Nidhi Company

Fit and Proper Criteria for Nidhi Finance Company Promoters

calendar21 Jun, 2022
timeReading Time: 3 Minutes
Nidhi Finance Company

The Central Government of India issued amendments to the Nidhi Rules, 2014, for ensuring the maintenance of the safeguard of the interest of the citizens of the country. The latest amended Nidhi Rules specifies the regulations for the Public Companies that seek to function as Nidhi Finance Company need to mandatorily obtain a declaration priorly from the Central Government of India before initiation of any acceptance of deposits.

Essential Amendments of the Nidhi Rules, 2022

In accordance with the safeguard interest of the citizens of the country, it is quite clear that before applying for becoming a member, the Applicant has to mandatorily ensure that a declaration of the Applicant Company as Nidhi Finance Company by the Central Government needs to be issued that is in accordance with the latest amendments of the Nidhi (Amendment) Rules, 2022 which are mentioned below as follows –

  • If a Public Company that is incorporated as a Nidhi and has a Share Capital of INR 10,00,000 is mandatorily required to declare their Company as a Nidhi Finance Company by the Central Government of India, which can be done by applying for the NDH – 4 Application Form that requires a minimum membership of 200 members and a NOF that is of INR 20,00,000 within 120 Days of the Company Incorporation.
  • It is mandated to compulsorily meet the Fit and Proper Criteria for Nidhi Finance Company for the Promoters and Directors of the Applicant Company in accordance with the Latest Amended Nidhi Rules, 2022.
  • Regulations needed for the maintenance of timely deposits is also mentioned in the latest amendments issued, which clearly states that if no declarations are issued by the Central Government of India within 45 days of the date of receipt of the NDH – 4 Application Form that is submitted by the Applicant Company, the Approval for the Company is assumed to be granted. However, this Rule is only applicable to the Applicant Companies that were incorporated after the enforcement of Nidhi (Amendment) Rules, 2022.

Fit and Proper Criteria for Nidhi Finance Company Promoters and Directors

The Applicant Company needs to attest a Declaration that states that all the Fit and Proper Criteria are met by the Promoters and Directors of the Company in accordance with the NDH – 4 Application Form.

The Fit and Proper Criteria for Nidhi Finance Company Promoters and Directors are mentioned as follows –

  • The Integrity, Genuineness, Moral and Ethical Behavior, Imperiality, Reputation and Character of the Promoters and Directors of the Applicant Company
  • The Promoters and Directors of the Applicant Company should not be involved in any of the following criteria which may result in immediate disqualification –
  1. There should not be any complaints filed or pending against the Promoters and Directors of the Applicant Company under Section 154 of The Code of Criminal Procedure (CrPC[1])
  2. Filing of Chargesheet in relation to any Economic Offences committed
  3. Any Restraining Order, Prohibition Order, or Department Order passed against the Promoters and Directors of the Applicant Company on criminal or civil matters in relation to Company Laws, Securities Laws, Financial Market in Force
  4. Any Order assed of Convictions filed against the Promoters and Directors of the Applicant Company that affects the moral and ethical character
  5. Involvement in any offences declared any not yet discharged
  6. The Promoters and Directors of the Applicant Company should not be declared of unsound mind
  7. The Promoters and Directors of the Applicant Company should not be declared as a Wilful Defaulter
  8. The Promoters and Directors of the Applicant Company should not be declared Fugitive against any Economic Offences
  9. The Directors of the Applicant Company should not be appointed as Directors of 5 or more Nidhi Companies.
  10. The Promoters of the Applicant Company should not be appointed as Promoter of 3 or more Nidhi Companies.

Conclusion

The Nidhi Rules 2014 was replaced by the latest amendments of the Nidhi (Amendment) Rules, 2022. The latest amendment was enforced to severe in the public interest with the essential objective being focused on the declaration of the applicable Company as a Nidhi Finance Company by the Central Government of India. Prior to this amendment, these Regulations although mentioned, they were not made mandatory to be declared by the Central Government.

Read our Article:Different Nidhi Company Forms and Their Uses

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