NIDHI COMPANY COMPLIANCE, (2014)

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Nidhi Company
Compliances
December 10, 2019 Authored by Corpbiz
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NIDHI COMPANY COMPLIANCE, (2014)
Nidhi as the Hindi word denotes sampatti is a
type of public company which may be incorporated
with an exclusive object of cultivating the habit
of thrift and savings amongst its members,
deposits from, and lending to, its members only,
for their mutual benefit.. The basic function of
a Nidhi is to promote the savings and utilization
of funds by its members and to safeguard the
financial conditions of its members. Introduction
A Nidhi Company is a kind of financial company.
Nidhi Companies are formed to borrow and lend
money to its members. It is dependent on the
principle of mutual benefit and instils the
habit of saving among its members. These
companies are more operative in the southern part
of India. Nidhi Companies do not need to
register for a license from Reserve Bank of India
(RBI). However, they have to be registered as a
public company and their names should end with
Nidhi Limited. A Nidhi Company works through
its members. Any person who is a member of a
Nidhi can make deposits and borrow or take loans
when need be.

• A Nidhi must be
• A company,
• Incorporated as a Nidhi,

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• With the object of cultivating the habit of
  thrift and saving amongst its members,
• Receiving deposit from and lending to its members
  only,
• For their mutual benefit,
• Complies with such rules.
• Objective
• Nidhi is Public Limited Company formulated with
  the primary object to carry on the business of
  accepting deposits and lending money to
  member-borrowers only against jewels, mortgage
  of immovable property and fixed deposit receipts.
  Nidhis are not permitted to engage themselves
  in the business of Chit Fund, hire purchase,
  insurance or in any other business including
  investments in shares or debentures. Thus,
  Nidhis do their business only with Members.
  Such Members are only individuals. Bodies
  Corporate or Trusts are never to be admitted as
  Members.
• The Nidhis cater to the needs of middle class
  and lower middle class persons, who are all the
  members of the Nidhi generally operate in a small
  local area and the members, are very often known
  to each other.
• Requirements for Nidhi Company
• A Nidhi company to be incorporated under this Act
  shall be a Public Company
• It shall have a minimum paid up equity share
  capital of Rs.5,00,000/-
• No preference shares shall be issued.
• If preference shares had already been issued by a
  Nidhi Company before
• commencement of this Act, such preference shares
  are to be redeemed in accordance with the terms
  of issue of such shares
• The object of the company shall be cultivating
  the habit of thrift and savings amongst its
  members, receiving deposits from and lending to
  its members only for their mutual benefits
• It shall have the words Nidhi Limited as part
  of its name

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• Compliances with rule 5
• Rule 5 (1), provides that every Nidhi Company
  shall, within a period of one year from the date
  of commencement of these rules, ensure that it
  has complied with the requirements of a Nidhi
  Company. The amendment changed the rule 5(1)
  which reads after amendment, as every Nidhi
  Company shall within a period of one year from
  the date of its incorporation ensure that it
  has complied the entire requirement for a Nidhi
  Company.
• Explanation
• In simple words, we can say that Nidhi Company
  has to comply with all the requirements for
  Nidhi Company within the period of 1 year from
  its date of incorporation. Requirements Like
• not less than two hundred members
• Net Owned Funds of ten lakh rupees or more
• Unencumbered term deposits of not less than ten
  per cent of the outstanding deposits as
  specified in rule 14 and
• Ratio of Net Owned Funds to deposits of not more
  than 120.
• Rule 5(2), provides that if Nidhi is not
  complying with the requirements, it shall within
  thirty days from the close of the financial year,
  apply to the Regional Director in Form NDH- 2,
  along with fee specified in companies
  (Registration office and Fee )Rules, 2014 for
  extension of time and the Regional Director may
  consider the application and pass the order
  within thirty days of receipt of the application.
  The amendment inserted a proviso to rule 5(3),
  which provide that the Regional Director may
  extend the period to one year from the date of
  receipt of application.
• Explanation
• In Simple Words
• Rule 5(2) cast a duty on Nidhi that within ninety
  days from the close of the first financial year
  after its incorporation and where applicable, the
  second financial year, Nidhi shall file a return
  of statutory compliances in Form NDH 1 with the
  Registrar duly certified

