to continue, it’s better to close it down.
Below mentioned are few advantages which Nidhi Company can get on closing;
- Compliance Free; Once Nidhi Company files its application for closing, company needs not to keep track over its compliances. However, the company would dissolve anyway.
- No Penalty; After Closure process is imitated, company shall not get worried about the state to pay penalty fee for undressed causes.
- No Record keeping required; After submitting the closure documents, there is a requirement for keeping and maintaining the documents.
- Save cost of yearly compliance; Once the company gets closed, it saves the cost of yearly compliance filing.
- No Director’s Default; After Nidhi Company Incorporation, company has to mandatorily perform certain compliances. In this case, if company fails in filing the annual documents to ROC, company along with its director are held liable for non – compliance. However, once the company is into its winding process, annual filing is not necessary until and unless ROC specify.
What are the Documents required for the closing of Nidhi Company?
Following are the mandatory documents required for closing of Nidhi Company;
- Indemnity Bond notarized by Directors (STK 3);
- Latest Statement of Accounts;
- Statement of Accounts furnishing details assets & liabilities of Company Audited by Chartered Accountant.
- STK 4 form attached in Affidavit by every company;
- Special Resolution or Consent of 75% Members;
Optional Documents (If applicable)
- Pan card of company
- Bank Account Closure Certificate
What are the ways to close the Nidhi Company?
- Defunct Company; A that cannot offer compliance in order to match the legal needs, along with where company is not making a return and other filings, in order to be legal on a yearly basis is known as Defunct Company.
- Winding up Voluntarily;
Winding up Voluntary means, a situation where a member of Nidhi Company wishes to close external and internal operations of the company, along with closing its external legal partnership that a company would have. This process includes the passing of a special resolution in the board meeting.
- Selling of Nidhi Company;
The other way to close the Nidhi Company is selling it off. The process is similar to Voluntary Closure; however, it included the control and the total member of present ownership is taken and is offered to the new interested buyers. All the properties and legal attachments will be transferred to the person who is buying the Nidhi Company.
What is the procedure of Closing of Nidhi Company?
- DSC and Application Filling- The first step is drafting of application and DSC to proceed further.
- Notice by ROC –After filing the closure application, ROC shall approve the application and further send notice.
- Finally Closed – During the closing process, if no one files an objection, company name is strike off, and company gets closed.
- Processing of Digital signature certificate should be processed;
- Drafting and submission of application shall be done only by the qualified person.
- All the completed documents shall be required to be submitted in all phases.
- The process required 20 to 25 working days, rest depends upon the processing time of government.
What are the criteria of fast closure of Nidhi Company?
- The company applying under FTE (Fast Track Exit) should not possess any asset and liability.
- The company should not have started any business action or operation since incorporation or minimum 1 year is required to be passed since last business action or procedure.
- The company has appropriately filed all the financials to the Registrar of Companies, till the time of its closure.
The process of closing of Nidhi Company is simple if taken all necessary steps. We at Corpbiz will help you in closing of Nidhi Company by taking all required measure which is mandatory for the process.
Read our article:New Winding Up Companies Rules (2020) under Companies Act 2013