Brief about Nidhi Company

Overview

When you start a company it becomes your baby, and one of the hardest thing to do is to let go of it. Same thing is with the Nidhi Company. People gets the idea behind it but fails to interpret the requirements of the law. What is Nidhi Company is actually defined under Section 406 of the Companies Act, 2013 and governed by Nidhi Rules, 2014 and RBI Guidelines.

A Nidhi Company is a type of company which is formed to borrow and lend money to its members. It inculcates the habit of saving among its members and works on the principle of mutual benefit. It doesn't require to take license from the RBI, It is registered as a public Company and should have “Nidhi Limited” as the last words in its name.

As Per Law, It should be incorporated with a minimum paid-up Capital of Rs 5 Lakhs but considering further practicalities it should be incorporated with an

• Authorized and paid-up Capital of minimum Rs 10 Lakhs.
• Minimum number of members should be seven and directors three.
• Only an Individual can become member of Nidhi Company.
• Pan and Aadhar should be mandatory document for a member.
• It should have minimum 200 members in the first financial years and where applicable second financial year. For instance A company is incorporated in December than the time limit for 200 members is 31^st March of next year. But in case a company is unable to fulfill the minimum member's requirement then it can apply to Regional Director for extension of time limit in NDH-2 with reasonable grounds and RD if satisfied will grant extension of one more year. i.e. the second financial year.

Works which can be done by Nidhi Companies includes accepting deposits and lending among members, opening Savings Account, Fixed Deposits, Recurring Deposits etc. It can also provide locker facilities but the Income from locker rent should not more than 20% of its Total Income.

Deposits

Nidhi Company can take deposits for minimum 6 months and maximum 5 years

1. Savings Account: It can hold any amount of money in its member's saving account, but interest shall be paid only on Rs one lakh. The rate of Interest for saving account shall be the rate prescribed by RBI +2%.
2. Fixed Deposits
3. Recurring Deposits

Securities

Gold, Silver and Jewellery, Immovable Property, NSC, FD, Insurance (only term)

Branches

It should not open a branch for 3 years from its incorporation. Branch can be opened only if the company is regularly earning profits from 3 years.

It can open only 3 branches in a District.

Closure of Branch should not be done unless- An advertisement is made in a local and vernacular language at least 30 days prior to the closure. It should disseminate the information regarding loans, deposits etc,

And an intimation should be made with ROC for closure of the Branch in GNL Form, Since no form is prescribed.

• On Right Issue, Co's Act is not applicable, A Nidhi Company can issue any number of shares to any of its member.

• Directors of a Nidhi Company can hold office upto a term of ten years then cooling period should be two years.

Compliance Calendar

• NDH-1: Return of Statutory Compliance within 90 days from the ending of first Financial Year.(Four mandatory Compliances)
• NDH-2: For extension of time limit. (with Board Resolution and petition)
• NDH-3: Half Yearly Return every 30^th September and 31^st March.
• NDH-4: Declaration as Nidhi Company.