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Nidhi Company Compliance

A Nidhi company is similar to a non-banking financial entity that is recognised under section 406 of the Companies Act, 2013. The primary activity of a Nidhi Company is to borrow and lend funds to its members. The Nidhi Company needs to satisfy the provisions and rules given under the Companies Act, 2103 and Nidhi Companies Rules, 2014 and amended rules of 2022.

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An overview on Nidhi Company

A Nidhi company falls under section 406 of the Companies Act, 2013, read with Nidhi Rules 2014 and Amendment Rules 2022. Its primary undertakings are lending and borrowing money among its members. Such companies fall under the non-banking financing sector. Like other types of companies, the Nidhi Company should also file tax and compliance forms annually. The Nidhi Company should satisfy all the rules and Regulations given under the Companies Act, 2013 and Nidhi Company Rules 2014 and Nidhi Company (Amendment) Rules 2022. If a Nidhi company fails to follow such required compliances, it will be made liable for such default with its officers, and the penalty will be levied.

Nidhi Company is treated as a Public Limited Company. In order to prevent any legal actions, a Nidhi Company needs to follow the required compliances.

Post Incorporation Compliances of a Nidhi Company

There are few necessary compliances set out by the Nidhi Company Rules to be followed by every Nidhi Company within one year of its incorporation, such as:

  • The minimum number of members should be 200.
  • The Net owned funds (NOFs) should be Rs 20 lakhs,
  • The NOFs & the deposit should be in a ratio not greater than 1:20
  • Unencumbered term deposits must not be lower than 10 percent of the outstanding deposit as cited in Rule 14 of Nidhi Rules 2014 and Amended Rules of 2022.

Limitations Imposed on Nidhi Companies

According to the Rule 6 of Nidhi rules 2014, a Nidhi Company has been restrained from performing given undertakings

  • Undertake business activities relating to leasing finance, Chit fund, and Hire purchase.
  • Acquiring securities issued by a body corporate
  • Issue debentures, preference shares, or any debt instruments
  • Open current account with its serving members
  • Make any arrangements or acquisitions or concessions until the same is approved in the General meeting via a special resolution and get the approval of the Regional Director.
  • Perform other form of business in its name
  • Lend to or accept funds from third party
  • Lend to accept funding from body corporate.
  • Leveraging partnership arrangement for borrowing or lending operation.
  • Conducting publicity for obtaining any deposits in any form
  • Pledge assets lodged by its members as security.
  • Pay any incentive or brokerage for disbursing credits or deployment of funds to channelize deposit from its members.

Note:

If the company meets all the aforementioned provisions, it can facilitate locker facilities to its members if the income from locker render does not surpass 20 percent of the total income of the Nidhi company at any instance during the FY.

Private circulation of the particulars relating to FD schemes among members bearing the terms “for private circulation to members only” shall not be considered as an advertisement.

Types of Compliances

There are two types of compliances as mentioned in the Companies Act and Nidhi Company Rules: 

  1. Annual compliances of Nidhi Company

Annual Compliances are generally those compliances that include the status and performance of the Nidhi Company in the whole year. The annual compliances are filed annually, but few such compliances are filed after a certain interval of time. 

  1. Event-Based Compliances of Nidhi Company

Event-based compliances are only filed at the time of incorporation of Nidhi Company. And again, these compliances are needed to be fulfilled at the time of any alteration in the structure of the Nidhi Company, and such alteration is non-periodical. These compliances are not mandatorily to be filed at a fixed interval. 

Filing Compliance with Registrar of Companies as Per Nidhi Rules 2014 and Amended Rules 2022

Form

Due Date

Contents

Noteworthy Points

NDH – 1 Return of Statutory Compliance

Within ninety days from the closure of the first financial years & where applicable form the second Financial Years.

Details relating to members, deposits loans, reserves for the financial years,

E- Form GNL-2 Form relating to the submission of documentations with the registrar

NDH – 2 Application to Regional Director and Intimation to Registrar

 

Within thirty days from the closure of the financial year

Application relating to the extension of timeline for not meeting requirements of members and deposits as required post-incorporation.

