WHAT IS A NIDHI COMPANY?

It is a Public Limited Company which aims to create a habit among its members to save their earnings more or start doing savings and reducing the expenditure or expenses of the members. Its main objective is to create savings over expenses for giving some benefits, so that more savings can be done by the members.

Nidhi Company motivates the members by stating that they will provide all the facilities which are given by the banks to them. They provide saving deposits, recurring deposits and also provide fixed deposits. They also give more interests than the banks on deposits. The Nidhi Company provide loans to the small enterprises on low rate of interest. It is like a small bank which provide financial assistance to their members by providing those loans, creating saving accounts, recurring accounts and also fixed deposits.

REGULATIONS ON NIDHI COMPANY

Nidhi Company are not come under the guidelines of Reserve Bank of India (RBI). It comes under the category of NBFCs (Non-Banking Financial Company). RBI under their notification, they declared that Nidhi Company’s does not comes under the regulations of RBI.

“Nidhi implies an organization which has been fused as a Nidhi with the object of developing the habit for frugality and investment funds among its members, getting deposits from, and advancing to, its members just, for their shared advantage, and which conforms to such standards as are endorsed by the Central Government for the guideline of such class of Companies.” Nidhi Company are regulated by Companies Act, 2013 under the Nidhi Rules, 2014.

COMPLIANCES OF NIDHI COMPANY

  • It basically incorporated same as like a Public Company i.e. it must have Minimum seven members and three directors.
  • RULE 4UNDER NIDHI RULES 2014
  1. It is required for a Nidhi Company that within one year of incorporation it shall at least two hundred members and its share capital must be of rupees ten lakhs or more.
  • Minor, Boarding Corporation and Trust cannot be a member of a Nidhi Company.

It is mandatory for every Nidhi company to use ‘Nidhi Limited’ in the last of their name.

REGISTERATION FOR NIDHI COMPANY

  1. Must obtain a DIN (Director Identification Number) and DSC (Digital Signature Certificate)
  2. Name approval by using Reserve Unique Name (RUN) service of MCA.
  3. Prepare MOA & AOA.
  4. Incorporation from SPICE+.
  5. Applying for PAN & TAN.

COMPLIANCES FOR NIDHI COMPANY

The deposits done by the members must not be more than twenty times of the paid capital share capital. The Company has to deposit ten percent of the total amount as the un-encumbered deposit.

  • NDH-1

It is a Return of Statutory Compliances, which is to be filed up after one year of formation of a Nidhi Company and it must be filed up within ninety days of completion of one year to the Registrar of Company (ROC). This form only be filed up or submitted by a Chartered Accountant, Company Secretary or by a Cost Accountant in practice.

  • NDH-2

If a Nidhi Company is not able to file NDH-1 within ninety days of completion of one year, then they have to file this NDH-2. The main purpose to file NDH-2 is to get more time or a grace period to file NDH-1 because any compliance is not fulfilled by the Nidhi Company. The compliances which are not fulfil are-

  • If a company is not able to increase its Net Owned Capital up to ten lakhs within one year or,
  • The company is not able to increase their members up to two hundred.

So, this form is duly submitted to the Regional Director so that they may grant thirty days of grace period for filing the NDH-1.

  • NDH-3

It is required to file the form NDH-3 within thirty days of the end of each half year which must be duly certified by a Chartered Accountant, Company Secretary or Cost Accountant in practice.

  • ADT-1

This form is to be filed for the Appointment of an Auditor for the period of one year to five year. If company appoint an Auditor every year then this form is to be filed up for each year or if the company appoint an auditor for five year then it is not needed to file this form for every year it must be filed only for the first year.

  • BOOK OF ACCOUNTS

It is require to maintain all the records like ledgers, cash books, Profit & Loss, loans amount, debtors, and creditor’s information in an easy format.

  • STATUTARY REGISTERS

Information about meetings, Directors, Shareholder meetings and all other registers given in Companies Act.

  • FINANCIAL STATEMENTS and DIRECTOR REPORT

Company needs to maintain Profit and Loss, Balance Sheet, Cash Flow, Notes to Accounts, Tax Audit reports also a Report which consists of all activities held in a company, decisions taken by directors, all meeting records. A declaration must be submitted in which it is mentioned that all these reports, meetings and all the compliances have duly made and submitted.  

STATUTORY MEETINGS

All type of meetings must be held in the company because if any director or shareholder make a complaint that no meeting has been done by the Company or if shareholders make a complaint that company is not giving any information about the company, then it will be very difficult for the company to resolve this problem.

  • AOC-4

It is required to the Company to file its Financial Statements including all the reports mentioned above to the Registrar of Company (ROC) after the thirty days of Annual General Meeting.

  • MGT-7

It is required to the Company to file its Annual Return to the Registrar of Company after the sixty days of Annual General Meeting.

  • PENALTY

If any default is made, then the Directors of the Company held liable for any such default or delay. The penalty for such default is rupees five thousand on each director. If any delay in filing of a form mentioned above then the penalty of rupees fifty per day on per form.

CONCLUSION

The main takeaway from this article is that Nidhi Companies are easier to run than other loan-giving organizations since the RBI is less involved. However, the above-mentioned compliances offered by the Companies Act, 2013 and the Nidhi Rules 2014 must be strictly adhered to, or you risk facing severe penalties.

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