Compliance Requirements and Loans under Nidhi Companies

A Nidhi company is a form of Indian Non-banking finance company that borrows and loans money to its members. It is created to borrow and lend money to its members. It instills in its members the habit of saving and operates on the principle of mutual benefit.

Conditions For Nidhi Company 

1. Should be a public company.
2. Must have at least Rs. 5 lakhs as a minimum paid-up capital.
3. Must have the suffix of “Nidhi Limited” in its name.
4. There must be a minimum of 200 Shareholder
5. The minimum net-owned fund should be Rs. 10 lakhs.

Incorporation of Company Required Document

1. Pan Copy of Director and shareholder
2. ID Proof Copy of Director and shareholder
3. Copy of address proof of Director and shareholder (bank statement/Electricity bill/ mobile bill)
4. Passport size photograph
5. Property owner document of Registered office premises
6. NOC of the same.

Registration Process for Nidhi Company

1. Minimum 7 Members.
2. Minimum 3 Director.
3. Make DSC
4. Make RUN Services for Name Approval
5. Prepare necessary documents post name approval.
6. File incorporation form SPICE+.

Also Read: What are Masala Bonds and their Benefits?

Roc Compliance as Per Nidhi Rules, 2014:

1. Form NDH-3: Half-Yearly Return

Need to File Form NDH-3 with ROC within 30 days from the close of each half year. i.e. 30^th May and 30^Th October. 

2. Form NDH-1: Yearly Return by

Nidhi Company is required to file Form NDH-1 on or before 29th May of every year. This form contains all the details regarding the members, loans, deposits, reserves, etc. for the full financial years.

Things that Nidhi Company Cannot do as per Nidhi Rules:

1. It can not bear chit funds, employ financial leasing protection, or buy securities issued by any corporate body.
2. Nidhi Company may issue no preference shares or debt instruments of any kind under any name.
3. The Company shall not open any of its members’ current accounts.
4. It shall not make any concessions or agreements or acquisition until the General Meeting has adopted a Special Resolution and received prior approval by the regional director responsible for such a Company.
5. carry out some activity other than the borrowing or lending sector on its behalf
6. The business Nidhi shall not take deposits or lend any sum other than its members.
7. Offer protection to any of the properties deposited by its members.
8. Nidhi is forbidden from taking deposits or lending money to any company.
9. Such companies shall not enter into any relationship arrangement in their borrowing or lending operation
10. Nidhi Company prohibited any publicity for seeking deposits in any form.

• Minimum Members And Net Owned Funds Requirements For Nidhi Company:

1. Every Nidhi company should have at least 200 members within 1 year of incorporation and at any time thereafter.

2. In 1 year from the date of incorporation, each company shall have net-owned Rs. 10 Lakh funds.

• Amount of Loan a Nidhi Company Can Give to its members:

1. Rs. 2 Lakh where the total volume of deposits is less than Rs . 2 crores.
2. Rs. 7.50 Lakh if the total amount of deposits in its members exceeds Rs . 2 lakh but exceeds 20 crore rupees.
3. Rs. 12 Lakh, where the balance of its members’ deposits is over Rs. 20 lakh, but less than 50 lakh rupees.
4. Rs. 15 Lakh, where the total number of Deposits is more than Rs. 50 crore.
5. No new loans above 15 percent can be obtained if Nidhi is not profitable for the three previous financial years continuously.
6. Members who have taken and defaulted on a loan from Nidhi can not accept new credits from Nidhi.
7. Only the representatives of the Nidhi Company can borrow from the Nidhi Company.

Also Read: Leveraging Government Schemes and Private Grants for Funding your Venture

Annual Filing of Financial Statements and Annual Return

Form Aoc-4: Filing of Financial Statements

Nidhi company is required to file its financial statements, notice calling the General Assembly, the reports of its Directors, the audit reports, and the ROC balance sheet within 30 days from the date of the Company’s Annual General Meeting.

Form MGT-7: Annual Return

Within 60 days of the Annual General Meeting per company shall send its annual return along with the list of company members.

What Are Advantages & Disadvantages Of Nidhi Company?

• Advantages of Nidhi Company

1. Ability to accept deposits
2. Needs less capital
3. Can use it as a base for creating NBFC
4. Best suited for the finance business

• Disadvantages of Nidhi Company

1. Cannot run microfinance
2. There are more business restrictions
3. Inability to invest in any company
4. No advertising allowed

Conclusion

• Within 90 days of the closing of 1 FY following the company ‘s incorporation, NDH-1 should be fully PCS approved.

• No business or trust may be the company’s shareholder.

• Nidhi may have branches up to 3, but Regional Director is required for further approval. It shouldn’t be outside the State, however.

• The director must be a business employee.

• Upon 2 years of ceasing to be director, the director shall hold ten consecutive years and may be reappointed.