E- Form RD -1 Applications made to Regional Director

NDH -3 application for Half Yearly return

Within thirty days from the closure of each half year

Details relating to members, deposits, loans, for the said duration. It entails details such as total members admitted in the half-year, overall members who ceased to be members as on date

E- Form GNL-2 Form relating to the submission of documentations with the registrar

NDH -4

For New Nidhi Company

 

Within the duration of sixty days post expiration of one year

From the date of incorporation

For Existing Nidhi Company


Within a timeline of one year from its incorporation date or within the duration of 6 months from the date of commencement of Nidhi Rules 2019, whichever is later

For filing application for declaration as Nidhi Company and updating of status

Failure to file form NDH -4

Companies shall not be permitted to file Form No.SH -7 (Notice to Registrar of any changes to share capital) and

Form PAS -3 (Return of Allotment)

NDH -5

A Nidhi shall not close any branch unless it— (a) publishes an advertisement in a newspaper in vernacular language in the place where it carries on business at least thirty days prior to such closure, informing the public about such closure;

 (b) fixes a copy of such advertisement or a notice informing such closure of the branch on the notice board of Nidhi for a period of at least thirty days from the date on which advertisement was published under clause (a); and (c) gives an intimation to the Registrar within thirty days of such closure.

Format of advertisement to be given while closing branch

 

AOC – 4

Within the duration of 30 days from the date of the Company’s AGM

Filing of Financial Statements

 

MGT -7

Within the duration of 60 days of the AGM

Annual return along with a list of members serving the company

 

Forms NDH-1 & NDH-3 should be filed with standard fees and should be approved by the concerned professional.

Limits under Rule 15 of Nidhi Rules 2014 for the grant of loan against certain deposit valuation are:

Deposit Made (Rs)

Loan Granted (Rs)

Less than 2 crores

2 lakhs

higher than 2 crores but lower than 20 crores

7.5 lakh

Higher than 20 crores lower than 50 crores

12 lakhs

50 crores or more

15 lakhs

A Nidhi company that has failed to ensure profitability in the three preceding financial year shall not disburse any new loans surpassing 50 per cent of the max. amount of loans cited above.  

A member cannot have access to any loans in case of previous defaulting history relating to loan repayment.

The loans can be disbursed only against the given security 

  • Gold (including gold jewellery)
  • Silver (including silver jewellery)
  • Property
  • Fixed Deposit
  • Insurance Policy

Checklist for compliances for Nidhi Company

There is an important checklist for Nidhi Company compliances which each Nidhi Company must fulfil with the time. 

The checklist for Annual compliance:

  • Form NDH 1
  • Form NDH 2
  • Form NDH 3
  • Form NDH 4
  • Form NDH 5
  • Declaration of Nidhi by the Central Government
  • Form ADT 1
  • Preservation of Book of Accounts
  • Protection of the Statutory Register
  • Financial statements
  • Director’s report
  • Statutory Meetings
  • Filing of Annual Income tax returns 
  • Form AOC 4
  • Form MGT 7

The checklist for Event-based compliance:

  • Change of name of the company
  • Alteration in the address of the Registered Office
  • Appointment or resignation of any Director
  • Appointment or resignation of any Auditor
  • Changes in objectives of Company (MOA)
  • Transfer of shares
  • Alteration in capital structure
  • Increase in authorised capital
  • Appointment of KMP (Key Managerial Personnel)

Penalties for non-compliance

When the Nidhi Company fails to comply with the required compliances as mentioned under the Companies Act or the Nidhi Company Rules, then it is made liable for:

  • Rs. 5000, with other officers in case of non-payment or default 
  • And then for Rs. 50 per day till the default continues.

The Nidhi Company (Amendment) Rules 2022

The followings are the said amendments made under the Nidhi Company (Amendment) Rules 2022:

  • Branch 

The definition of the Branch has been inserted. According to this rule, Branch means a place other than the registered office of Nidhi Company.

  • Deposit raised by the company 

No company shall raise the deposit for any member or gives a loan to any of its members if:

It does not comply with the rules or requirements of Nidhi Company New Rules,

if the application in Form NDH -4 has been rejected by the central government,

However, not anything written under these rules shall apply to the company incorporated on or after the commencement of these Nidhi Company Amended Rules. 

  • Declaration of Nidhi Company

Any public company wanting to be declared as a Nidhi company shall apply in Form NDH-4 within a period of 120 days from the date of its incorporation for declaration as a Nidhi company, after fulfilling the following conditions:

     (i) it has not less than 200 members;

    (ii) it has Net owned Funds of Rs. 20 lacs or more

After examining the application, the central government conveys its decision within 45 days to the company, and if it fails to do so within 45 days, it will be deemed to be approved.

