An RBI licence is not necessary for the lending business type known as Nidhi Company. Nidhi Company must submit annual compliances, also known as Nidhi Company Compliances, just like any other business. The Companies Act of 2013 and the Nidhi Rules of 2014 both outline these compliances. The Nidhi Company’s yearly compliance is a period, and since these compliances are submitted annually, they must be filed periodically after specific gaps in time. These compliances are mostly used to paint a clear image of the company’s work state and performance at a certain point in time. The Nidhi Company must adhere to all requirements set out by the Nidhi Regulations of 2014 and the 2013 Companies Act.
What Is The Nidhi Company?
Section 406 of the 2013 Companies Act governs or regulates The Nidhi Corporation. A firm that has been formed as a Nidhi with the purpose of encouraging its members to practise thrift and saving, accepting deposits from and lending to members exclusively for their mutual advantage, is what is meant by section 406 (1) of the Indian Penal Code. The person who wishes to start a business with the least amount of capital investment should choose this sort of business.
Nidhi Business Registration Benefits
Simple to Create a Business
A Nidhi Company can be launched with 7 individuals, of whom 3 will be chosen as directors. It just takes 10 to 15 days to form a Nidhi firm.
The Nidhi Corporation registration procedure may begin with a minimum capital investment of Rs 5,00,000. The business also gives customers the option to invest their money within 60 days after finishing the registration procedure.
Nidhi Corporation Has a High Level of Certainty
Nidhi Company’s main goal is to encourage its partners to develop a saving habit. As a result, Nidhi Business may be viewed as a long-term investment because its partners will continue to practise conserving money.
No RBI Rules Exist
The Nidhi Corporation does not require any RBI clearance because it satisfies the requirements for an NBFC. To regulate the commercial operations and workings of such firms, the Nidhi Regulations, 2014 were developed.
Very Little Risk
Due to the Nidhi Company’s nature of holding deposits and lending money to its partners in accordance with the Nidhi Regulations 2014, the risk level associated with the registration process is modest. It is a safe, reliable method of offering very low-interest loans to its members.
Documents Needed To Comply With Nidhi Company Requirements
The following compliances must be observed:
- The annual Nidhi Company compliances aid in developing a precise understanding of the operation and performance of the business.
- Every firm must register in accordance with the Companies Act of 2013 in order to submit the yearly compliances.
- If preference shares are issued, they must be redeemed in accordance with the same conditions as the issue.
- Additionally, Nidhi Company meets the definition of a public business; as a result, it aids in safeguarding the interests of its members and makes compliance with regulations a must for all Nidhi Companies.
Pre-Incorporation Nidhi Company Compliances
The crucial pre-incorporation Nidhi Company compliances listed below are necessary for Nidhi Business Registration:
- For a Nidhi Corporation to be registered, there must be a minimum of 7 members, of which 3 must be directors.
- A capital requirement of at least Rs. 5 lakhs must be met.
- If the Nidhi Corporation does not make a profit after the inspection for three consecutive financial years, it is not allowed to open new branches.
- The maximum interest rate on a loan is 7.5% over the highest rate of interest offered on deposits.
- The phrase “Nidhi Limited” must come last in a company’s name.
- Nidhi Business does not permit partnerships with trusts or corporations.
Post-Incorporation Nidhi Company Compliances
Following the Nidhi Corporation Registration, the following essential compliances must be met:
- Within a year after its organisation, it should have 200 members or more.
- According to the Nidhi Regulations for 2022, the NOF (Net Owned Fund) should be Rs 20 lakhs.
- NOFs to deposits shouldn’t be more than one to twenty.
- Upkeep of the books of accounts.
- Keep the official Registers updated.
- Establish statutory meetings.
Types of Nidhi Company Compliances
You can check the two different types of Nidhi Company Compliances listed below, which are specified in the Nidhi Company Rules and the Companies Act:
These compliances often reflect the condition and performance of the Nidhi Corporation over the course of the whole year. Also, these Nidhi Company Compliances are submitted annually; however, not many of them are submitted after a predetermined period of time.
These compliances are filed during the Nidhi Company Registration and must be met at any change in the Nidhi Company’s organisational structure, even if the change is not periodic. These Nidhi Company compliances are not needed to be filed at a set frequency.