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• by a company secretary in practice or a chartered
  accountant in practice or a cost accountant in
  practice.
• Rule 5 (4), the amendment provides that if the
  failure to comply with the rule 5(1) extends
  beyond the second Financial Year till it complies
  with the provision contained Rule 5(1) and gets
  itself declared under section 406(1) of the act,
  besides being liable for penal consequences as
  provided in the act.
• Explanation
• Rule 5(4) mandate that Nidhi shall not accept any
  further deposits from the commencement of the
  second financial year till it complies with the
  provisions contained in sub-rule (1), besides
  being liable for penal consequences as provided
  in the Act.
• Compliances Regarding New Branches
• Pre Incorporation Compliances
• Post Incorporation Compliances
• Pre-incorporation compliances of Nidhi Companies
• Pre-incorporation, as the name suggests, is the
  compliance which is mandatory for every Nidhi
  Company to follow after the registration. There
  are certain requirements that applicants must
  fulfill for obtaining Nidhi Company Registration.
  The requirements are as follows
• There should be a minimum of 3 Directors and 7
  Shareholders for registering your firm as a
  Nidhi Company, and
• You must have a minimum paid up share capital of
  Rs. 5 lakhs.
• Post-incorporation compliances of Nidhi Companies

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• 2. Annual compliances.
• Generic compliances
• Generally, these compliances are the one that
  every Nidhi Company needs to follow after the
  incorporation has been registered as Nidhi
  Company. Under this compliance, you have to
  ensure the following within a year of Nidhi
  Company registration
• A minimum number of members or shareholders
  should increase to 200 within 1 year of
  incorporation
• The net owned fund of the company should be Rs.
  10 lakhs or more. (The Net Owned Fund is the sum
  of paid-up equity share capital and free reserved
  as
• reduced by the stored and intangible assets
  appearing in the last audited balance sheet)
• The unencumbered deposits should be equal to or
  more than 10 of the outstanding deposits as
  specified in Rule 14 of Nidhi Rules, 2014.
• The ratio of net owned funds to the deposit must
  not be more than 120.
• Unencumbered term Deposits
• Unencumbered Term
• Under Rule 14 of the Nidhi Rules, 2014, every
  Nidhi shall invest and continue to keep
  invested, in unencumbered term deposits with a
  scheduled commercial bank (other than a
  co-operative bank or a regional rural bank), or
  post office deposits in its own name an amount
  which shall not be less than ten per cent of the
  deposits outstanding at the close of business on
  the last working day of the second preceding
  month.
• Furthermore, in cases of unforeseen commitments,
  temporary withdrawal may be permitted with the
  prior approval of the Regional Director for the
  purpose of repayment to depositors, subject to
  such conditions and time limit which may be
  specified by the Regional Director to ensure
  restoration of the prescribed limit of ten per
  cent

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• Requirements W.R.T Deposits And Loans
• As mentioned above, the objective of a Nidhi
  company is to take deposits and provide loans to
  its members. The Ministry of Corporate Affairs
  (MCA) being the regulator of Nidhi companies
  has regulated the norms for taking deposits and
  providing loans which are as follows
• Deposits
• The Nidhi Company shall be allowed to accept
  deposits with the following timelines
• Fixed deposits- 6 to 60 months
• Recurring deposits- 12-60 months
• Recurring deposits relating to mortgage loans-
  Maximum period shall correspond to the repayment
  period of loans granted.
• Interest rate on deposits
• Savings Account- Maximum 2 above the rate
  allowed by nationalized banks
• Fixed and Recurring deposits- At par with the RBI
  rate
• Loans
• A Nidhi company can provide loan to its members
  as per the following ceiling limits
• Where total amount of deposits from its members
  is less than Rs. 2 Cr- can grant Loan of Rs. 2
  lakhs
• Where total amount of deposits from its members
  is more than Rs. 2 Cr but less
• than Rs. 20 Cr- can grant Loan of Rs. 7.50 lakhs
• Where total amount of deposits from its members
  is more than 20 Cr but less than Rs. 50 Cr- can
  grant Loan of Rs. 12 lakhs
• Where total amount of deposits from its members
  is more than Rs. 50 Cr- can grant Loan of Rs. 15
  lakhs