When the central government gets satisfied that the company meets all the requirements, then it will notify it as Nidhi Company or Mutual Benefit Society in the official gazette. However, the company shall commence its business only if the central government approves its application. 

  • Fit and proper person

The company shall attach a declaration with regard to the fulfilment of fit and proper person by all of its directors and promotors with the Form NDH-4.

To determine that any promoter or director is a fit and proper person, the following criteria should be looked upon:

(a) Integrity, honesty, ethical behaviour, fairness, reputation and character 

(b) Not incurring any of the following disqualifications:

(i) Any complaint or information under section 154 of CrPC has been filed or is pending against him

(ii) Chargesheet filed against him in the matter of economic offences

(iii) Restraining, prohibition or department order has been passed against him in any matter related to company law, securities law or financial market in force

(iv) Conviction order passed against him involving moral turpitude

(v) Declared involvement and not been discharged 

(vi) Unsound mind

(vii) Wilful defaulter

(viii) Fugitive economic offender

(ix) Director of five or more companies  

(x) Such person is the director in five or more than five; or promoter in three or more than three Nidhi Companies

  • Minimum paid-up share capital 

In the amendment, the minimum paid-up share capital has been raised from 5 lakhs to 10 lakhs.

  • Rules for an existing company

Nidhi company existing on the date of enforcement of Nidhi Company New Rules shall comply with all the requirements within a period of 18 months from the date of such enforcement. 

  • Rule 5 of Nidhi Rules

Rule 5 talks about the minimum number of members, Net owned fund, etc., and in the amendment, it has been mentioned that it will not be applicable for the companies incorporated as Nidhi Company on or after the enforcement of Nidhi Company New Rules 2022. So, the requirement of filling of application in Form NDH 1 within 90 days from the incorporation of the company shall not be applicable to the companies incorporated on or after the enforcement of new Rules.

  • Restrictions on Nidhi Company

In the new rules, it has been stated that the Nidhi Company shall not raise loans from the banks or any financial institutions or any other source to advance the loans of its members. 

Another restriction given to Nidhi Company is on acquiring or purchasing securities or controlling the composition of the Board of Directors of any other company or from entering into an arrangement for the change of its management.

  • Transfer of the shares

Any member shall not transfer more than 50% of their shares during the subsistence of such loan or deposit. However, members shall retain the minimum number of shares required.

  • Net owned funds

The requirement of Net owned funds for Nidhi company has been changed from 10 lakhs to 20 lakhs. 

  • Opening of branches

In case a Nidhi company wants to open more than three branches outside the district or any branch outside the district, then it shall now have to apply in Form NDH 2 along with the fee as required under the Companies (Registration Offices and Fee) Rules, 2014 and intimate about such opening to the Registrar within 30 days from the opening. However, it cannot open branches unless it has filed its financial statement or annual return to the Registrar. And, it shall not open its Branch outside the state where its registered office is situated.

  • Closing of Branches

A Nidhi company shall not close any branch unless the proposal to close the Branch with the plan of how the existing deposits shall be paid and how the existing loan shall be recovered is approved by the Board of Directors in the meeting and has obtained the prior approval of Regional Director as per the Companies (Registration Offices and Fee) Rules, 2014. The regional director shall pass the order of approval within 30 days of the application. After obtaining approval from Regional Director, the Nidhi Company shall publish in the local newspaper at the place of its business prior to 30 days of such closure, and it shall also fix a copy of the information of closure on the notice board of Nidhi Company for a period of thirty days since the day of such publication and give an intimation to the Registrar within 30 days of such closure. Also, any place which is not a registered office or Branch where a Nidhi Company carries its business shall be closed within a period of 6 months from the date of enforcement of Nidhi Company (Amendment) Rules 2022 and also intimate this to the Registrar. 

  • Silver

Under Rule 12 and Rule 20, the word silver shall be added next to the word gold where ever it is stated, so from now Nidhi Company will able to grant loans to its members for silver jewellery.

  • Joint shareholders loan

In the case of joint shareholders loan Nidhi Company will be able to it only to the member whose name appears first in the register of members.  

  • Dividends

A Nidhi company shall not declare dividends exceeding 25% in a financial year, and this has been added to Nidhi Company New Rules under Rule 18 by substituting old Rule 18. 