Annual Compliance of an Indian Nidhi Company or Organisation
The annual Nidhi Company Compliances is cyclical, and because it is frequently reported annually, it must be filed on a regular basis at predetermined intervals. These annual compliances are meant to provide readers a clear image of the company’s current state of operations and Nidhi Company’s performance over the previous year. The Nidhi Corporation must adhere to all compliance requirements outlined in the Nidhi Regulations of 2014 and the Companies Act of 2013. To keep the government informed of the company’s operations and functional divisions, Nidhi Companies in India are required to adhere to the annual Nidhi Compliances listed below:
|Form NDH-1: Return of Statutory Compliance||This form includes all the data for the entire financial year on reserves, deposits, loan members, etc. The documents are sent to the Registrar using E-form GNL-2.||90 days following the end of the financial year.|
|Form NDH-2: Extension of time||If the firm fails to enrol at least 200 new members during the first year of establishment, this form must be filled out. Neglecting to keep the NOF to deposit ratio at 1:20.||Within 30 days of the Financial Year’s end, this Form must be submitted together with the required fees.|
|Form NDH-3: Half-yearly return||This Form must be submitted to the ROC.||30 days before the end of the half-year.|
This form is used to update the company’s status and declare it to be
a Nidhi Business.
During 120 days after the elapse of a year from the date of
establishment for new companies.|
Within one year after the date of incorporation or within six months of the start date of the Nidhi Regulations, whichever comes later, for an existing Nidhi Company.
|Form AOC-4||This Form is for filing financial documents & other supporting documents to the ROC.||30 days after the AMG (Annual General Meeting).|
|ITR-6||Financial Statement||By September 30|
|Form MGT-7||Annual Filing||60 days after the AMG (Annual General Meeting).|
Event based Nidhi Company Compliances
Event-Based Nidhi Company Compliances are often only required to submit one document as part of the registration process. Moreover, these compliances must be adhered to whenever the non-periodic structure of the Nidhi Corporation changes. The list of Event-Based Nidhi Company Compliances is provided below:
- Any name change for the business.
- Address change for the registered office.
- Share transfer.
- Selection of the KMP (Key Managerial Personnel).
- Appointing, dismissing, or registering a director or auditor.
- Increased the company’s permitted capital.
- Any modifications to the company’s goal.
- Any more event-based changes.
What Consequences Apply for Non-Compliance?
For any Nidhi Business in India, filing compliances is required. You may see the penalties for non-compliance that the Nidhi Corporation faces below: –
- If the Nidhi Company fails to comply with the Nidhi Company Compliance, the company and the responsible executives might face fines of up to Rs. 5000.
- If the breach is continued, the firm would be subject to a daily fine of Rs. 500.
New Compliance Guidelines for Nidhi Business
The Nidhi (Amendment) Regulations, 2022, issued by the Ministry of Corporate Affairs, strengthen the compliance requirements for the Nidhi Corporation.
- After 120 days of establishment, every public business that is registered as a Nidhi Company and has a share capital of Rs. 10 lakhs must file a Form NDH-4 and apply to the Central Government to be notified as a Nidhi Company.
- Within 14 months of establishment, the Nidhi Corporation must get permission or licence from the Central Government to begin operations.
- The organisation must have at least 200 members and a NOF of Rs. 20 lakhs.
- During 45 days of completing the NDH-4 Form, if a corporation hasn’t heard anything from the central government, the approval is deemed to be given.
Restrictions on the Nidhi Company
It is difficult to register a Nidhi Corporation in India; there are a number of requirements that all parties involved or members must abide by. A Nidhi Corporation generally is not allowed to engage in any of the following activities:
- A firm shouldn’t engage in the leasing finance, chit fund, purchase of securities or insurance, or hire buy industries.
- Every member of a Nidhi Business should not have a current account opened for them.
- None of the assets that are offered as security by the Nidhi Company’s members may be pledged.
- Any person or non-member who is not a member of the Nidhi Company shouldn’t be allowed to borrow money from or deposit it with the Nidhi Company.
- It is improper for a Nidhi Corporation to issue debentures or preference shares.
- A Nidhi Business shouldn’t sign any contracts or pay commissions to promote deposits.
- This business is not permitted to publish any advertisements.
Nidhi Companies was founded to encourage its shareholders to save money for unanticipated costs. By carefully planning their savings, individuals may be able to achieve financial independence and be ready for unforeseen costs. In order to avoid penalties and maintain efficient operations, a Nidhi corporation must comply with yearly filing requirements and other compliances.