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Compliances with Filing Form NHD- 1 Return of
Statutory Compliances As per the Nidhi Companies
Rules, Nidhi Companies shall have at least 200
members within one year of incorporation. Nidhi
Company shall file NDH 1 within 90 days from
closure of financial year. Compliances with
Filing Form NHD- 2 For Extension Within 30 days
from the close of the first financial year, apply
to the Regional Director along with fee
specified in Companies (Registration Offices and
Fees) Rules, 2014 for extension of time and the
Regional Director may consider the application
and pass orders within thirty days of receipt of
the application. Regional director may extend the
time unto 1 One year. E-Form RD-1 Applications
made to Regional Director. Compliances with
Filing Form NHD- 3 For Half Yearly Within 30
days from the conclusion of each half year duly
certified by a company secretary in practice or
chartered accountant in practice or cost
accountant in practice. E-Form GNL-2 Form for
submission of documents with the
Registrar. Compliances with Filing Form NHD-
4 NDH 4 is the recently introduced compliance
form under Nidhi (amendment) rules, 2019. The
form has been introduced by the government to
make sure that every Nidhi Company must declare
itself that it has been complying with all the
prescribed rules and regulations to the
government.
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• Due date for Filing NHD-4
• For Every New Nidhi Company within sixty days
  after the expiry of one expiry of one year from
  the date of its incorporation
• For Every Existing Company within a period of
  every year from its date of incorporation or
  within the period of six months from the date of
  commencement of Nidhi rules 2019, whichever is
  later.
• Compliance regarding opening new branch
• Rule 10 of companies (Nidhi Companies)Rule,2014
  deals with the opening of new branches by Nidhi
  Company.
• Provisions
• A Nidhi Company can open 3 branches after three
  profitable years of Company.
• Good track record required
• An existing Nidhi company can open a new branch
  only if it has earned net profits after tax
  continuously during the preceding three financial
  years.
• Maximum branches allowed
• Nidhi Company may open up to three branches
  within the district. To open a branch outside
  the district prior approval from regional
  director is required.

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• Branches Outside State
• Nidhi Company shall not open any collection
  center, office or deposit center outside the
• state of companys registered office.
• Closure of any Branch
• Nidhi Company shall not close any of its branches
  until it complies with the necessary conditions
• Advertisement in Newspaper Nidhi Company will
  have to publish a advertisement in the newspaper
  in a place where it carries on business atleast
  30 days prior to such closure.
• Publish on Board 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.
• Intimation to ROC Nidhi Company must give
  intimation to the registrar within thirty days
  of closure.

• General Restrictions or Prohibitions.
• No Nidhi shall
• Carry on the business of chit fund, hire
  purchase/leasing finance, insurance or
  acquisition of securities issued by anybody
  corporate
• Issue preference shares, debentures or any other
  debt instrument by any name or in any form
• Open any current account with its members
• Acquire another company by purchase of securities
  or control the composition of the Board of
  Directors, etc.
• Carry on any business other than the business of
  borrowing or lending
• Accept deposits from or lend to any person, other
  than its members
• Pledge any of the assets lodged by its members as
  security
• Take deposits from or lend money to anybody
  corporate
• Enter into any partnership arrangement in its
  borrowing or lending activities
• Issue or cause to be issued any advertisement in
  any form for soliciting deposit,
• Pay any brokerage or incentive for mobilizing
  deposits from members.
• Phone No.- 9121230280 , Email - info_at_corpbiz.io,
  website - https//corpbiz.io/

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