  • Compliances by certain companies

The Nidhi Company New Rules have added two provisos under the first proviso of Rule 23A. These provisos deal with compliance with the requirements of Rule 3A. These provisos state that if a company does not comply with the requirements or fails to comply with any of the requirements on or after the date of enforcement of Nidhi Company New Rules or if the central government has rejected the application, then it shall not raise the deposit from its members or provide any loan to its member under the provisions of these rules from the date of non-compliance or the date of enforcement of the Nidhi Company Amended Rules or the rejection of the application, whichever is later. And, also that the deposit raised by a company after the date of non-compliance or date of enforcement of the Nidhi Company New Rules or the date of rejection of the application, whichever is later, shall be deemed to have been raised in pursuance of Chapter V of the Companies Act and shall be subject to all the requirement of that chapter or any other provisions of the said Act. No fee shall be charged for filing an application under this rule if it is filed within nine months from the enforcement of the new rules; however, earlier, it was six months.

  • Forms

In the Annexure, an amendment has been made to Nidhi Company New Rules by making changes to the old rule 2014. The changes have been made in the heading of NDH 2 Form, serial no. 4, serial no. 6, in Form NDH 3 and NDH 4. Also, after NDH 4, another Form of NDH 5 is inserted. 

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Frequently Asked Questions

To incorporate a Nidhi Company it is important to satisfy following rules:

  • It ought to have in any event atleast 3 Directors.
  • It ought to have in any event atleast 7 Members.
  • The principle goal to be written in the MOA ought to be to develop the propensity for frugality and reserve funds among its individuals. Also, it can acknowledge stores and loan cash just to its individuals and will work for the shared advantage of its individuals.
  • It must have at any rate 200 individuals/investors.
  • Least Net Owned Fund ought to be Rs. 10 Lakhs.
  • Unhampered term deposit must be in any event 10% of the term store.
  • The proportion of Net Owned Fund to term store ought not be under 1:20.

The Nidhi Company utilizes the assets in loaning to investors according to Nidhi Rules. It loans such cash as little credit for business and fund.

  • Minimum of seven members can form a Nidhi Company out of which three are appointed as Directors of the company
  • Nidhi Company can come into existence with a minimum share capital of Rs 5, 00,000.
  • In case preference shares are issued they are to be redeemed as per the same terms of the issue.
  • A minor cannot considered as the member of Nidhi Company
  • Company must have “Nidhi Limited” in its name.
  • Minor cannot be a member of a Nidhi Company
  • A trust or a corporate body cannot be the member of Nidhi Company
  • Can't acknowledge the store of over 20% of Net Owned Funds.
  • Nidhi Company can't open branches in case it fails to earn any profit after assessment for sequential three money related years.
  • The rate of interest on the credit will not surpass 7.5% over the most noteworthy pace of intrigue offered on deposits.
  • They are not permitted to begin the matter of chit funds, Insurance, Hire Purchase Finance, Leasing Finance and obtaining of shares gave by organizations.
  • Nidhi Company can't give protections, for example, preference shares, debentures and so on.
  • They are denied from opening any present record with its individuals.
  • It can't go into organization for doing lending and getting business.
  • It isn't permitted to secure some other organization.

Any individual who is over 18 years old according to the standard age verification can turn into an individual from the Nidhi Companies. The individual covetous of turning into a part ought to have legitimate ID Proof and Address Proof.

  • As they are joined into the idea of Public Company so rules and guidelines of Companies Act, 2013 are pertinent.
  • RBI arrangements identified with Interest rate payable on store are relevant to Nidhi Companies. In any case, the center arrangements of RBI are not material to Nidhi Companies as RBI has absolved the Nidhi Companies from the equivalent.
  • Nidhi Rules, 2014.
  • Compliances help in forming exact insights about the company’s working performance.
  • It is necessary for every company which is registered under the Companies Act 2013 to file for the compliances.
  • Moreover Nidhi Company falls under the category of public company hence in order to protect the interest of its stakeholders it becomes compulsory for the Nidhi Company to follow the compliances.

Nidhi with the object of developing the propensity for thrift and reserve funds among its individuals, accepting deposits from, and lending to, its individuals.

The essential object of Nidhi is to carry on the matter of accepting deposits and loaning cash to members.

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