NIDHI COMPANY COMPLIANCE

WHAT IS NIDHI COMPANY?

Nidhi Company is a company registered under Companies Act. Nidhi Company is a type of Non-Banking Financial Company (NBFC) which is governed and regulate by the provisions of Companies Act, 2013. Nidhi companies work with the object of developing the habit of saving and reserve funds amongst its members and also accepting deposits and lending funds to its members only. They are also known as Permanent Fund, Benefit Funds, Mutual Benefits Funds and Mutual Benefit Company. The basic concept of Nidhi is “Principle of Mutuality”. These companies mostly work in southern part of the India.

There is no need to acquire the license from the Reserve Bank of India to incorporate Nidhi Company. Therefore it is simple to form it. Nidhi Companies registered as Public Companies and it is mandatory for them to suffix the word “Nidhi Company” in their name.

COMPLIANCES FOR NIDHI COMPANY

FORM	DUE DATE	CONTENTS	NOTES
NDH-1 – return of statutory compliance	Within 90 days from the closure of the first financial year and where applicable form the second financial year	Details regarding members, loans, deposits, reserves for the financial year	E- Form GNL-2 Form for submission of documents with the registrar
NDH – 2 – Application for Extension of time	Within 30 days from the closure of the financial year	Application for extension of time for not complying with the requirements of members and deposits as mandated post-incorporation.	E- Form RD -1 Applications made to Regional Director
NDH -3 Half Yearly return	Within 30 days from the conclusion of each half year	Details regarding members, loans, deposits, for the said period. It contains details of total members admitted in the half-year, total members who ceased to be members as on date	E- Form GNL-2 Form for submission of documents with the registrar
NDH-4	For New Nidhi Company Within 60 days after the expiry of 1 year from the date of its incorporation For existing Nidhi Company Within a period of 1 year from its date of incorporation OR within 6 months from the date of commencement of Nidhi Rules 2019, whichever is later	Filing application for declaration as Nidhi Company and updating its status	Failure to file form NDH -4 Companies will not be allowed to file Form No.SH -7 (Notice to Registrar of any alteration to share capital) and Form PAS -3 (Return of Allotment)
AOC – 4	Within the 30 days from the date of the Company’s Annual General Meeting	Filing of Financial Statements
MGT -7	Within the 60 days of the Annual General Meeting	Annual return along with a list of company members

LOANS UNDER NIDHI COMPANY

The below are the limits to the loan set against deposit made:

DEPOSIT MADE (in Rs)	LOAN PERMIT (in Rs)
Less than 2 crores	2 lakh
More than 2 crores but less than 20 crores	7.5 lakh
More than 20 crores less than 50 crores	12 lakh
50 crores or more then 50 crores	15 lakh

A Nidhi company that has not earned any profit in the last three preceding financial years should not issue any fresh loans exceeding 50% of the maximum amounts of loans specified above. A member will not be eligible for any loan if he has defaulted on any prior loan repayment.

The loans can be landed only against the following security

Gold or Jewellery
Property
Fixed Deposit
Insurance Policy
Nidhi Companies cannot issue a personal loan, vehicle loan, hire purchase, or microfinance. Nidhi companies are formed with the motive of developing the habit of saving among its members and they are governed by the Companies Act. Even though Nidhi companies are non–banking finance companies they are excluded from the provisions of the RBI Act and other regulations applicable to NBFCs.

POST INCORPORATION REQUIREMENTS COMPANY SHOULD MEET

Nidhi Company should fulfill the below given conditions within one year of its registration:

It should have minimum two hundred members within one year of its commencement.
The net owned funds should be 10 lakh rupees or more.
It should have unencumbered term deposits of 10 percent or higher of the outstanding deposits.
The ratio of net owned funds to deposit should not be more than 1:20.
Net Owned Funds = Equity share capital + free reserves - accumulated losses - intangible assets.
If at the end of one year from commencing, the Company was unable to meet the above requirement then the Company can apply to the Registrar in Form NDH-2 for an extension of time within thirty days before the end of the first financial year.
If even after the second financial year the Nidhi Company was not able to fulfill the requirements, then the Company should not accept any further deposits until it complies with the Provisions for operating as Nidhi Company.

RESTRICTIONS ON NIDHI COMPANY

Dealing with the business of Chit funds, hire purchase finance, leasing finance, insurance or acquisition of securities business,
Issue preference shares, debentures, or any other debt instrument in any form whatsoever,
Opening of current account with its members,
Accepting deposits and lending funds to other than its members,
Takeover another Company by the purchase of securities or control the constitution of the Board of Directors of any other Company in any manner whatsoever,
Enter into any arrangement for the change of its management, unless it has passed a special resolution in the general meeting and also obtain the prior approval from the Regional Director which has the jurisdiction over such Nidhi Company.
Pledge away any of the assets lodged by its members as security,
Enter into any partnership arrangement in borrowing or lending activities,
Advertise in any form for summon of any deposits,
Pay any brokerage or incentive for call up deposits from members or for the distribution of funds or granting loans.